Arnott’s pours $8m into Campbell’s canned soup factory upgrade

Arnott’s will pour $8m into expanding its Campbell’s soup factory in Shepparton to transform it into a hub for an expected lift in export volumes.

Arnott’s chief executive George Zoghbi says the investment will allow the plant to manufacture an extra 16.5 million kilograms of Campbell’s soups and stocks each year.

The Arnott’s Group, which owns some of most well known biscuit, cooking and soups brands in the supermarket aisle, will pour $8m into expanding its Campbell’s canned soup factory in Shepparton, Victoria to transform it into a hub for an expected fourfold lift in export volumes.

The sizeable investment is being driven by a growing taste for the soups in Asia, in contrast to flatlining and in some categories declining sales in Australia, with the Shepparton plant to manufacture an extra 16.5 million kilograms of Campbell’s soups and stocks each year, reflecting a 30 per cent lift in volumes.

However, Arnott’s is not overexposing itself to the growing prickly trade relationship between China and Australia that could endanger its Asian export strategy as it has done to the nation’s wine, coal, barley and beef industries, and is focusing markets on China’s doorstep such as Taiwan, Hong Kong and Thailand.

“Currently we have very good established markets in Asia for our soup business, such as Malaysia, Singapore, Japan and these markets are growing, they are supplied by US-based manufacturing and that will be moving to an Australian base,” Arnott’s chief executive George Zoghbi told The Australian.

“We stop at Southeast Asia. We go all the way up to Hong Kong … our three strongest markets are Malaysia, Singapore and Hong Kong. We still have a runway for growth in these markets in Southeast Asia, Australia and New Zealand.”

The 155-year-old Arnott’s Group, famous for its Tim Tam biscuits, was bought from US giant Campbell Soup Co last year by private equity firm KKR for $US2.2bn. Now based in Australia, it also has the local licence to the Campbell’s soup brands and cooking ingredients, manufacturing in Shepparton brands such as Country Ladle, Chunky, Campbell’s Condensed, Campbell’s Real Stock and V8 juices.

Asian consumers are well-known for their affinity for Australian-made health, beauty and food products, from vitamins and skincare to infant milk formula and soaps, and are increasingly reaching for canned soup in their supermarkets.

“We have very good established markets in Asia for our soup business, such as Malaysia, Singapore, Japan and these markets are growing, they are supplied by US-based manufacturing and that will be moving to an Australian base,” Mr Zoghbi said.

“Our brands, have been established for a long time and enjoyed by the consumers in this market, and always when you have food products particularly coming from Australia it is very well thought of because of the quality of Australian manufacturing.

“Also in our soup we are using a lot of Australian ingredients, which have a high value in the consumer’s mind as opposed to other countries.”

The Campbell’s soup factory in Shepparton.

Arnott’s will conduct an $8m upgrade of the Shepparton plant as part of an infrastructure investment program across the Arnott’s network over the next three years.

The upgrade will enable a 30 per cent increase in overall production volume at Campbell’s Shepparton in the next 12 months and 400 per cent increase in export volume. The new volume is expected to create up to a dozen new jobs as production increases to support demand, with indirect economic benefits flowing from a $10m increase annually in use of more farm produce, new operational expenditure and new employment in regional Victoria.

“We are proud that this iconic plant in regional Victoria will drive more Australian exports to Asia,” Mr Zoghbi said. “We plan to be a regional powerhouse of food brands based in Australia, and today, Shepparton brings us closer to that goal.”

Mr Zoghbi said declining domestic demand for soup products had meant its Shepparton plant was under-utilised. “This upgrade also secures the plant’s medium-term future,” he said.

By June 2021, a $3.9m investment in new plant and machinery will enable the Shepparton plant to produce larger soup can sizes in demand in a range of Asian markets, including a 1.4kg can. A further $3.9m is slated for the next financial year to upgrade plant infrastructure and equipment used to make non-canned products, such as stocks.

Turning to recent trading, Mr Zoghbi said other parts of the Arnott’s business were thriving this year as COVID-19 and lockdowns encouraged home cooking and demand for the company’s stocks.

“We are still trading very well,” he said. “The at-home consumption during COVID, we benefited from that across all our categories. We are still growing at double digits and our biscuits business is still growing strongly at mid-single digits if you looked at scanned sales. “The strongest categories are those that use ingredients for cooking, like our Campbell’s real stock category, which hasn’t seen growth of less than 20 per cent in any months.”