Campbell Soup Company
) business has been countering difficulties due to excess capacity
that has mainly resulted from tremendous growth in output, volume
declines of U.S. canned soup and the company's increasing emphasis
on new packaging designs, which come in package co-manufacturing
To clear up this mess, Campbell has decided to shut down two of its
manufacturing units - one in Sacramento, California and the other
in South Plainfield, New Jersey. The shuttering of these plants
will not only address the company's problem of excess capacity in
its U.S. thermal manufacturing network but also help perk up its
U.S. supply chain cost structure and asset utilization across its
U.S. thermal plant group.
The company expects the shutting down of these plants to position
it for profitable growth, while simultaneously improving
competitiveness and performance. The company expects this move to
help optimize utilization of its U.S. plant network, diversify
manufacturing capabilities, lower total delivered costs and enhance
flexibility in its manufacturing units.
The oldest in Campbell's U.S. network, the Sacramento plant,
produces soups, sauces and beverages and employs about 700
full-time workers. The company's decision to shutter this plant is
based on the fact that the production cost on a per-case basis at
this plant is highest in the group. Moreover, with the closing of
this facility the company will save on the capital investments
required to maintain a plant as old as this. Campbell plans to
close this facility in phases, ceasing all operations by July 2013.
Following the closure of this plant, the company expects to
compensate for the lost production of soups, sauces and beverages
from the Sacramento plant by improving utilization of its remaining
three thermal plants in Maxton, North Carolina; Napoleon, Ohio; and
The second Campbell plant in the closure list is its South
Plainfield spice plant. This is among the company's two spice
plants supplying ingredients to its U.S. thermal plants, the larger
of the two being the plant in Milwaukee. Employing about 27 people,
the company plans to close this plant by March 2013. Following the
closure, the company will consolidate spice production from its
The closing of these plants is expected to entail pre-tax costs of
nearly 115 million for Campbell, majority of which are expected to
be incurred in fiscal 2013. Further, the closures will attract
capital expenditures of nearly $27 million. However, the complete
execution of the said closures is expected to result in annual
pre-tax savings of about $30 million starting fiscal 2016, with
additional savings of about $21 million in fiscal 2014.
The high-quality foods and simple meals manufacturer, Campbell
Soup, operates in a highly competitive food industry and
experiences worldwide competition in all its principal products
from such well-established rivals as
General Mills Inc.
H. J. Heinz Co.
Currently, Campbell Soup retains a Zacks #3 Rank, implying a
short-term 'Hold' rating. Moreover, we maintain our long-term
'Neutral' recommendation on the stock.
CAMPBELL SOUP (CPB): Free Stock Analysis Report
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