Mark A. Clouse
President and Chief Executive Officer at Campbell Soup
Thanks, Rebecca. Good morning, everyone, and thank you for joining our first quarter fiscal 2023 conference call. I hope you had a happy Thanksgiving and filled up on Green Bean casserole, Pepperidge Farm stuffing, and plenty of our delicious snacks and cookies. As you read in our press release this morning, our fiscal year is off to a fast start. Our strong year-over-year performance across all three key metrics reflects the continued strength of our portfolio, and our successful efforts to substantially mitigate significant inflation through a combination of pricing and productivity improvements. I am also encouraged that we delivered those results while increasing investments in our brands and ensuring we remain a good value to consumers in this difficult economic time.
We also made significant progress on market share versus the fourth quarter, growing or holding share in most of our categories year-over-year. We are very pleased that the combination of stronger supply, accelerating innovation and appropriate investment is translating into strong profitable share growth as we had planned. Overall, Campbell's portfolio continues to demonstrate compelling consumer relevance and is well positioned for the current economic environment.
We recognize it's still early in our fiscal year, and the environment does remain challenging. But given the strength of the first quarter performance, the health of our brands and our consistent execution, we've increased our guidance to reflect our current outlook. Mick will provide more details on the drivers shortly. But this quarter's results and the full year outlook demonstrate the significant progress we've made across our brands, supply chain, culture and capabilities. Although there remains more to do on the business as we continue unlocking our full growth potential, this quarter's results represent a positive milestone in our journey. Organic net sales increased 15% to $2.6 billion due to both inflation-driven pricing and strong consumer demand.
While we did see some volume declines, it was partially mitigated by expected retail inventory recovery and a strong rebound in unmeasured channels, especially food service. Dollar consumption was up 10% in the quarter versus the prior year and 21% versus three years ago. As expected, we shipped ahead of consumption in the quarter as our supply chain execution and service levels continue to improve and retailers rebuild inventory levels. The improved supply also allowed us to significantly increase our marketing investment in both divisions as planned.
Turning to adjusted EBIT. Higher adjusted gross profit, partially offset by higher marketing and selling expenses and higher adjusted other expenses, resulted in a 15% increase in adjusted EBIT. The team has done an excellent job navigating inflation, leveraging a good balance of different tools. I also can see that our agility has improved in reacting to the volatile environment. As an example, we recently announced a very targeted Wave 4 pricing action on products where our input costs have gone up further. Adjusted earnings per share were $1.02, also up 15%, as the flow-through of adjusted EBIT and lower weighted average diluted shares were partially offset by higher adjusted taxes.
I'm thrilled with our progress on dollar share. We grew our held share in most categories year-over-year and also grew share versus the prior quarter. In fact, 10 out of 15 of our key brands grew share in the quarter, some of which responded faster and more significantly than expected as inventory and support were added. Even in categories where we experienced modest share declines, such as soup and pretzels, our share performance improved sequentially as planned. There is no question that the focus of our portfolio from a category and geographic perspective is a distinct advantage right now and is enabling us to effectively deploy investment and drive consistently strong execution.
Let's look at our divisions. Starting with Meals & Beverages, which delivered a strong first quarter, with reported and organic net sales growth of 15%. In-market performance continues to show the underlying health of our portfolio with dollar consumption growing 8% over the prior year and up 17% versus three years ago. The recovery in our supply chain resulted in materially improved service levels, up over 18 points versus the prior year, enabling retailers to replenish inventory in the quarter and be well positioned on supply heading into the critical holiday season. We also saw a marked recovery in our foodservice business as supply has also improved in this important channel.
Turning to Slide 10. Our strong dollar consumption growth was across most of our Meals & Beverages portfolio as we are well positioned within growing categories. The growth of our brands in key segments, namely ready-to-serve or RTS soups, Italian sauces, Mexican sauces and select segments in our condensed soup well outpaced the growth of their respective categories.
Turning to Slide 11. Our consumer insights show that consumers continue to cut back on out-of-home eating and are migrating from more expensive grocery categories as they seek ways to ease the impact of inflation. Consumers are making changes to stretch their budget and following several years of becoming more confident and comfortable with cooking, they continue to turn to our categories and importantly, our brands as evidenced by the continued growth of our Meals & Beverages business.
With consumers preparing about 80% of meals from home, our brands are well positioned for sustained growth, delivering consumers the quality, value and convenience they seek for simple at-home meals and quick-scratch cooking. For example, our spaghetti carbonara recipe is a top performer year-over-year as it easily and economically feeds a family for about $1.53 a serving.
Turning to Slide 12. U.S. soup net sales grew 11% over the prior year, with gains in ready-to-serve, condensed and broth. We continue to see a favorable net pricing benefit with dollar consumption up 5%, partially offset by pricing-related volume declines. Elasticities remain below historical levels. And while our total dollar share of U.S. soup declined, it was by less than 1 point. We had positive dollar share growth in the quarter in key strategic segments, partially offset by competitive share losses to private label in total condensed and broth as expected. We continue to focus on price gaps and are adding equity support with meaningful innovation to maintain the strength of the category and our brands over the long run. Chunky continued its positive momentum with dollar share up 1.6 points in the quarter coming from strong base velocities as we further recovered on shelf and 13% dollar consumption growth versus the prior year. This was the fifth consecutive quarter Chunky held or gained volume share, reflecting the powerful combination of a strong base business, highly relevant innovation and increased investment in compelling advertising. Versus three years ago, Chunky grew dollar consumption by 26%. Our chunky digital and social activations are seeing notable year-over-year increases in engagement and our Lunchtime is Your Halftime campaign is resonating, particularly with younger consumers as we expand our reach through our NFL partnership and gaming via EA Madden.
