Campbell’s SWOT analysis: stock faces headwinds as snacks division struggles

Campbell Soup Company (NYSE:CPB), a stalwart in the food industry with a market capitalization of $9.8 billion, finds itself navigating a challenging landscape as it grapples with increased competition and shifting consumer preferences. Currently trading near its 52-week low at $32.79, the stock has declined over 20% year-to-date. Recent analyst reports paint a picture of a company facing headwinds in its snacks division while maintaining strength in its meals and beverages segment. According to InvestingPro, 16 analysts have recently revised their earnings estimates downward for the upcoming period, reflecting growing concerns about near-term performance.

Company Overview and Recent Performance

Campbell Soup Company, known for its iconic soup products and diverse portfolio of food brands, has been the subject of scrutiny from various financial analysts. The company’s stock has been predominantly rated as "Underweight" or "Neutral" by major firms, reflecting concerns about its near-term performance relative to its peers in the food industry.

Recent financial results have shown a mixed performance. While the company has managed to deliver bottom-line beats with a healthy gross profit margin of 30.6%, top-line misses have been a cause for concern. Despite revenue growth of 8.65% in the last twelve months, the fiscal year 2025 (FY25) guidance has been revised downward, primarily due to softness in snacking categories that have not improved as expected.

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Segment Analysis

Meals & Beverages (M&B)

The M&B segment has shown resilience, benefiting from consumer trends favoring value-seeking and at-home meals. The Rao’s brand, in particular, has been a bright spot for Campbell, contributing significantly to the overall segment growth. However, analysts note a slowdown in consumption trends for Rao’s products, albeit compared to previously strong performances.

The integration of SOVO, a recent acquisition, is expected to be incorporated into the organic base of the company. This move could potentially bring new avenues for growth and diversification within the M&B product portfolio.

Snacks Division

The snacks division has been a primary source of concern for Campbell. Analysts report a slower-than-expected recovery in this category, with intense competition in the salty snacks market and increasing pressure in the cookies and crackers segments. The company plans to increase promotional activities to address competition from new entrants and bolster sales during key seasons.

Competitive Landscape and Market Trends

Campbell faces a dynamic and increasingly competitive environment in the packaged food industry. New market entrants and aggressive promotional activities from competitors have put pressure on the company’s market share, particularly in the snacks category.

Consumer behavior is shifting, with a trend towards value-seeking and at-home meal preparation. While this trend may benefit the M&B segment, it presents challenges for the snacks division. Analysts express caution about the overall food industry landscape, noting that it remains challenging.

Future Outlook and Challenges

Looking ahead, Campbell’s management has maintained its guidance for FY25, expressing confidence in a sequential top-line and market share momentum build into the second half of the fiscal year. However, analysts are less optimistic about consumer behavior and Campbell’s categories, suggesting potential earnings risk. InvestingPro’s Financial Health Score of 2.31 (FAIR) reflects these mixed signals, with particularly strong scores in profitability (3.44) but weaker momentum metrics (1.29).

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The company faces several headwinds that could impact its performance:

1. Potential EU tariffs on imported tomato sauce from Italy, which could pose an 8-9% EPS risk if resumed.

2. Exposure to steel costs, which may be affected by tariffs.

3. The planned reinstatement of incentive compensation.

4. Anticipated increase in brand spending aimed at boosting volume trends.

Macroeconomic Factors

The broader economic environment presents both opportunities and challenges for Campbell. Concerns about a potential prolonged consumer spending slowdown could impact restaurant sales, which may indirectly affect Campbell’s product demand. However, historical data suggests that restaurants continue to capture a larger share of retail sales, which could mitigate some of these concerns.

Bear Case

How might increased competition impact CPB’s market share?

The intensifying competition in the salty snacks, cookies, and crackers segments poses a significant threat to Campbell’s market share. New entrants and aggressive promotional activities from established competitors are putting pressure on the company’s snacks division. This increased competition could lead to margin compression as Campbell may need to increase its own promotional spending to maintain market position. The slower-than-expected recovery in the snacks category suggests that these competitive pressures are already impacting performance. If Campbell fails to effectively counter these challenges, it could result in a sustained loss of market share and negatively affect overall financial performance.

