All things go well for the large food companies – until they don’t.
Conagra posted disappointing sales figures this week, causing investors to show their concern as well as analysts, of course, who were expecting growth of 1.3%, but got a .7% decline from a year earlier. Conagra is the fourth largest packaged-food company and was doing splendidly in the field until last year when it acquired Pinnacle Foods. Recently, the company has struggled with the declining sales at Pinnacle Foods. And, for this reporting period, the company also cited Hunt’s as part of the problem, which had had to initiate a recall of its tomato paste cans during the quarter. Its Marie Callender’s frozen goods, which the company recently updated, was also problematic during this time. Conagra officials cited intensified competition for its frozen meals, reporting that rivals were using aggressive, short-term promotions on their competing offers. Which seems to imply that competitors are following Conagra’s lead and investing more in their frozen food categories. Conagra has had such a good run in the past and had become known as the poster child for brand renovation and for doing most things right from a management perspective. So the news comes as a greater disappointment in Conagra’s case then it might in that of other companies. Regardless, the quarter’s results are an ongoing reminder of how much effort toward innovative practices is required to maintain a constant level of sales in today’s food industry environment. Conagra continues to innovate and renovate its brands and has ambitious plans for new product rollouts (ref WSJ). In its presentation this week, the company leaders devoted a large amount of time to portraying the new plans for its plant-based meat product Gardein, for example. Conagra still has the best track record and at a valuation of 12.4 times forward earnings, it still appears to be at the head of the crowd in the food industry sector. My hope would be that company officials decline any further acquisitions and focus, instead, on renovation and innovation – those areas are what actually make companies great – and, if done well, they make great companies like Conagra even better.