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Drop It Like It's Hot, Campbell's

The worlds largest soup producer will hit the Street with earnings figures tomorrow morning.

Campbell's (CPB) isn't exactly setting the world on fire, but we can't get enough of this wide moat, profitable, and well-run (the Dorrance family owns 50% of shares outstanding) company:

...though Campbell dominates American soup, the company cannot afford to just sit back and collect profits. Complacency and annual price increases throughout much of the 1980s and 1990s opened the door for competitors like Progresso (now owned by General Mills) and private-label alternatives to take share. Stepping up spending on product innovation and marketing over the past five years has allowed Campbell to stem the tide, but management must maintain this level of investment to stay ahead of the competition.

Campbell's wide economic moat is founded on its U.S. soup business, which with the domestic sauce and beverage businesses accounts for 40% of sales and 60% of operating profits. With its namesake brand, Campbell is the largest producer of soups in the United States, outselling the next leading branded soup maker by a margin of nearly 7 to 1. Controlling more than 70% of the $4 billion domestic market for soup has allowed the division to generate 25% operating margins, making it one of the most profitable businesses in the packaged food industry. (Morningstar)

Soup remains a high margin business -- if Campbell's would reduce its leverage and pump up the margins on their non-soup goods, we'd pound the table a lot harder.

posted by Catablast! Media Group @ 9:03 PM