# Campbell's (CPB) Financial Model Free Excel 3-statement financial model and company analysis for Campbell's. - Canonical: https://finamodel.com/companies/campbells - Industry: Food - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/CPB.xlsx ## Model Purpose This model forecasts the future cash flows and earnings of The Campbell's Company to determine its intrinsic equity value and evaluate the margin accretion and deleveraging trajectory following the recent Sovos Brands acquisition. ## Company Overview The Campbell's Company (formerly Campbell Soup Company) is a leading North American manufacturer and marketer of branded convenience food and beverage products. The company operates primarily through two segments: Meals & Beverages (approximately 50% of net sales) and Snacks (approximately 50% of net sales). The business is heavily concentrated in the United States, which accounts for the vast majority of its revenue, with minor operations in Canada and Latin America. Campbell operates an asset-heavy manufacturing model, producing shelf-stable and frozen foods in company-owned facilities while relying on a mix of direct-store-delivery and warehouse distribution. Its competitive position is strong, holding market-leading shares in wet soup, premium pasta sauces, and crackers against peers like General Mills and Kraft Heinz. Recent major events include the $2.7 billion acquisition of Sovos Brands in March 2024 (adding the high-growth Rao's and noosa brands) and the divestiture of the Pop Secret popcorn business in August 2024. ## Revenue Deep Dive ### Meals & Beverages - **Segment name:** Meals & Beverages - **Revenue driver formula:** Volume (Cases Sold) x Net Price Realisation per Case + Acquired Revenue - **Historical growth rate:** 1% to 3% organic CAGR, supplemented by the Sovos Brands acquisition. - **Key growth levers and headwinds:** Growth is driven by the premiumisation of pasta sauces (Rao's marching towards $1 billion in sales) and broth innovation. Headwinds include private label trade-down pressure, changing consumer habits, and potential long-term impacts from GLP-1 weight loss drugs. - **Pricing dynamics:** Highly competitive retail pricing environment requiring heavy trade promotions and merchandising support to maintain shelf space. - **Revenue recognition notes:** Recognised at the point of delivery to retail customers, net of estimated trade promotions, consumer coupons, and discounts. - **Seasonality:** Highly seasonal. The second fiscal quarter (winter months) is historically the strongest due to peak soup and broth consumption. ### Snacks - **Segment name:** Snacks - **Revenue driver formula:** Volume (Pounds/Cases Sold) x Net Price Realisation per Unit - Divested Revenue - **Historical growth rate:** 3% to 5% organic CAGR. - **Key growth levers and headwinds:** Driven by power brands like Goldfish, Pepperidge Farm, and Snyder's of Hanover. Headwinds include consumer pushback on price increases and the loss of revenue from the Pop Secret divestiture. - **Pricing dynamics:** Stronger pricing power than the Meals segment due to highly differentiated brands and a direct-store-delivery network that ensures premium shelf placement. - **Revenue recognition notes:** Recognised upon delivery to independent distributors or direct retail customers, net of trade spend. - **Seasonality:** Relatively stable throughout the year, with slight upticks around back-to-school and holiday gathering seasons. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Ingredients (tomatoes, wheat, dairy, meat), packaging materials (steel cans, glass jars, cardboard), direct manufacturing labour, overhead, and inbound freight. - **Gross margin range:** 30.0% to 32.5% historically. - **Key input costs and commodity exposures:** Highly exposed to agricultural commodities, steel, and energy prices. - **How COGS scales with revenue:** Scales linearly with volume, though supply chain productivity programmes and operating leverage in manufacturing plants can drive slight margin expansion during high-volume quarters. ### Operating Expenses - **R&D:** Approximately 1% of net sales, covering recipe formulation, packaging innovation, and food safety. - **SG&A:** Split into Marketing and Selling expenses (approximately 8% to 10% of net sales) and Administrative expenses (approximately 5% to 7% of net sales). Marketing is heavily driven by advertising campaigns and retail partnerships. - **Depreciation & Amortisation:** Approximately 3% to 4% of net sales, reflecting the asset-heavy manufacturing base and amortisation of acquired intangible assets. - **Stock-Based Compensation:** Approximately 0.5% of net sales, relatively low compared to technology firms but standard for consumer