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Campbell Soup Company (CPB - Analyst Report), in following the footsteps of The Hain Celestial Group, Inc. (HAIN - Analyst Report), recently agreed to acquire Plum Organics, a leading provider of premium organic baby food.  We believe that the acquisition will enhance Campbell Soup’s product categories and also provide access to a wider range of customers.

The manufacturer of high-quality food and simple meals, Campbell Soup has not disclosed the financial details of the transaction but intends to fund the acquisition with available credit limit. Further, the deal will likely be completed by the fourth quarter of fiscal 2013, subject to regulatory approvals.

We believe that with this acquisition, the company will be able to compete with Hain Celestial in every food category. Earlier this month, the latter had made a similar strategic move and acquired Ella’s Kitchen Group Limited, the manufacturer and distributor of premium organic baby food.

In the United States, the organic baby food segment is one of the most flourishing food categories, having grown at an average annual rate of 43% from 2010–2012. Currently, the segment is anticipated to be worth $2 billion in the country.

Founded in 2007, Plum Organics ranks second in the organic baby food category and fourth in the overall baby food category in the United States. Since its incorporation, it has launched over 150 products for babies, toddlers and kids in the U.S. and the U.K.

Campbell Soup, which competes with Flowers Foods, Inc. (FLO - Snapshot Report) and H. J. Heinz Company , intends to operate Plum Organics as a separate business under its North American division. Moreover, the company expects its kids-based soup, beverage and snacks annual sales to touch the $1 billion mark. During fiscal 2012, Plum Organics generated total revenue of $93 million. Campbell Soup revealed that the acquisition will not impact the company’s fiscal 2013 revenue guidance.

Campbell Soup, which currently carries a Zacks Rank #2 (Buy) intends to boost its top line and increase returns on investment through strategic measures. During fiscal 2012, the company made significant progress in this direction, including stabilization of the North American soup and simple meal business, overseas expansion, and growth of healthy beverages and baked snacks business. We believe that Campbell Soup’s prudent investment and strategic initiatives toward product innovation and brand building will lead to an increase in its customer base and profitability.

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