Campbell Soup CEO talks 'positive' acquisition of Sovos Brands

Yeah, well, I talked about this a lot yesterday, and it's great to see you, Brian, as always. Look, I think in the world of having done a lot of integrations and a lot of acquisitions over the years, this one literally could not be going better. Across the board, when I look at the elements—again, it's early days—but when you look at the elements that indicate positive acquisitions in general, you're looking for really affirmation of a lot of the diligence that you've done, and across the board we see check marks on everything. I think what's been a pleasant surprise is that the growth on the business has actually accelerated from the time of announcement, which you don't always see, and has been really powerful. Across the board, whether you're talking about pasta sauce, some of the category extensions—whether it was soup or dry pasta or frozen pizza—these are tremendous positive contributors to growth. As we laid out a year ago, we looked at the reasons to believe for why the growth would continue, and a year later I can tell you across the board we've checked every box. Finally, I would just say what a gift to get the members of the SOS team as part of the Campbell family. They are tremendous, they've done a great job, hit the ground running. So really, Brian, across the board we're feeling great.

Yeah, so clearly, Brian, you and I have talked about this before. Consumers right now, although there's a lot of reasons to believe in recovery and improvement, it's important to remember that for many consumers in the country, they have been weathering this storm of inflation, of higher interest rates, really pressure coming from all sides for a relatively extended period of time. I mean, we're talking literally several years. That pressure has trained consumers to find a path to still feed and satisfy their family but to do it in a more affordable way. When you think about affordability, convenience, and joy of your family, and you put those together, really a spaghetti and pasta sauce dinner—you can't really do better than that. With the combination of a more affordable, more mainstream brand in Prego and the addition of a really one-of-a-kind, unique, distinctive brand in Rao's, it's really giving us a tremendous one-two punch in this very important area for consumers right now.

Well, Brian, let's first put it into context. As I've said many times, through challenging economic environments, snacks historically has been among, if not the most resilient of categories in all of food. I think it's been true in this journey we've been on as well. In fact, if you look at the last three years, the CAGR of growth for the snacks businesses has been 8%. That's well above food but also much higher than historical run rates for snacking. I think what you did see in this quarter was a little bit of the normalization of that growth line and some building or mounting pressure as it relates to the economy in general. Although we did see a more off-pace quarter, I am not worried structurally at all about the business. In fact, when I look at the latest four weeks—the period really through Memorial Day, which of course is a big weekend for snacking—the results have already begun to stabilize. In many of the categories where we play more of these elevated experience, like Kettle potato chips or organic tortilla chips, all of them moved back into positive territory, generally mid to high single-digit growth rate. So although I do think we'll see a little bit of normalization on growth, I am not worried about the long-term trajectory and the belief that snacking will continue to be an outsized behavior for consumers.

Yeah, I mean, I wouldn't describe it as a luxury, but I would say that as consumers are navigating this backdrop and this environment of a lot of pressure—and remember, as much positive momentum as we see, I want to be really clear—the path to consumer recovery in the world of food has never been clearer than it is right now. You see higher consumer confidence as pricing is normalized, you're seeing volumes begin to recover. One of the things I look at very closely is the number of categories in food where household penetration is growing. We're now up over 70% of the categories that are growing. So there's a lot of reasons to believe. But nonetheless, if you are a middle or lower income household right now, you're still dealing with high interest rates, higher rent, you probably just took a hit on car insurance. Other things—I did, Mark, my car insurance is through the roof, it's like double digits. What the hell is going on here? Come on. These are real-world influences on consumer behavior. So although I don't see it as a luxury, what you might see is a consumer being a little more thoughtful, a little more choiceful, and maybe willing to try a private label brand or certainly to look for something that may be on promotion or deal. I think this will again, when I think about snacking over a longer period of time, the resilience has been astounding. But I do think we're in a moment where you're seeing a little bit of that consumer behavior that we may have seen on meals and beverages categories 18 months ago. That really is a little bit of the dynamic and why, perhaps for people trying to pinpoint this recovery in food, it doesn't move in a linear way, and that makes it a little bit tougher to predict.

I do. I mean, I think we all wish that we had more of a catalyst of deflation to see more relief in pricing. I think the reality is that as we look at the world today and look a little bit forward, we continue to see somewhat of a mixed bag. Certainly, that inflation level has come down dramatically. We're not dealing with what we were the last several years, and that is very encouraging. But I think this belief of costs or prices coming down in a material way is just not what we're seeing on the horizon. I think we're going to be in a period, as I've said before, Brian, where you're going to have some things that are deflationary and you're going to have some things that are still ticking up. The balance of that, I'm hopeful, is a more benign environment for inflation going forward, but certainly not deflationary in nature.

I don't know, Brian, how old are your kids? Right, this is—it's a good thing I have no kids. We maybe could pass as some form of relative. We kind of look alike. I mean, I could see the resemblance. I mean, the beard, you know. I don't know, you have to tell me what your driving record is, Brian, before I do that.

Absolutely, in September. We'll see you there.

Okay, great. Thanks, Brian.