staples. - **Restructuring / one-time charges:** Frequent occurrences. The company regularly records restructuring charges related to supply chain optimisation and acquisition integration (e.g., $50 million in expected synergies from Sovos). ### Margin Profile - **Gross margin:** 30.0% to 32.5%. - **EBITDA margin:** 18.0% to 20.0%. - **Operating margin (EBIT):** 14.0% to 16.0% (adjusted). - **Net margin:** 8.0% to 10.0%. - **Margin trend:** Stable to slightly expanding as the higher-margin Sovos Brands portfolio is integrated and supply chain productivity initiatives offset commodity inflation. ## Balance Sheet Structure - **Total assets:** Approximately $12 billion to $14 billion. - **Key asset categories:** Goodwill and Intangible Assets dominate the balance sheet due to historical acquisitions (Snyder's-Lance, Pacific Foods, Sovos Brands). - **Goodwill & intangibles as % of total assets:** Typically exceeds 50% of total assets. - **Working capital profile:** - **Days Sales Outstanding (DSO):** 25 to 35 days. - **Days Inventory Outstanding (DIO):** 55 to 65 days. - **Days Payable Outstanding (DPO):** 65 to 75 days. - **Net working capital as % of revenue:** Slightly positive to neutral. - **Working capital funding:** The company operates with a relatively tight working capital cycle, leveraging supplier payment terms to fund inventory builds ahead of the winter soup season. - **PP&E:** Represents manufacturing plants, bakeries, and distribution centres. Useful lives range from 15 to 40 years for buildings and 3 to 20 years for machinery. - **Right-of-use assets / operating leases:** Material but manageable, primarily related to warehouse space and vehicle fleets. ## Capital Expenditure & Investment - **Capex as % of revenue:** 4.5% to 5.5% (approximately $517 million in 2024). - **Maintenance capex vs. growth capex:** Roughly 60% maintenance and 40% growth (capacity expansion for high-demand products like Goldfish and Rao's). - **Major capex programmes underway or planned:** Expanding production capacity for the Distinctive Brands unit and automating existing supply chain facilities. - **Capitalised software / development costs:** Minimal compared to physical infrastructure. - **M&A pattern:** Transformational and bolt-on acquirer. The company uses M&A to pivot its portfolio towards higher-growth categories. - **Typical acquisition multiple paid:** The Sovos Brands acquisition was executed at approximately 14.6x adjusted EBITDA (including expected synergies). ## Debt & Capital Structure - **Total debt:** Approximately $5.5 billion to $6.5 billion following the Sovos acquisition. - **Debt/EBITDA ratio:** Currently around 3.0x, with management targeting a return to the 2.5x to 3.0x range. - **Credit rating:** Investment grade (typically BBB/Baa2). - **Key debt instruments:** Senior unsecured notes, commercial paper for short-term working capital, and revolving credit facilities. - **Maturity profile:** Staggered maturities over the next 10 to 30 years. - **Interest rate profile:** Predominantly fixed-rate bonds, with a weighted average cost of debt around 4.0% to 4.5%. - **Covenants:** Standard interest coverage and leverage ratio covenants on the revolving credit facility. - **Share repurchase programme:** Active but secondary to debt reduction and dividends. Authorised for up to $500 million, though execution depends on leverage targets. - **Dividend policy:** Highly consistent dividend payer. Payout ratio is typically 45% to 55% of adjusted net income, yielding around 3.0% to 4.0%. ## Cash Flow Characteristics - **Operating cash flow conversion:** OCF / Net Income typically ranges from 1.2x to 1.5x due to high depreciation and amortisation add-backs. - **Free cash flow margin:** 7.0% to 9.0% of net sales. - **Major non-cash items:** Depreciation, amortisation of intangibles, and deferred income taxes. - **Working capital cash flow impact:** Highly seasonal. Cash is used to build inventory in the first fiscal quarter and released in the second and third quarters. - **Capex intensity:** Moderate. The company must continually invest in physical plant infrastructure to maintain food safety and production efficiency. - **Cash tax rate vs. GAAP effective tax rate:** Cash taxes generally track closely to the GAAP effective tax rate of 23% to 25%, barring one-time legislative changes. ## Sheet Structure 1. **Assumptions**: Contains all hardcoded drivers for revenue growth, margins, working capital days, capex, and WACC. 2. **Revenue Build**: Forecasts volume and price/mix for Meals & Beverages and Snacks, adjusting for the Sovos acquisition and Pop Secret divestiture. 3. **Income Statement**: Projects consolidated net sales, COGS, gross profit, marketing and selling, administrative expenses, R&D, interest, and taxes. 