Campbell Soup Company CPB has been optimizing its portfolio by divesting non-core businesses. It announced the divestiture of its noosa yogurt brand to Lakeview Farms. The noosa yogurt brand is an ideal fit for Lakeview Farms, which produces fresh dips, desserts and specialty products. Notably, noosa’s products fully complement Lakeview’s existing product offerings.

The deal is anticipated to close in the first quarter of 2025, upon the satisfaction of regulatory approvals. Campbell, a leading food producer known for its iconic brands, expects the sale of noosa yogurt to have no major impact on its results for fiscal 2025.

Background of noosa Yogurt

Campbell acquired noosa in March 2024 as part of the Sovos Brands, Inc. buyout. Since acquiring noosa yogurt, the company has been exploring strategic options for noosa, as the yogurt category does not align with its core business strategy.

The yogurt brand has performed well, generating net sales of $177 million for the 12 months ending Oct. 2024. The sale of noosa yogurt aligns well with Campbell's strategy to concentrate on its portfolio of leading brands, reinforcing its commitment to focus on core business areas. The transaction is expected to be slightly dilutive to Campbell's earnings per share, reducing EPS by 1 cent in fiscal 2025.

Management expressed satisfaction with the decision to sell noosa yogurt to a company dedicated to the refrigerated category.

Strategic Moves Drive Campbell’s Growth

Campbell’s recent acquisitions and divestitures demonstrate a proactive approach to enhancing its market position and profitability. One of the key drivers of this growth is the addition of Sovos Brands, which brings a diverse portfolio of products to Campbell. Sovos Brands’ portfolio includes a diverse range of products, including pasta sauces, dry pasta, soups, frozen entrées, frozen pizza and yogurts, which are marketed under the brand names Rao’s, Michael Angelo’s and noosa. 

Sovos Brands has significantly bolstered Campbell’s performance with its better-than-expected contributions. The company’s sales improved by 11% in the fourth quarter of fiscal 2024 attributed to the buyout of Sovos Brands. Through the fourth quarter of fiscal 2024, the company generated cost synergies of $10 million related to the Sovos Brands integration plan.

The performance of Sovos Brands, particularly Rao's, has been outstanding, with sales growing faster than expected, contributing positively to the overall performance. Management remains confident about the long-term sales growth of Sovos Brands, expecting it to be in the mid-single-digit range.

Campbell’s Path Forward

Looking ahead, Campbell Soup provided optimistic guidance for fiscal year 2025, projecting net sales growth of 9-11%, including contributions from the Sovos Brands acquisition and the impact of Pop Secret’s divestiture. The company expects organic net sales growth in the range of flat to up 2%, suggesting a slight improvement in the volume/mix compared to fiscal 2024.

Adjusted EBIT growth is likely to be 9-11%, including the impacts of the abovementioned acquisition and divestiture. The guidance also includes expectations of inflation in the low-single-digit range. Adjusted EPS is envisioned to increase 1-4% to $3.12-$3.22 in fiscal 2025 compared with $3.08 delivered in fiscal 2023.

Fiscal 2025 includes an additional week compared with fiscal 2024, which is factored into the guidance. The extra week is estimated to contribute about 2% points to both reported and organic net sales, as well as adjusted EBIT. It is also expected to add nearly 6 cents to adjusted EPS. These recent developments underscore the dynamic nature of the company's operations and its strategic planning.

The Zacks Rank #3 (Hold) company’s shares have lost 3.9% in the past three months compared to the industry’s decline of 6.8%.

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