Campbell Soup to close two plants in US

US-based Campbell Soup plans to shut down two plants in California and New Jersey due to excess capacity, a move which will enable the company to lower costs.

The firm noted that several factors have led to excessive capacity at its plants, including lower sales of canned soup in US; productivity improvements; and a shift to new packaging formats which are often produced under co-manufacturing agreements.

While the company manufactures other products such as Arnott’s biscuits, Pepperidge Farm baked products and V8 vegetable juices, soups account for approximately half of its revenue, and its soup division has been struggling with lower sales and shrinking profit margins.

The facility at Sacramento, California, currently produces soups, sauces and beverages, and has the highest production cost on a per-case basis, the company said.

It will be closed in phases, with the complete closure scheduled by July 2013, and the majority of the production will be shifted to the company’s remaining three soup plants in Maxton, North Carolina; Napoleon, Ohio; and Paris, Texas.

The facility at South Plainfield, New Jersey, will be closed by March 2013, and production will be shifted to the company’s larger facility in Milwaukee.

Campbell North America president Mark Alexander said that in order to facilitate profitable growth, it is necessary to continue to optimise the company’s US plant network and diversify its manufacturing capabilities.

"We expect the steps we’re announcing today to improve our competitiveness and performance by increasing our asset utilisation, lowering our total delivered costs and enhancing the flexibility of our manufacturing network," Alexander added.

Campbell expects the closures to lead to annual ongoing pre-tax savings of approximately $30m from fiscal 2016, starting with nearly $21m in savings in fiscal 2014.

However, the company will incur pre-tax costs of approximately $115m, most of which will be booked in fiscal 2013, as well as $27m in capital spending.

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Image: Campbell Soup expects the closure of the facilities to lead to annual ongoing pre-tax savings of approximately $30m from fiscal 2016. Photo courtesy of Coolcaesar.