4. **Balance Sheet**: Tracks cash, receivables, inventory, PP&E, goodwill, intangibles, payables, debt, and equity. 5. **Cash Flow Statement**: Bridges net income to operating cash flow, cash from investing (capex, M&A), and cash from financing (debt issuance/repayment, dividends). 6. **Debt Schedule**: Models the commercial paper and senior notes tranches, calculating interest expense and tracking mandatory repayments. 7. **DCF Valuation**: Calculates unlevered free cash flow, applies the WACC, and determines the implied share price using a terminal growth rate. ## Key Financial Relationships 1. Meals & Beverages Net Sales = Prior Year Meals & Beverages Net Sales * (1 + Organic Volume Growth + Organic Price/Mix Growth) + Acquired Sovos Revenue 2. Snacks Net Sales = Prior Year Snacks Net Sales * (1 + Organic Volume Growth + Organic Price/Mix Growth) - Divested Pop Secret Revenue 3. Consolidated Net Sales = Meals & Beverages Net Sales + Snacks Net Sales 4. Cost of Products Sold = Consolidated Net Sales * (1 - Gross Margin %) 5. Gross Profit = Consolidated Net Sales - Cost of Products Sold 6. Marketing and Selling Expenses = Consolidated Net Sales * Marketing & Selling % 7. Administrative Expenses = Consolidated Net Sales * Administrative Expense % 8. Adjusted EBIT = Gross Profit - Marketing and Selling Expenses - Administrative Expenses - R&D Expenses 9. Interest Expense = Average Total Debt Balance * Weighted Average Interest Rate 10. Income Tax Expense = (Adjusted EBIT - Interest Expense) * Effective Tax Rate 11. Accounts Receivable = (Consolidated Net Sales / 365) * DSO 12. Inventory = (Cost of Products Sold / 365) * DIO 13. Accounts Payable = (Cost of Products Sold / 365) * DPO 14. Free Cash Flow = Operating Cash Flow + Capital Expenditures ## Cross-Sheet Dependencies - The **Assumptions** sheet dictates the growth rates and margin profiles used in the **Revenue Build** and **Income Statement**. - The **Income Statement** generates Net Income, which flows to the top of the **Cash Flow Statement** and feeds Retained Earnings on the **Balance Sheet**. - The **Balance Sheet** working capital line items (Receivables, Inventory, Payables) dictate the changes in working capital on the **Cash Flow Statement**. - The **Cash Flow Statement** determines the ending cash balance, which flows back to the **Balance Sheet**. - The **Debt Schedule** calculates interest expense based on the debt balances from the **Balance Sheet**, feeding the **Income Statement**. This creates a circular reference if average debt balances are used to calculate interest. ## Sign Convention - Revenues, assets, and equity balances are represented as positive numbers. - Expenses (COGS, SG&A, Interest, Taxes) are represented as negative numbers in the Income Statement build to allow for simple summation. - Capital expenditures and dividends are represented as negative numbers in the Cash Flow Statement. - Increases in assets (e.g., rising inventory) are negative in the Cash Flow Statement, while increases in liabilities (e.g., rising payables) are positive. ## Things Most Likely to Go Wrong - Failing to normalise for the 53rd week in fiscal 2025, which management estimates adds approximately 2 points of growth to reported net sales and adjusted EBIT. - Mismodelling the Sovos Brands integration. The model must account for the $50 million in expected run-rate cost synergies over the next two years. - Ignoring the Pop Secret divestiture. The historical Snacks segment revenue must be adjusted downwards to create an accurate baseline for future organic growth. - Overestimating gross margins by ignoring the persistent reality of agricultural commodity inflation and supply chain wage pressures. - Miscalculating interest expense. The debt load increased significantly in 2024 to fund the $2.7 billion Sovos acquisition, altering the historical interest burden. - Misaligning the fiscal year. Campbell's fiscal year ends in late July or early August, not December. - Excluding restructuring charges entirely. While management reports "adjusted" metrics, cash restructuring costs are a regular feature of this business and impact true free cash flow. - Double-counting acquired growth. Sovos Brands revenue must be modelled as inorganic in year one and organic thereafter. ## Validation Checks - Gross margin should remain strictly within the 30.0% to 32.5% band based on historical performance and management guidance. - Capital expenditures should forecast between $500 million and $550 million annually. - The Debt to Adjusted EBITDA ratio should trend downwards from 3.0x towards the target range of 2.5x to 3.0x. - Marketing and selling expenses must remain between 8.0% and 10.0% of net sales to support brand equity. - The Balance Sheet must balance perfectly in every forecast period (Total Assets = Total Liabilities + Shareholders' Equity). - The effective tax rate should remain stable between 23.0% and 25.0%. - Operating Cash Flow to Net Income conversion should consistently exceed 1.1x due to heavy depreciation add-backs. - Dividend payout ratio should remain between 45% and 55% of adjusted net income. