Conagra Warns of Near-Term Supply Strains

Conagra Warns of Near-Term Supply Strains
Conagra made gains with refrigerated and frozen foods in its latest financial quarter.

Conagra Brands Inc. said this week it will put more investment toward manufacturing capacity amid increasing consumer demand for at-home food during the the pandemic.

The company this week reported a 21.5% year-over-year increase in net sales for the fiscal fourth quarter ended ended May 31, to $3.3 billion. That revenue increase, the company said, was driven by a 21% year-over-year increase in volume.

“The significant volume increase was primarily driven by consumers increasing their at-home food consumption as a result of the COVID-19 pandemic, which benefitted the Company's retail businesses and negatively impacted the Foodservice segment,” Conagra said.

Significant Q4 growth, in general, also came from e-commerce.

More specifically, net sales for Conagra’s Refrigerated and Frozen segment increased 23.3% year over year in Q4 to $1.4 billion. “Volume increased across multiple categories as consumers increased their at-home food consumption in connection with the pandemic. As a result, many brands, including Birds Eye, Marie Callender's, Banquet, Healthy Choice, P.F. Chang's Home Menu, Odom's Tennessee Pride, and Reddi-wip experienced considerable organic volume and net sales growth in the quarter.”

For the Grocery and Snacks segment, Q4 sales hit $1.5 billion, up 44.1% year over year. “Several grocery and snack brands experienced significant double-digit organic sales growth rate in the quarter, including Chef Boyardee, Hunt's, Libby's, Armour, Duncan Hines, Orville Redenbacher's, Snack Pack, and Slim Jim,” Conagra reported.

By contrast, net sales for the Foodservice segment decreased 27.9% to $193 million. “Volume decreased 34.2% primarily driven by lower restaurant traffic as a result of the pandemic,” the company reported.

On the Q4 earnings conference call with investors, Conagra President and CEO Sean Connolly described the initial stages of pandemic consumer behavior.

“We had this massive initial surge, right, with pantry stocking and alike, and that went a long way toward kind of depleting our inventories and really starting to deplete customer inventories,” Connolly said. “Since then, while we haven't been at the level of that initial surge, demand has been extremely high.”

He then addressed how how the company plans to deal with consumer demand during the second half of 2020, months that could bring more spread of the virus and more lockdowns. “With another surge, that's just going to put more strain on it,” he said. “So we are focused. We're doing everything in our power to add additional capacity so that we can protect the upside to the best of our ability, but it is going to be strained near term.”

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