Campbell’s Pricing Decision Spine: 2 of 5 Vertebrae

Campbell’s reported a 6% revenue increase.?Drivers include higher prices greater amid greater promotional spend and lower volumes.?Profits decreased despite the higher prices partly due to the higher promotional spend but largely attributed to variable cost increases driven by pandemic related supply chain restraints and Russia’s invasion of Ukraine.

On the plus side, Campbell’s market share has increased despite higher pressure from store brands in stock and other kitchen basics.?

For many executives in consumer-packaged goods (CPG), market share is more important than other business performance metrics.?The primacy of market share among many possible metrics is largely due to Profit Impact of Market Strategy (PIMS) studies first released in the 1970s and highly marketed by Boston Consulting Group (BCG).?The PIMS study concluded that market share and profits are strongly correlated.?Despite the numerous economics, finance, and marketing studies that have challenged the PIMS study and its conclusions, market share remains a priority for many executives that cannot be threatened by a price increase.?

Moreover, sales and marketing executives are often biased towards pursuing volume over price to drive profits.?Mark Clouse, CEO of Campbell Soup, comes from a background in sales and marketing of consumer package goods (CPG) after serving in the U.S. Army.?(Thank you for your service.)

Due to the shrinking profits among higher variable costs and promotional spend, and due to known industry biases favoring market share over pricing quality, we have come to the following conclusion.?

Campbell’s Pricing Spine:?2 out of 5 vertebrae for these decisions.

They should have raised prices faster and reduced their dependency on promotions.

CPB (Campbell Soup Co.) fell in the weeks following the news from 51 to 48. 2022 revenue of $8.6 billion with an 8.8% margin and P/E ratio near 48.

Kang, Jaewon and Seal, Dean (2022, September 2). Campbell’s Profit Slides as Shoppers Rethink Spending. Wall Street Journal, B3.