Closing out the slide, Pacific has returned to growth as a result of restored supply and innovation, with dollar consumption of Pacific RTS soup up 21% versus prior year and share grew by 0.4 points in the quarter. Pacific's growth is outpacing organic subsegments in the quarter, and the launch of RTS cans is the leading contributor to the growth with millennial buyers up 16% versus prior year.
Turning to the next slide and our progress on building a $1 billion sauce business, Prego continues to solidify our position as the branded dollar share leader in the Italian sauce category. Growth in the quarter was driven by both pricing and higher volume, reflecting improved service versus a year ago. The brand had strong in-market dollar consumption of plus 21% and share growth of 1.1 points versus prior year. Pace also performed well, with dollar share gains of 0.4 points, marking the third consecutive quarter of dollar share growth and increased dollar consumption of 16%.
Turning to Snacks. We had an impressive quarter as our brands rapidly responded to the recovery of supply and increased investment with accelerated top line growth and share improvement. The strong 15% top line growth, which was fueled by our power brands, reflected pricing actions offset by slight pricing-related volume declines. Sales growth exceeded dollar consumption of 13% versus prior year due to the replenishment of retailer inventory, which have been depleted in the prior year due to supply challenges.
As you'll see on the next slide, in-market dollar consumption in our power brands was up 15%, with six of eight brands growing double digits. On a three-year basis, dollar consumption was up 28%, with all eight power brands growing double digits and four of our five salty power brands growing over 30%. This also supports the historical learning that consumer snacking behavior is very resilient and relevant in tough economic environments. Overall, six of our eight power brands grew dollar share in the first quarter, including Cape Cod, Snack Factory and Lance, each of which grew share by over 1 point.
As we have recovered from significant supply constraints that began in the second quarter of fiscal 2022, we began to see sequential dollar share improvement quarter-to-quarter. Specifically, over the last four quarters, Goldfish gained 0.6 points, Snyder's of Hanover gained 3.5 points, Lance is up 4.8 points, and Pepperidge Farm cookies were up 0.4 points. Our snack brands are also highly differentiated against competition with positive velocity trends.
In fact, on Slide 16, you'll see that our brands are growing faster than their respective categories. And five out of seven power brand categories, including crackers, Kettle chips, deli snacks, organic tortilla chips and sandwich crackers.
Consumers continue to show their love for Goldfish and respond to the steps we've taken to broaden the appeal of this iconic brand. This is a remarkable growth story for one of our most important brands. We continue to deliver against our strategy to expand our consumer base with robust and relevant innovation and effective marketing that engages the entire family, not just younger kids. In fact, for the third time in a row, Goldfish crackers were teens most preferred snack brand according to Piper Sandler's Fall 2022, Taking Stock With Teens survey. Our Goldfish Dunkin' Pumpkin Spice crackers were the top turning new cracker item and leading pumpkin spice snacking item during the quarter. We've continued this momentum with a new partnership with Disney Marvel and our limited-edition Black Panther: Wakanda Forever Goldfish, which hit the store shelves last month. And keep an eye out for the limited return of Goldfish Frank's RedHot Crackers in the coming months.
We also continued to win in salty snacks, with dollar consumption and dollar share gains in Kettle Chips, Cape Cod, Snack Factory and Late July. Our Snack Factory Pretzel Crisps and Snyder's of Hanover will have new holiday activations inspiring new occasions and elevating every holiday snack tray.
And finally, I want to highlight Pepperidge Farm cookies. The holidays are their Super Bowl and with supply back, we're able to return to full speed through the holidays. We've introduced new packaging designs across the portfolio from Milano to Chessman and brought back holiday favorites, like Linzer cookies. We also have new limited-edition Milano Hazelnut Hot Cocoa, and with the return of the Milano Fancy Santa activation, we hope to do our share in making the holidays a little more special.
In closing, I'm really pleased with our strong year-over-year performance and the fast start to the year. This is perhaps one of the most complete quarters we've delivered. We continue to build momentum and confidence with a powerful portfolio of brands in both divisions and the continued strength of our supply chain execution. We're recovering on share and driving growth in key categories. And with our portfolio focus, we are well positioned for the current consumer and economic environment.
Our innovation is resonating with consumers, driving more engagement, especially among younger households and there's more to come. It's important to remember that there's still much to do on our business, and the environment does remain challenging. But being able to face those challenges off a stronger and more stable foundation is very encouraging and bodes well for the future.
Before turning it over to Mick, I wanted to comment on our recent management changes. As we announced in November, Mick has been appointed President, Meals & Beverages; and Chris Foley is now President of Snacks. Mick will continue to serve as Chief Financial Officer until a successor to this role is in place. The search is going very well, and I look forward to updating you in the future.
Both Mick and Chris have played a significant role in Campbell's transformation over the last several years by enhancing our culture and improving our business performance. I'm confident that they are the right leaders to continue to build our momentum and unlock our full growth potential. In closing, I'd like to thank all of the Campbell's team for their hard work and wish all of them and you happy holidays. With that, over to Mick.