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Conagra CEO sees new consumer behaviors outlasting pandemic

  • Company ramps up production, advertising to capitalize on past year’s shifts toward packaged foods

Conagra Brands Inc. said it is investing in added manufacturing capacity and marketing, aiming to maintain pandemic-driven sales momentum.

The coronavirus crisis has brought big food companies back into millions more homes, giving Conagra and its peers a chance to win over consumers who had dropped their brands for newer or trendier ones.

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Companies such as Campbell Soup Co. and General Mills Inc. also have said they want to capitalize on the growth by expanding marketing and production.

Conagra Chief Executive Sean Connolly said Thursday that he expects the new enthusiasm for cooking and packaged foods to continue “well into the future." The food giant is now adding production capacity for popcorn and some frozen meals.

“Even post-vaccines, people will be eating more at home," Mr. Connolly said in an interview. “A lot of our consumers have made investments in their homes. They’ve learned they like cooking, and some people will emerge financially strapped."

Conagra is spending money on marketing and to modernize some of its recipes and packaging. The company gained market share in the latest quarter, Mr. Connolly said, adding, “We believe that modern, high-quality products will beat outdated ones."

The executive said younger consumers in particular are buying its brands repeatedly. He said he expects them to continue to do so as they expand their families and work remotely more often even after the pandemic. The boost to Conagra’s grocery business comes at the expense of its sales to food-service outlets.

Conagra’s sales rose 8% on a comparable basis in its latest quarter. The company said its Marie Callender’s frozen meals, Orville Redenbacher popcorn and Duncan Hines cake mixes have benefited from people eating more at home. Conagra said it expects comparable sales for the current quarter to rise 6% to 8%.

Shares of Conagra fell 2% to $35 on Thursday. Its shares were up 6.6% over the past year through Wednesday, compared with 2.2% for the packaged-foods and meats index, and 15% for the S&P 500.

Demand for packaged foods at grocery stores has moderated since the beginning of the pandemic last spring. Still, sales growth at many companies is at least quadruple the levels they reported before the public-health crisis.

Credit Suisse food analyst Robert Moskow said in a note to investors this week that Conagra might be too optimistic about the potential for brands that were unpopular before the pandemic, such as Chef Boyardee and Duncan Hines, to maintain sales momentum after it ends.

Conagra’s projected operating margin for its continuing quarter was lower than analysts expected. Some, including Mr. Moskow, have questioned the food maker’s decision to spend more on nontraditional advertising such as social media.

“We are meeting consumers where they are," Mr. Connolly said.

Conagra said it has paid down debt faster than planned following its 2018 acquisition of Pinnacle Foods, potentially opening the door for small acquisitions or share buybacks. Mr. Connolly said the company is also open to divestitures at the right price.

Overall for the quarter, which ended Nov. 29, Conagra reported a 6.2% rise in sales to about $3 billion. Its profit rose to $380 million from $262 million a year earlier. The company’s adjusted profit of 81 cents a share beat the 74 cents a share analysts predicted.

This story has been published from a wire agency feed without modifications to the text.

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