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Meals & Beverages Organic Growth | 1.5 | % | Reflects mature soup market offset by high-growth Rao's brand | | Snacks Organic Growth | 2.5 | % | Reflects steady pricing power and volume growth in power brands | | Gross Margin | 31.4 | % | Aligns with FY2024 adjusted gross margin | | Marketing & Selling % of Sales | 8.5 | % | Required to maintain brand equity and retail shelf space | | Administrative % of Sales | 6.0 | % | Historical average adjusted for Sovos synergies | | R&D % of Sales | 1.0 | % | Standard innovation spend for packaged food companies | | Effective Tax Rate | 24.0 | % | Blended US statutory and state tax rates | | Days Sales Outstanding (DSO) | 30 | Days | Based on historical receivables turnover | | Days Inventory Outstanding (DIO) | 60 | Days | Reflects seasonal inventory builds | | Days Payable Outstanding (DPO) | 70 | Days | Reflects strong supplier negotiating power | | Capex % of Sales | 5.2 | % | Aligns with management guidance of ~$530m on ~$10.3B sales | | Weighted Average Interest Rate | 4.5 | % | Blended rate of existing senior notes and commercial paper | | Dividend Payout Ratio | 50.0 | % | Consistent with historical capital return policy | | WACC | 7.5 | % | Standard discount rate for large-cap consumer staples | | Terminal Growth Rate | 2.0 | % | Aligns with long-term inflation and population growth | ## Data Sources & Benchmarks - **Filings:** SEC EDGAR (Form 10-K, Form 10-Q, Form 8-K) and The Campbell's Company Investor Relations website. - **Key Peers:** General Mills (GIS), Kraft Heinz (KHC), Conagra Brands (CAG), Kellanova (K), J.M. Smucker (SJM). - **Industry Data:** Nielsen or IRI scanner data for retail consumption trends and market share tracking in the US grocery channel. - **Consensus Estimates:** FactSet or Bloomberg for forward-looking analyst estimates on organic growth and adjusted EPS. ## Sources - The Campbell's Company Q4 2024 Earnings Press Release and Fiscal 2025 Guidance. - The Campbell's Company Fiscal 2024 Form 10-K. - Sovos Brands Acquisition Announcement and Integration Updates (March 2024). - Federal Reserve Economic Data (FRED) for macroeconomic inflation trends impacting COGS. --- ## Frequently asked questions ### What does The Campbell's Company do? Campbell's is a leading North American manufacturer and marketer of branded convenience food and beverage products, operating primarily through its Meals & Beverages and Snacks segments. The company produces shelf-stable and frozen foods, holding market-leading shares in categories like wet soup, premium pasta sauces, and crackers. ### What are the primary revenue drivers for Campbell's Company? Campbell's revenue is primarily driven by its two main segments, Meals & Beverages and Snacks, each contributing approximately 50% of net sales. Strategic acquisitions, such as the recent addition of high-growth brands like Rao's and noosa from Sovos Brands, also play a significant role in its growth trajectory. ### What is the assumed revenue growth rate in the Campbell's financial model? The financial model forecasts Campbell's revenue growth at approximately 3.65% annually. This growth rate is applied across the forecast horizon from FY2026 through FY2030 to project the company's future top-line performance. ### How does Campbell's Company manage its capital expenditures? Campbell's capital expenditure is projected at approximately 3.64% of revenue in the financial model, reflecting its asset-heavy manufacturing model. Historically, capex has ranged from 4.5% to 5.5% of revenue, with roughly 60% allocated to maintenance and 40% to growth initiatives like capacity expansion. ### What is the purpose of the Campbell's Company financial model? The model's purpose is to forecast Campbell's future cash flows and earnings to determine its intrinsic equity value. It also evaluates the margin accretion and deleveraging trajectory following the recent Sovos Brands acquisition. ### Can I download an Excel financial model for The Campbell's Company? Yes, an Excel financial model for The Campbell's Company is available for download. This model provides detailed financial forecasts for the company from FY2026 through FY2030, based on key assumptions. [Interactive forecast calculator](https://finamodel.com/companies/campbells/forecast)