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ConAgra Foods: ‘We believe in frozen, we have an innovation machine’

By Elaine WATSON , 21-Sep-2012
Last updated on 21-Sep-2012 at 14:53 GMT2012-09-21T14:53:12Z

While higher ticket prices have dented volumes of its Banquet brand, ConAgra is predicting a steady rebound in the frozen case this year as innovative new products gain traction.

Speaking to analysts on a conference call about the firm’s Q1, 2013 quarter results, chief executive Gary Rodkin said:“Our latest round of new products, including Healthy Choice and Marie Callender's Bakes, Healthy Choice Greek Frozen Yogurt and the Marie Callender's single-serve cream pies are all ramping up in terms of store presence and points of distribution.

“We expect these to make a good contribution to sales and volume for the full fiscal year, and we'll support them with marketing and additional new items as the year progresses.”

The feedback we get from our customers is that we are, by far, the best innovator…

He added: “The feedback we get consistently from our customers is that we are, by far, the best innovator.We are doing things that are platform oriented, not really one-off.”

Recently-acquired brands PF Chang’s and Bertolli have also opened up new opportunities in the frozen case, he said.

“These brands are targeted at a higher income segment at higher price points and… bring us new consumers and new eating occasions.”

We'll bring out some things for breakfast that will get consumers interested

President of Consumer Foods André Hawaux added: “In frozen we have an innovation machine… We feel very good about the capabilities to innovate off of those two brands unbelievably well in multi-serve but also in other areas.

“We've now sort of captured the frozen case, if you will, from sunrise to sunset in the sense that we have it now at the breakfast occasion all the way through the dessert occasion.

“We're looking at innovation across that entire lineup. We think we'll bring out some things for breakfast that will get consumers interested.”

We chose favorable mix and margins over volume: We've made the right trade-offs

'We still provide a high-quality protein and starch and the vegetable, in many cases for a $1, and that's unbelievable value'

Asked whether increasing the price of Banquet products was a risky strategy, Rodkin said: “It would be very difficult to significantly undercut a brand like Banquet.

Hawaux added: “We still provide a high-quality protein and starch and the vegetable, in many cases for a $1, and that's unbelievable value. A year ago, it was being sold for $0.88, and that was unsustainable from a margin perspective.

“We've made the right trade-offs. We haven't lost a lot of consumers in that franchise, and they will be back as we lap that pricing.”

We’re interested in the value-added side of private label

Asked about ConAgra’s ambitions in private label, Rodkin said: “We're interested in the value-added side of private label.

“Retailers are interested in developing and improving their own store brands. And we've got a well-developed infrastructure on private label.”

He added: “We’re leveraging those capabilities that we have across the company on the branded side like innovation and food safety and category management and just our overall talent.”

Consumer Foods: We chose favorable mix and margins over volume

Omaha-based ConAgra Foods is organized into two businesses: Consumer Foods, which sells grocery brands such as Healthy Choice and Egg Beaters; and Commercial Foods, which supplies foodservice and manufacturing customers with frozen potato products, flours and Spicetec flavors and seasonings

Sales in Consumer Foods were up 8% in the first quarter, driven by acquisitions and higher prices. However, organic volumes dropped 4%.

Sales in the Commercial Foods division were up 5%, driven by a strong performance fromLamb Weston, which has been moving into higher margin products such as sweet potato fries, said Rodkin.

“Domestically, retail demand for food prepared at home continues to be relatively soft, but away-from-home eating occasions have held up better, and we've benefited from that.”

On the acquisition trail

ConAgra, which made multiple abortive attempts to buy Ralcorp last year, has since made several acquisitions including Unilever’s PF Chang’s and Bertolli brands; Kangaroo Brands’ private label pita chips business; breakfast sandwiches and sausages maker Odom's Tennessee Pride; packaged fruit, veg and snacks maker Del Monte Canada; and private label snack maker National Pretzel Company.

And more deals are in the pipeline, said Rodkin: “What we're not going to do is just plant a lot of flags; we're going to build out from the infrastructure in places that we already have pretty good scale.

“It could be places like India with our JV, places like Mexico.”

Q1 results, 2013

ConAgra posted a sharp rise in net income to $252m in the 13 weeks to August 26 compared with $94m in Q1, 2012, ahead of analysts’ expectations.

Net sales rose 6.7% to $3.31bn.