Why food companies want consumers to buy more of everything

Price increases have been good for profits, but packaged food and snack company executives see sustained volume growth as the way forward, so they are flooding store aisles with new takes on familiar products, such as frozen bar-b-que loaded chicken patties. Executives are also shelling out on marketing and scooping up brand names to entice inflation-wary consumers.

“If you’re [growing] through price increases, you’re usually just keeping up with your competition," said Anthony Gruber, chief financial officer at Mama’s Creations. “You’re not gaining any more product out on the shelves, and you’re not gaining more consumers."

The fresh-deli prepared food maker’s growth primarily comes from volume, which drove around 90% of sales in the three months ended Oct. 31, 2024.

Volume growth is even more critical when consumers are stretched, executives say. Discussions about brand, price and package size that historically took place once or twice a year now come up monthly to help adjust based on a product’s performance, said Rob Holston, head of the global and Americas consumer products sector group at EY.

Executives also are rethinking how long they should keep some products on store shelves, hoping limited runs of six to eight months spark excitement and sell more product, Holston said.

Recent special store aisle editions include mystery flavor Twinkies and candy cane-shaped tubes filled with Slim Jims.

Retailers are also taking closer measures of consumer behavior to determine whether shoppers are more brand or budget conscious.

Costco Wholesale is always focused on volume and holding prices down, said Gary Millerchip, the warehouse grocer’s CFO. He pointed to price cuts last year for several of the company’s own Kirkland Signature brand products: Organic peanut butter dropped 13% to $9.99; Sauvignon Blanc declined to $6.99 per bottle, from $7.49; and prices on frozen shrimp products fell $1 last year.

While some items on Costco’s shelves are cheaper, the wholesale giant still is holding on to a profit. After the price cut on frozen shrimp products, for instance, sales of crustacean-specific offerings grew 30%, while overall sales dollars rose 11%, Millerchip said.

“This approach lowers the amount of profit per item sold," he said. “But by growing the total amount of items sold, it can increase overall profit."

Retailers and food makers influence prices as they look to adjust to shoppers’ budgets and protect profit. Packaged food and snack companies measure how price changes and the number of products sold affect revenue. The closely watched metrics also account for so-called mix—typically added in with either price or volume, which includes where products are sold, packaging and size.

Price changes have carried more of the load in recent years. While pandemic-era inflation has slowed, some groceries have seen an uptick in prices since last fall and food costs remained near a 19-month high in December. Companies are holding back where possible from further price increases on inflation-wary consumers.

“Price has gone as far as it can probably go in most of these categories," said Holston. “So volume becomes king."

Conagra Brands is raising prices on its Swiss Miss hot cocoa and Duncan Hines products to offset higher expenses for cocoa and sugar. But the company is holding the line on other prices and for now absorbing higher costs for eggs and meat that affect products such as its frozen meals.

Conagra’s price mix rose in recent years, largely because of price increases, and boosted its profit. But with fewer price increases, its price mix in late 2023 slipped into negative territory for the first time since at least 2021. It has stayed negative since.

Organic net sales were also down for most of 2024 until the latest quarter ended Nov. 24, when they increased slightly because of volume improvements. Volumes also rose for the first time after at least eight consecutive quarters of declines.

Conagra executives last month said 67% of the company’s brands held or gained volume share in the latest three-month period, with microwave popcorn, chili and frozen single-serve meals among the standouts.

“We’re not where we want to get to in terms of volume growth on a continued basis," said Chief Financial Officer Dave Marberger. “But we broke positive, which is a really important threshold for us."

Not at all costs

Food and beverage companies’ volumes are starting to stabilize after three years of declines. Sales last year grew 2.6% compared with the prior year, with price mix up 1.6% and volume up 1.1%, said consumer-analytics firm Circana. It expects overall sales to rise 2% to 4% this year, price mix to increase 1.5% to 3.5%, and volume growth likely between 0% and 1%.

At J.M. Smucker, price and volume rose in the three months ended Oct. 31. The maker of Folgers coffee and Twinkies combines volume with mix, a metric that has increased at least over the company’s last four consecutive quarters. Smucker expects positive volume mix to continue in its snack and coffee segments through the current fiscal year ending in April, on the back of new treats such as the May launch of Jif peanut butter and chocolate flavored spread, the first major flavor update for the brand in a decade.

Smucker is also giving consumers options. Shoppers looking for Hostess doughnuts, for instance, can choose from two-packs, a sleeve of six or a bag of 15 depending on the doughnut size and flavor.

“We have to bring the right value proposition to the consumer," said Tucker Marshall, the company’s finance chief.

Food companies are balancing volume growth without putting more dollars behind products struggling with sales or discounts that affect profit.

“You need volume growth just to grow your business," said Nomad Foods CFO Ruben Baldew. “But we’re not going to hunt for volume at any cost."

The company behind frozen-food aisle brands Findus and Birds Eye in the U.K. and Ireland has notched two consecutive quarters of volume growth.

Raising prices to offset inflationary pressures is important for protecting margins, but with consumers hunting for value, it can be tempting to drop prices so frozen peas and chicken strips sell, Baldew said.

Still, that isn’t the primary way Baldew is looking for volume gains. Growth is instead pinned on new and refreshed products, quality ingredients, measured promotions, advertising and strong sales, he said, noting, “We don’t want to go into the price trap."

Write to Jennifer Williams at jennifer.williams@wsj.com