ConAgra changes tactics after summer of crazy deals: 'We need to be more price competitive'

By Elaine WATSON

- Last updated on GMT

ConAgra Foods CEO Gary Rodkin: 'We don't like this kind of environment. It's not ideal for long-term brand health and margins, but we will do what's necessary to improve volume'
ConAgra Foods CEO Gary Rodkin: 'We don't like this kind of environment. It's not ideal for long-term brand health and margins, but we will do what's necessary to improve volume'

Related tags: Brand, Conagra foods

ConAgra has committed to pumping more resources into trade spending following a summer of crazy discounting in the frozen aisles and some other parts of the store as firms attempted to tackle weak volumes with bigger discounts, said bosses yesterday.  

Speaking on ConAgra's first quarter earnings call for fiscal 2014, CEO Gary Rodkin said: “We've seen competitors really dial it up this summer.

"In one large part of the ​[frozen meal] segment, merchandising that was, on average, about four for $10 or $2.50 apiece went to about five for $10 or $2 apiece and in some cases, hotter than that.”

As the summer went on, we saw trade spending accelerate

He added: “As the summer went on, we saw trade spending accelerate, and this is because customers, key customers were competing for traffic and manufacturers really heated up their competition for market share.

“We frankly lost some share of quality merchandising and, in turn, market share and, of course, volume. We're now in the process of course-correcting that.”

He added: “We had been on a path of increasing our marketing dollars over the last several years, but this environment calls for some course correction toward more in-store merchandising.

“We have shifted some dollars from advertising to merchandising to be more competitive. Said simply, we're acknowledging that in this environment, we need to be more price competitive in certain categories.”

We don't like this kind of environment… but we will do what's necessary to improve volume

C-store-shopping
Rodkin: 'As the summer went on, we saw trade spending accelerate, and this is because customers, key customers were competing for traffic and manufacturers really heated up their competition for market share'

But will it work?

“We know from past experience that when we get our fair share of merchandising, we get a lift in volumes”, ​claimed Rodkin.

“To be clear, we don't like this kind of environment. It's not ideal for long-term brand health and margins. But we will do what's necessary to improve volume in a fiscally responsible way.”

He added: “We will continue to support our brands that respond well to advertising spend; brands like Marie Callender's, Bertolli, Reddi-wip, PAM and others. This is simply about balance and what is needed in the current environment.”

But brand building is still important, he said: “It’s incumbent upon us in the frozen industry to convince folks of the value of the frozen meal. If you went into one of our plants, you'd see that it's just a giant kitchen and the food is really good quality, good nutrition, very good value. We need this to take some of the stigma away from the process side of this, and that's work that is ongoing.”

We got the price value equation wrong

As for recent product launches, new Bertolli items, premium meals and desserts, and Marie Callender's single-serve cakes were doing well, he said.

“But for a few of the new items this go round, quite frankly, we got the price value equation wrong. What I mean by that is we believed the premium quality of our Marie Callender's breakfast sandwiches and our Orville Redenbacher's Pop Crunch, for example, would command a premium price in their respective categories.

“So even with superior products, we know we need to work harder and smarter at getting the value equation right.”

Referring to the integration of private label giant Ralcorp, he said: “We like what we're seeing on cost synergies. We're off to a good start and on track with expectations for fiscal 2014 and are confident about our projections.”

ConAgra-basket-landscape
We had been on a path of increasing our marketing dollars over the last several years, but this environment calls for some course correction toward more in-store merchandising

Q1 net income fell 42%

Shares in ConAgra Foods fell sharply yesterday as it said net income fell 42% to $144.3m in the quarter ended August 25 on sales up 27% to $4.2bn, below analyst estimates of $4.29bn.

Meanwhile, it expects second-quarter earnings to be about 55 cents per share (analysts had expected 63 cents per share).

ConAgra is best known for its branded grocery products such as Marie Callender's frozen meals, Hebrew National hot dogs and Hunt's canned vegetables, but it also supplies frozen potato, vegetable, spice and grain products to restaurants, foodservice operators and commercial customers.

Ralcorp is best known for its private-label foods for retailers and frozen bakery products for in-store bakeries and foodservice customers.  

Related topics: Manufacturers

Related news

Follow us

Products

View more

Webinars