Campbell Soup Company (CPB), the manufacturer of high-quality food and simple meals recently announced the completion of the acquisition of Plum Organics – a leading provider of premium organic baby food. Though the company has not disclosed the financial details of the transaction, according to its previous announcement, the acquisition was funded with its available credit limit.
Last month, Campbell Soup entered into an agreement with Palm Organics to acquire the latter. We believe that the acquisition will enhance Campbell Soup’s product categories and reach out to a wider range of customers as well.
Campbell Soup followed the footsteps of The Hain Celestial Group, Inc. (HAIN), which had made a similar strategic move and acquired Ella’s Kitchen Group Limited, the manufacturer and distributor of premium organic baby food in May 2013.
In the United States, the organic baby food segment is one of the most flourishing food categories, having grown at an average annual rate of 43% from 2010–2012. Currently, the segment is anticipated to be worth $2 billion in the country.
Founded in 2007, Plum Organics ranks second in the organic baby food category and fourth in the overall baby food category in the United States. Since its inception, it has launched over 150 products for babies, toddlers and kids in the U.S. and the U.K.
Campbell Soup, which competes with Flowers Foods, Inc. (FLO) and J&J Snack Foods Corporation (JJSF), intends to operate Plum Organics as a separate business under its North American division. Moreover, the company expects its kids-based soup, beverage and snacks annual sales to touch the $1 billion mark. During fiscal 2012, Plum Organics generated a total revenue of $93 million.
Campbell Soup, which currently carries a Zacks Rank #2 (Buy) intends to boost its top line and increase returns on investment through strategic measures. During fiscal 2012, the company made significant progress in this direction, including stabilization of the North American soup and simple meal business, overseas expansion, and growth of healthy beverages and baked snacks business. We believe that Campbell Soup’s prudent investment and strategic initiatives toward product innovation and brand building will expand its customer base and increase profitability.
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