Conagra: “Bold, On-Trend Flavors and Modern Attributes” Boost Q4 Sales

As food producers report increased sales, food company Conagra reported today that it will expand its manufacturing capacity to meet the demand as many consumers likely continue cooking at home. The move comes as the global company continues to invest in updating its heritage brands for today’s consumer.

On the company’s fourth quarter earnings call today, Conagra executives reported that net sales increased 25.8% year-over-year to $3.3 billion, with double digit growth across its three retail segments: frozen, staples and snacks. Looking back at the year, Conagra saw “unprecedented progress,” president and CEO Sean Connolly said, adding that the company’s refrigerated & frozen segment grew in organic net sales throughout. Connolly said that the company’s recent investments in “bold, on-trend flavors and modern attributes” have paid off.

“This consistency shows that our modernization efforts have been working and are sustainable,” Connolly said.

The company, he noted, has been “dramatically transforming” its portfolio in the past five years which is helping bring “an element of pleasant surprise” to consumers during the pandemic. In the fourth quarter, Conagra saw growth in consumer trial along with solid repeat sales, Connolly said, including positive traction from new innovations like Healthy Choice Power Dressings and co-branded Healthy Choice and Gardein Power Bowls in Chipotle Chick’n and Be’f & Vegetable Stir Fry. He noted that most of Conagra’s retailer partners accommodated their reset schedules during the pandemic.

The company has more innovation in the pipeline as it seeks to capitalize on the “rediscovery and discovery” of eating at home brought on by the pandemic, Connolly said, noting dollar sales of new innovations in MULO grew 43% over 2019 and comprised 17% of total annual retail sales.

The gains in retail more than offset losses from foodservice shutdowns, said EVP and CFO David Marberger. Consumers are rediscovering their kitchens, pantries and freezers, Connolly added, as they are baking, cooking and eating together more during the pandemic. Consumers, he said, are “legitimately rediscovering certain things in their house — and they like it.”

Others are exploring food for the first time at home, learning new skills and understanding the quality and value of frozen foods, he said, noting that 39% of Conagra consumers are millennials.

“Many are learning how to truly cook for the first time or discovering they can create restaurant favorites at home,” he said. “Many of these [trends] have staying power and are likely to persist in a post-COVID world.”

While the demand has slowed, it’s still “at very high levels,” Connolly said. Despite uncertainty ahead, Connolly expects continued growth, noting these consumer trends around eating (and working) from home are likely to stick.

As that happens, frozen food will remain key, Connolly noted, adding that Conagra’s frozen food portfolio is popular amongst millennials and Gen X shoppers. The company’s frozen portfolio grew 26.2% year-over-year in dollar sales during the quarter, which also saw a 52.1% dollar sales increase for frozen plant-based meat alternatives. Additionally, 46% of Healthy Choice single-serve meal buyers were new, the company found.

“Frozen is an increasingly important domain for consumers especially in today’s environment,” he said.

While frozen vegetables’ dollar sales were up 26.5% year-over-year, and Bird’s Eye holds the top share in the category, Connolly said, the brand faced “unique dynamics” during the pandemic as surge outpaced capacity. Additionally, a Bird’s Eye plant temporarily closed due to COVID-19, he said, which further constrained capabilities, but is now back online. Moving forward, the company will add new production partners to rebuild its inventory and meet demand.

But it wasn’t just frozen that saw a surge in demand; Conagra’s snacking portfolio grew 20.1% year-over-year in Q4 with a 6.9 point gain in household penetration. In particular, popcorn sales grew 42.2% as consumers flocked to Orville Redenbacher, Angie’s Boom Chicka Pop and Act II for movie nights, Connolly said. Sweet treat sales grew 39.7% and meat snacks 12.4%, while seed snack sales declined 13.7 as convenience stores saw less traffic and sporting events were cancelled.

Additionally, Conagra’s staples business is “more relevant than ever before,” Connolly said, and saw a 7.7 point gain in household penetration during the quarter.

Another positive note is that once consumers are “in,” they return, Connolly said: all brands saw growth in repeat buyer rates, including plant-based brand Gardein which grew 132% year-over-year in repeat buyers while Healthy Choice saw a 105% increase. Currently, 64% of Conagra consumers are repeat purchasers.

“If we can get people to try our food they will come back for more, and that’s exactly what’s happening,” he noted.