Analysis: Campbell Soup Co. Plans to Divest Yogurt Component Post Sovos Brands Acquisition
According to Campbell Soup Co., the yogurt component of Sovos Brands’ portfolio will likely be divested after the $2.7bn acquisition is complete. The main focus of the deal is on Rao’s Italian pasta sauces, which Campbell believes will help achieve their goal of creating a $1bn sauces business. Campbell does not plan to dispose of its existing range of Prego sauces, as they see a complementary fit with Rao’s sauces. The acquisition will also add Michael Angelo’s Italian ready meals, soup, dried pasta, and frozen pizza to Campbell’s product lineup, along with the Noosa yogurt brand.
During a presentation to analysts, Campbell’s president and CEO, Mark Clouse, stated that while yogurt is not a core part of their strategy, they are pleased with Noosa’s performance and profitability. However, Clouse emphasized that the company does not see yogurt as a long-term focus, but rather a strategic alternative to be evaluated in the future.
Discussing the potential for growth in the Rao’s sauces brand, Clouse highlighted the high velocities of their SKUs and the distribution opportunity for existing and new products. Campbell aims to achieve annual run-rate “cost synergies” of around $50m from the Sovos Brands’ deal, with expected integration costs of $90m over the next two years.
Rao’s Sauces and Prego: A Complementary Fit
Clouse emphasized that Rao’s sauces and Prego sauces have different target consumers and occasions, making them a complementary fit within Campbell’s product portfolio. He expressed confidence in Prego’s significant growth potential within the mainstream segment.
Campbell’s Strategic Roadmap and Future Expansion
Clouse believes that the Sovos Brands acquisition aligns with Campbell’s focused strategic roadmap and will fuel earnings growth. The addition of fast-growing premium brands, like Rao’s sauces and Noosa yogurt, strengthens and diversifies Campbell’s meals and beverages division. Clouse also mentioned the potential synergies between Campbell’s existing Pepperidge Farms frozen portfolio and the new frozen meals and pizza category.
Growth Potential for Rao’s Sauces Brand
Clouse highlighted the distribution opportunity and potential for increased household penetration for Rao’s sauces. He sees a significant runway for growth in frozen meals and pizza, pasta, and soup categories, as well as opportunities to enhance brand equity and awareness.
