Budget-conscious diners cooking at home are boosting the fortunes of Campbell Soup ( CPB ).
The company, which owns brands like Milano cookies, Goldfish, and the newly acquired Rao's pasta sauce , said customers are seeking out quality meals for lower prices.
"[It's a] good time to be in meals and beverages in the world of food right now because it just fits so well with what consumers need," CEO Mark Clouse told Yahoo Finance over the phone. "You're seeing in-home meals stay at a very high level,"
Inflation in the cost of eating out jumped 4.1% year over year, while the price of groceries is up 1.1%, creating more incentive for shoppers to dine at home.
Clouse said it's a misconception that Rao's $8-$9 canned sauce is "super premium" and only for "high-income households."
"If you want a high-quality-rate Italian dinner at home and you're going to order — let's call it mediocre Italian food on Doordash ... you're gonna pay $30-$40. That leaves you a tremendous value to pay $8 or $9 for a jar of pasta sauce," Clouse said. As consumers seek lower prices, there's growth in dry pasta, soup, and pizzas as well.
In Campbell's fiscal 2024 Q4, sales increased 11% year over year to $2.3 billion, while adjusted earnings per share jumped 26% to $0.63.
Its overall volume mix is up 1%, led by a 2% increase for meals and beverages, while its snacks segment stayed flat.
Clouse said consumers are "coming back to categories that they might have taken a hiatus from because they just had to make tougher choices" as higher interest rates, rent, and car insurance persist.
The company expects net sales to grow between 9% and 11% for fiscal year 2025.
JPMorgan analyst Ken Goldman reiterated an Overweight rating on shares, highlighting that while Clouse has been optimistic about shoppers returning to normal behavior, much of the optimism isn't baked into the guidance for meals and beverages.
"Should the consumer environment improve, therefore, it may help soup volumes more than anticipated," Goldman said.
Meanwhile, the Biden-Harris administration has been cracking down on food costs, with Harris now laying out bigger plans for the White House including a federal ban on price gouging.
Per the cost of living plan laid out by the Harris campaign, within Vice President Harris and Governor Walz's first 100 days, they plan to work with Congress to:
When Yahoo Finance asked for his take on the potential bills, Clouse said he's ready to "navigate all worlds" from a policy standpoint.
"There is never a day we're not starting with the consumer first and trying to figure out how do we do the right things and be appropriately thoughtful about what they're dealing with," said Clouse. "Our balancing act here has been to be appropriately priced where it's justified, but then to also weigh affordability and value."
"We don't win if consumers don't find us affordable and a great value," he added.
—
BrookeDiPalma