Campbell Soup Co. (NYSE: CPB) shares did not react much early on Friday despite the company making a sizable acquisition. The American soup giant is looking to add some more organic flavor to its portfolio by buying Pacific Foods for a total of $700 million in cash. In the past Campbell has tried to move into organic foods but was not entirely successful, so the question is whether Campbell can hit the mark on this one.

Pacific Foods was founded in 1987 and is a leading producer of organic broth and soup, which also produces shelf-stable plant-based beverages and other meals and sides. Pacific Foods has a sustained track record of growth, and it generated approximately $218 million in trailing 12 month net sales as of May 31, 2017.

This acquisition will help accelerate Campbell’s efforts to deliver real food and beverages that meet consumers’ changing tastes and preferences. At the same time, it will further Campbell’s efforts to drive innovation in health and well-being to reinvent the center store, while giving the company more access to natural and organic customers and channels.

This is Campbell’s fifth acquisition in five years as the company is looking to expand its organic portfolio to meet a growing market. Looking at its acquisitions over this time, the direction is obviously tied to this trend.

Keep in mind that organic food is a growing trend in the United States, with a total addressable market of over $11 billion, which has grown at a compound annual growth rate of 15.3% over the past four years.

Denise Morrison, Campbell’s president and chief executive, commented:

This acquisition is consistent with our Purpose, ‘Real food that matters for life’s moments.’ Pacific is an authentic brand with a loyal consumer following. The acquisition allows us to expand into faster-growing spaces such as organic and functional food.

Although $700 million is nothing to sneeze at, it makes up just under 5% of Campbell’s total market cap of $15.7 billion.

Shares of Campbell Soup traded up 0.6% at $51.98 Friday morning, with a consensus analyst price target of $57.79 and a 52-week trading range of $51.62 to $67.12.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.