What risks does CPB face from potential EU tariffs?

The potential reinstatement of EU tariffs on imported tomato sauce from Italy presents a significant risk to Campbell’s earnings. Analysts estimate that these tariffs could pose an 8-9% EPS risk if implemented. This is particularly concerning for Campbell’s tomato-based products, which are a key component of its meals and beverages segment. Additionally, the company’s exposure to steel costs, which could also be affected by tariffs, may further impact profitability. These tariff-related risks could lead to increased production costs, potentially forcing Campbell to either absorb these costs and accept lower margins or pass them on to consumers, risking a decrease in sales volume.

Bull Case

How could the integration of SOVO benefit CPB?

The integration of SOVO into Campbell’s organic base presents a significant opportunity for growth and diversification. SOVO’s product portfolio could complement Campbell’s existing offerings, potentially opening up new market segments or strengthening the company’s position in current ones. This acquisition may also bring innovative products or technologies that could enhance Campbell’s competitive edge. Furthermore, the integration could lead to synergies in production, distribution, and marketing, potentially resulting in cost savings and improved operational efficiency. If executed successfully, the SOVO integration could provide Campbell with a much-needed boost in its product lineup and market presence, particularly in the meals and beverages segment.

Can CPB’s promotional strategies effectively combat new market entrants?

Campbell’s planned increase in promotional activities, particularly in the snacks division, demonstrates a proactive approach to addressing competition from new entrants. By focusing on key periods such as the holiday season, Campbell aims to defend its market share and potentially capture new customers. The company’s strategy to offset increased promotional costs through greater productivity capture, overdelivery from its Rao’s brand, and reduced interest expenses shows a comprehensive approach to maintaining profitability while competing aggressively. If these promotional efforts are well-targeted and effectively executed, they could help Campbell maintain or even grow its market share in the face of new competition. Success in this area could lead to improved sales volumes and potentially strengthen brand loyalty among consumers.

SWOT Analysis

Strengths:

• Strong performance in the Meals & Beverages segment
• Robust Rao’s brand contributing significantly to growth
• Diversified product portfolio across food categories
• Established brand recognition and consumer loyalty

Weaknesses:

• Challenges in the Snacks division with slower-than-expected recovery
• Reliance on key brands for segment growth
• Vulnerability to commodity price fluctuations and potential tariffs
• Need for increased promotional spending to maintain market share

Opportunities:

• Integration of SOVO acquisition to expand product offerings
• Potential for snacks division recovery with effective strategies
• Consumer trends favoring at-home meal preparation
• Possibility for innovation in healthier snack options

Threats:

• Intense competition in the snacks category, particularly from new entrants
• Potential EU tariffs on imported tomato sauce
• Shifting consumer preferences towards healthier options
• Macroeconomic uncertainties affecting consumer spending

Analysts Targets

• Barclays: $35.00 (June 13th, 2025)
• Barclays: $35.00 (June 4th, 2025)
• Barclays: $40.00 (June 2nd, 2025)
• Piper Sandler: $42.00 (May 23rd, 2025)
• Barclays: $40.00 (March 12th, 2025)
• Barclays: $40.00 (March 6th, 2025)
• Barclays: $46.00 (March 5th, 2025)
• Barclays: $46.00 (December 6th, 2024)
• RBC Capital Markets: $51.00 (December 5th, 2024)
• Barclays: $49.00 (December 4th, 2024)
• RBC Capital Markets: $51.00 (December 2nd, 2024)

This analysis is based on information available up to June 14, 2025, and reflects the market conditions and analyst opinions as of that date. For the most current insights and comprehensive analysis of Campbell Soup Company, including Fair Value estimates and detailed financial metrics, visit InvestingPro. The platform offers exclusive access to detailed Pro Research Reports, transforming complex Wall Street data into actionable investment intelligence.

InvestingPro: Smarter Decisions, Better Returns

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