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Jefferies analyst Thilo Wrede says the sales decline is part of a long-term trend against canned goods in the U.S. as consumers seek less processed foods that have a shorter shelf life.
To reverse that trend, Campbell's must invest in chilled soups and boxed packaging, Wrede wrote in a research note.
"We would argue that soup per se is not the problem, but the packaging and innovation in the U.S. market is leading to the underwhelming performance of the category," Wrede wrote. "We believe that Campbell could reverse this trend by more aggressively investing in chilled soup, using the Bolthouse brand as its vehicle."
Wrede argued that growing the share of chilled soup from 3% of the canned category to 10% could increase revenue by roughly $340 million.
The Bolthouse brand would serve as a good vehicle for the investment because it "stands for vegetable (and fruit) based products ... and appears to be well regarded among Millennials."
Wrede pointed to the successful growth of chilled soup in the U.K., where it is 33% of the canned volume, as a sign that it would be successful in the U.S.
The U.K. consumes 26% more soup per capita than the U.S.
"While the canned soup trends in the U.K. are healthier than [in the U.S.], the growth of the overall category is mainly driven by chilled soups that have a shorter shelf life and are considered to be less processed/more natural," Wrede wrote.
Wrede said New Convent Gardens is an example of a brand that effectively markets chilled, boxed soups in the U.K.:
Jefferies
The closest that Campbell gets to New Convent's flavor selection are the Millennial targeted Go Soups, according to Wrede.
"However, compared to the resealable TetraPak containers of New Covent Garden, the pouch packaging of Go Soup seems to be impractical and we are not fans of the black and white graphics either," he wrote.
Here's Campbell's Go Soup:
Jefferies