Campbell Soup CEO on inflation: 'Value is a big driver right now'

Campbell Soup CEO Mark Clouse joins Yahoo Finance Live to discuss company earnings, inflation, consumer demand, and the outlook for profit growth.

Video transcript

BRIAN SOZZI: Campbell's Soup stock is still warm after a hot quarter. The company beat on earnings and revenue and boosted its guidance as it passed higher costs along to shoppers and drove product innovation in soup and Goldfish crackers. The man himself, Campbell Soup CEO Mark Clouse, joins us now. Mark, always great to get some time with you here right as we get into the peak of soup season, and you had a pretty good quarter in US soups. Why do you think that's the case?

MARK CLOUSE: Well, I think, Brian-- first of all, great to be on the show. Thanks for having me. You know, I think in the moment that we're in right now, the soup business really matches both the demand for consumers and the value that they're looking for. And as we've watched consumers navigate through tough inflation, a backdrop of a tougher economic environment, I think soup, in many ways, checks a lot of boxes for consumers right now.

It's a product that's very versatile, whether you're preparing your thanksgiving dinner or whether it's something that you're using for a quick lunch, and I think that has demonstrated a lot of resilience in this time. And I also think it's a bit a culmination of all the work that we've been doing the last several years to rejuvenate this brand and business by bringing, as you said, a lot of innovation as well as great marketing. Our Chunky business is an example. Really great.

Best new item in soup last year was our spicy line of Chunky, really targeting younger consumers. And we paired that with great marketing on things like EA Madden, which really would not have initially thought of Chunky in the world of gaming, but it's proven to be a great bridge for younger consumers and younger targets. And then a full line of better for you products with Well Yes and Pacific that really rounds out that portfolio. So I think, you know, kind of the culmination of a lot of good work, but in a good moment for the category as well.

BRIAN SOZZI: Mark, I've told you this before. I've tried that spicy Chunky soup and it has sizzled my tongue. I mean, it is a good new product by the Campbell team. I have to give credit where credit is due. But the moment that we are in, like you just mentioned, is it-- do you think consumers are just cutting back on making larger meals because they've been hit with so much inflation that they now view a can of soup as the only meal they can possibly afford?

MARK CLOUSE: Well, I think it's really more about making your dollar stretch. And you know, one of the things that we talked a little bit about yesterday is 80% of meals right now are being prepared in home. And what we're hearing and understanding from consumers is they don't really wanna make trade offs, but they wanna understand how to do this in a more economic way.

And so when you look at an average meal prepared with our products-- so think condensed soup, think broth, even Prego pasta sauce. As you're putting together a dinner for your family, average, even with the inflation we've experienced, about $2 a serving. And that's versus, away from home, about $20.

And even if you're in the grocery, we're seeing a lot of migration from higher cost categories or segments like frozen, for example, into the shelf stable space, both for prepared meals but also for, as you point out, quick lunches. You know, I think one of the things that's really worked well on Chunky is the protein content and the messaging around kind of the fulfillment of lunch with something that's quick and easy. So I don't know that I see it shrinking, necessarily, but I do think value is a big driver right now.

BRIAN SOZZI: Let's pick apart some of your ingredient basket here. So you have-- I'll put tin. You use, obviously, tin to put the put the soup in. You have tomatoes, you have vegetables. Within this ingredient list or this cost of goods sold, is inflation coming down? Are we beyond the worst?

MARK CLOUSE: Well, I think as you think about the year-- and if you listened to us yesterday, it was a pretty significant number where inflation in the first quarter for us was 18%, and many of the elements that you're describing are part of that. I do think as you manage through the balance of the year, the incremental nature of inflation will begin to moderate. But remember, you're gonna begin to lap big increases in inflation a year ago, and so that's part of what's helping those comparisons as you move through the year.

Interestingly enough, I think what you're going to be experiencing in most businesses is some areas that are coming down and some areas that are still demonstrating incremental inflation. We talked about yesterday, as surgical and targeted as this will be, a bit more pricing needed to match a few places where we're still seeing inflation creeping up. But at the end of the day, I think collectively or in total, you'll see a moderation of the amount of incremental impact from inflation without it necessarily turning yet into something like deflation or overall costs going down.

BRIAN SOZZI: And I know, Mark, the Goldfish brand has been very hot for you really the past few years. In terms of this year, how much in sales will that brand do this year? And then next year, what else do you have coming on that front?

MARK CLOUSE: Well, it represents a significant part. It's our biggest brand on the snacks side by far, and it is one that has just, as you said, been doing tremendously well. And really at the heart of that strategy-- and this was I think just an excellent job by our marketing team and really understanding that the Goldfish brand is in almost every home, but really had been targeted primarily to the kids.

And the strategy over the last couple years has been to broaden that range of household members because everyone sneaks a handful of it, but we want them really excited about the products that are coming in and bringing the full range. And so you go from a Frank's Redhot, which was one of our really successful in and outs announced that we're gonna be bringing back in limited quantities due to popular demand, but also on down to the base product or even things like the "Wakanda Forever: Black Panther" partnership that we have right now where we're still very focused on the kids in the household but wanna bring that full range.

And then innovation like Megabytes and some of the pack sizes that really help match consumers' lifestyles has been really the key ingredient to success there. So a big brand, iconic brand, but one that we've really kind of been able to rejuvenate and bring some new life to through broadening it across further consumers.

BRIAN SOZZI: I know I've been an avid consumer of all things Goldfish for many years. Campbell Soup CEO Mark Clouse, thanks for giving us some time this morning. Really appreciate it. Happy holidays to you.

MARK CLOUSE: Yeah. Thanks, Brian. You as well.

BRIAN SOZZI: Thanks so much.