Campbell Soup Co.’s division that includes Bolthouse Farms has made changes to planting and harvesting methods that should enable the unit to put a troubled period behind it, Ed Carolan, the new president of Campbell Fresh, said Wednesday at the company’s annual investor day in Camden.
Campbell paid $1.55 billion in cash for Bolthouse Farms, which had $689 million in annual revenue at the time of the 2012 acquisition. It was meant to be the cornerstone of Campbell’s push into fresher food, but the Bakersfield, Calif., company has yet to fulfill expectations.
Bolthouse’s problems may have peaked in the quarter ended May 1, 2016, when the unit’s sales fell by $14 million, accounting for nearly half of Campbell’s revenue decline in a tough quarter.
At the time, Campbell officials blamed cold, rainy weather in California for a disruption in carrot supplies.
On Wednesday, Carolan, who was named to head Campbell Fresh in November, also said Bolthouse had started planting carrots too close together in a bid to get more yield.
That hurt quality and led to a high rejection rate by retailers because the carrots did not meet standards for color, texture, and diameter. In a related supply problem, Bolthouse was also unable to fulfill many of the orders from retailers.
Under Carolan, Bolthouse, which farms carrots on 35,000 acres in California, Washington, Georgia, and Canada, has made planting and harvesting changes that reduced rejections by 68 percent in the quarter ended April 30 compared with the corresponding three months in 2016. Bolthouse was also able to fill 99 percent of its orders in the recent quarter, Carolan said.
Even so, revenue of $742 million at Campbell Fresh was down 7 percent in the nine months ended April 30, likely because of lost customers. It had a $1 million operating loss. The company’s goal is to improve the operating margin to about 10 percent by fiscal 2020.
In reference to the stumbles at Bolthouse, Denise Morrison, Campbell’s president and chief executive, told the group of 40 to 50 analysts and investors at Wednesday’s meeting that it was “essential to separate strategy from execution.”
“We should have done better,” she said.
Campbell Fresh also includes Garden Fresh Gourmet, a producer of salsa, hummus, dips, and chips, which Campbell bought for $231 million in 2015. Aside from fixing its carrot problems, Bolthouse is making a big push into beverages, such as plant-based, high-protein milk.
Also at the investor meeting, Campbell announced that it was going to give up its membership in the Grocery Manufacturers Association, a trade group for large food companies, because it has been finding itself at odds with some of the positions of its peers. Campbell, for example, came out in favor of telling consumers on labels if a product contained genetically modified ingredients.
“It’s a big statement and underscores its commitment to siding with the consumer in terms of transparency and health and wellness,” said Mitchell B. Pinheiro, who works in portfolio management and research at Costello Asset Management Inc. in Feasterville. “It’s an uphill climb to change Campbell’s image to the stanchion of health and wellness, but they’re on the right track.”