Campbell Soup Co., struggling through a sales slump as consumers seek out more natural products, has agreed to buy a company that makes organic soup and broth for $700 million.
The deal to acquire Pacific Foods of Oregon will be financed with debt, Campbell said on Thursday. The Tualatin, Oregon-based maker of organic foods generated revenue of $218 million over the last year.
Campbell, the nearly 150-year-old company known for canned goods, has struggled with changing consumer tastes and is expected to post declining sales for a third consecutive year. The Camden, New Jersey-based company has stumbled with moves into carrot farming and protein drink production since its 2012 purchase of Bolthouse Farms.
Fast Growing Category
The acquisition of Pacific Foods will give it more products in a faster-growing category, according to Ken Shea, an analyst at Bloomberg Intelligence. “Organic is definitely where the customer is going,” he said.
Sales of canned soup, like those of other packaged-food products that have dominated grocery stores for decades, are flagging amid broad shifts in how consumers eat and shop.
Campbell shares rose 1.8 percent to $52.61 in late trading in New York. The stock has slipped 15 percent this year, closing Thursday at $51.68.
Campbell acquired Bolthouse -- a producer of carrots, juices and salad dressings -- in 2012 for $1.55 billion. That business, now part of the Campbell Fresh unit, has struggled with poor harvests and a drink recall. Last September, Chief Executive Officer Denise Morrison said Campbell had restructured the fresh-food unit and removed several senior Bolthouse managers in a bid to turn the business around. Bolthouse’s issues were “unacceptable,” she said.
Now, Campbell is pushing hard into organic soup. With the acquisition of Pacific Foods, it’s getting a company with a “sustained track record of growth,” Morrison said.
“The acquisition allows us to expand into faster-growing spaces such as organic and functional food,” she said in Thursday’s statement.