Campbell Soup Closes 65-Year Old Soup Plant in Cost-Cutting Initiative

Campbell Soup (NYSE:CPB) is closing its oldest and most expensive manufacturing plant in the U.S. in an effort to cut down on production costs as soup sales continue to decline.

The Camden, N.J.-based canned soup maker said it will shut the Sacramento plant that employees 700 full-time workers in phases, with a goal of ceasing operations by July 2013.

The plant closures are expected to save about $30 million annually beginning if fiscal 2016, starting with around $21 million in savings in fiscal 2014.

The Sacramento facility, built in 1947, makes soups, sauces and beverages, but has the highest production costs on a per-case basis of any others in Campbell’s U.S. network. Its production will be shifted to Campbell's remaining three thermal plants in Maxton, N.C., Napoleon, Ohio and Paris, Texas.

The move reflects recent changes that have led to excess capacity at the remaining thermal plants, including improvements in productivity, declines in U.S. canned soup volume and new packaging formats that are often produced under co-manufacturing agreements.

Campbell Soup is also closing down its spice plant located in South Plainfield, N.J., which supplies ingredients to its U.S. thermal plants. Built in 1962, the facility employs 27 people. It will close in March, at which time spice production will be moved to its larger Milwaukee plant.

“We recognize this is difficult news for employees in Sacramento and South Plainfield,” Campbell’s President of North America, Mark Alexander, said in a statement.

The company forecasts incurring pre-tax costs of about $115 million related to the plant closures, most of which will be booked in fiscal 2013. The program will also require about $27 million in capital spending.

“As we position Campbell for profitable growth, we must continue to optimize our U.S. plant network and diversify our manufacturing capabilities,” Alexander said. “We expect the steps we’re announcing today to improve our competitiveness and performance by increasing our asset utilization, lowering our total delivered costs and enhancing the flexibility of our manufacturing network.”

Shares of Campbell edged lower on Thursday to $34.92 but are up more than 7% from 12 months ago.