NEW YORK (TheStreet) -- Increasingly health-conscious Americans continue to exert pressure on the sales of two of the country's most iconic food makers.
On Thursday, Campbell Soup (CPB - Get Report) offered sales guidance for its new fiscal year that was below long-term targets that were lowered just a month earlier. The disappointing outlook reflects the ongoing challenges for packaged food giants such as Campbell's Soup and newly formed Kraft Heinz (KHC - Get Report) in getting U.S. consumers to consume cans of salty soup and other products laden with artificial ingredients.
Campbell's projects its fiscal year sales to fall in a range from unchanged to up 1%. In July, the company forecasted organic sales growth of 1% to 3%, compared to a previous target of 3 to 4%. Adjusted earnings in the fiscal year are seen rising 3% to 5%, also below Campbell's long-term goals, which call for growth of 5% to 7%. Campbell's shares rose by 0.3% in early trading Thursday as earnings surpassed estimates by a penny.
"Shifts in the industry are placing pressure on mainstream food companies," acknowledged Campbell's President and CEO Denise Morrison on a call with analysts Thursday. Morrison has not been shy in explaining to investors exactly what challenges she and her teams face in improving Campbell's bottom line.
Saying that the packaged-food industry is in the middle of a "period of revolutionary change" at an investor presentation on July 22, Morrison noted that conditions are "far from the Rockwell-esque picture us in the food business are accustomed to." At play, according to Morrison, are major cultural shifts, changes in the size of American households and a growing movement toward simpler foods and organics.
The mixed outlook and cautious comments by Campbell's stem from a fourth quarter that offered a snapshot of the new realities packaged food giants are facing in American supermarkets.
Sales and profits at Campbell's U.S. simple meals segment were one of the few bright spots in the fourth quarter as consumers flocked to broth products to help in healthier meal preparation, as well as new offerings from Prego pasta sauce, especially in Alfredo category. On the other hand, canned soup sales fell 4%, while ready-to-eat soup sales declined 3%. The segment's organic sales rose 4%, and profits advanced 4%.
Elsewhere, the results weren't necessarily as appetizing.
Organic sales at the company's global baking and snacks segment rose 1%, but profits fell 26%. At the U.S. beverage business, organic sales fell 4%, and profits were down by 23% as consumers embraced V8 vegetable juice, but shunned the more sugary V8 Fusion line of products. Bolthouse Farms, the business acquired in July 2012 that targets more health-aware consumers, performed well amid volume gains at retailers for its refrigerated juice drinks and salad dressings.
For its part, Campbell's is trying to develop new products and marketing tactics to suit changing consumer preferences. The company plans to remove artificial colors and flavors from nearly all of its North American products by the end of fiscal 2018. Additionally, Campbell's will move away from using high-fructose corn syrup in certain products, including the complete line of Pepperidge Farm fresh breads by the end of fiscal 2017.
The company also recently unveiled a new food-information website called whatsinmyfood.com, which allows consumers to sesarch for details on how Campbell's produces and sources its packaged food.
In June, Campbell's shelled out $231 million to acquire Garden Fresh Gourmet, which produces refrigerated salsa in the U.S. and also makes hummus, dips and tortilla chips that are found in the well-trafficked perimeters of supermarkets. The purchase of Garden Fresh Gourmet gives Campbell's a formidable presence in the deli area that is often jam-packed with fresh food, complementing its Bolthouse Farms brand.
Newly-merged rival Kraft Heinz is also bearing the brunt of changing consumer habits.
Second quarter net revenue fell 4.9% year over year at the Kraft division. Excluding the impact of currency fluctuations, organic revenue dropped 3.3%. The company pinned the blame on lower demand for ready-to-drink products such as Capri Sun.
The scene wasn't much better at the Heinz division. Net sales for the ketchup maker declined 4.1%, largely because of a 9.4% hit from currency volatility. Heinz's sales volume rose just 1.7% as the company said major U.S. retailers had invested in more inventory in early 2014 ahead of changes at the company.
The sluggish sales volume suggested that similar to Kraft, Heinz is experiencing challenges in getting health-conscious consumers in the U.S. to buy its products.