Dive Brief:
- Campbell's Soup has entered into an agreement to buy natural and organic brand Pacific Foods of Oregon for $700 million in cash, according to a company statement.
- “This acquisition is consistent with our purpose, ‘Real food that matters for life’s moments,’" Campbell's President and CEO Denise Morrison said in the written statement. "Pacific is an authentic brand with a
loyal consumer following. The acquisition allows us to expand into faster-growing spaces such as organic and functional food. Moreover, Pacific Foods is an excellent fit with Campbell — strategically, culturally and philosophically. It advances our strategic imperatives around real food, transparency, sustainability and health and well-being.” - Pacific Foods will continue to operate from its certified organic plant in Tualatin, Oregon. Company CEO and Co-Founder Chuck Eggert will stay on as a supplier of key ingredients through family farms, and Pacific Foods will maintain its farm-to-table approach.
Dive Insight:
With its simple and fresh ingredients, Pacific Foods has been a leader in shelf-stable organic and allergen-free soups, broths and products for years. The acquisition is a smart move for Campbell, which has struggled with lagging demand for its marquee condensed soups and disappointing revenues for its Fresh segment.
This deal brings into Campbell's fold a well-known brand that serves important consumer needs in areas where the soup company is lacking. Pacific Foods will become part of Campbell's Simple Meals and Beverages division, which oversees the company's shelf-stable soups, frozen and center-store brands. This segment has seen high and low points, with sales of its RTE soup brands, especially its new healthier ingredient variety Well Yes, doing well.
The Pacific Foods brand is also a nice bridge to the company's consistently underperforming Fresh division, which includes produce, beverage and dressings brand Bolthouse Farms, as well as fresh soups and dips brand Garden Fresh Gourmet. In Campbell's last earnings report, Fresh sales fell 6% to $248 million. Analysts have said Campbell's foray into fresh is a cautionary tale of a CPG company trying to apply its previous center store success to the very different world of the store's perimeter.
Brian Todd, president and CEO of The Food Institute, which tracks mergers and acquisitions, told Food Detective that this purchase continues Campbell's strategy of extending its reach through taking on new brands. Some of its past acquisitions have included Bolthouse Farms, baby food company Plum Organics and cookie maker Kelsen Group.
"The trend of big food companies breaking into to the organic, healthy, and good-for-you segments continues and acquisitions such as this are perceived as the most efficient way to do so," he wrote in an email. "The rapidly changing consumer market is one that is difficult for large traditional companies to keep up with due to their sheer size and layers of management and leadership."
With the addition of a nationally known organic brand, Campbell could potentially bolster sales both in its soup segment and its produce offerings. Pacific Foods may be able to do what other acquisitions could not and enhance Campbell's reputation as a company with a focus on better-for-you, organic food.