'Long forgotten' legacy brands are 'growing strongly again,' says Conagra Brands... but will it last past the lockdown?

Speaking on the firm’s Q3 earnings call Wednesday, Connolly noted that many large CPG companies have experienced a surge in sales as shoppers stock up, and expect to see a sustained lift (albeit not at surge levels) in the weeks to come as the bulk of food sales switch to retail.

“Products like ours are getting levels of trial that were not anticipated and that could turn into consistent users over time as that trial converts to repeat” ​[a phenomenon recently predicted​​ by Rabobank’s Nick Fereday].”

“Large established brands that had long been forgotten are growing strongly again,” ​added Connolly, who sits at the helm of a huge portfolio of packaged food brands, from Healthy Choice and Marie Callender’s to Slim Jim, Hunt’s, evol, Alexia, Duncan Hines, and Gardein.

“People are stocking up and they’re stocking up with foods of all kinds, across all temperature states including categories like frozen, so just logically we know we are getting higher levels of trial here during this phenomenon."​

‘In e-commerce, we’re reaching a large number of new triers that we had not reached previously’​

He added: “In the world of e-commerce, what we are seeing is that we are reaching a large number of new triers that we had not reached previously.”​

Will new trial translate to new customers? ​

But will shoppers ditch these legacy brands once the crisis passes, or could some of these new customers become loyal repeat purchasers?

“When you get new triers like this, you tend to be getting lighter users,” ​Connolly conceded.

“But the point of all of this is it should help categories like frozen, it should help some of our other categories that people may have forgotten about, but it’s just too early to quantify the impact of that.”​

Prioritizing top SKUs​

When it comes to inventory management, Conagra Brands has pared back production of some products to focus on getting high-velocity SKUs into stores, said Connolly.

“We have pared back on some of our SKUs so that we can continue to serve the highest velocity SKUs. Keeping food in stock so that we can feed America is our top priority right now, as it is the priority of our retailers. ​That has caused us to reprioritize in terms of SKUs.”​

Situation as regards to retailer resets is ‘fluid’​

Asked whether retailers were delaying shelf resets – when buyers typically review categories and reallocate space – he said:

“​In the​ case of the innovation resets, I would tell you the word that comes to mind for me is ‘fluid.’ We are hearing different things from different customers.”​

Shelf resets: ‘We are hearing different things from different customers’​

He added: “Many customers, most customers, are just trying to keep products on the shelf right now. Some customers, big ones, have said to us that they want to continue with the shelf set timing; others had said we’re going to push that back a bit, just so we can ensure that we don’t have any complexity and anything going on at the store shelves that’s going to be a distraction from keeping products in stock.​

“I think you’re going to see some customers take it ​[new products] sooner, some customers take it later, and it’s not as if those who take it later would be in a deficit position if this pandemic does not abate anytime soon, because as we’re seeing right up until today, the consumer pull remains extremely strong across the board.”​

Drop-off in foodservice demand more than offset by increased retail demand​

While about 10% of Conagra Brands’ sales are in the foodservice segment, the reduction in demand experienced there had been more than offset by the surge in retail demand, said Connolly.

“So far in Q4, foodservice shipment declines have accelerated and trends imply a Q4 organic net sales decline that could be in the range of down 50% to 60% versus last year. ​[But] given the depth and breadth of our portfolio, we are well positioned to meet this increased demand for at-home consumption.”​