ConAgra increasing consumer pull for brands
by Eric Schroeder
OMAHA — Acquisitions and good organic volume performance spurred 8% sales growth in the Consumer Foods unit of ConAgra Foods, Inc. during the fiscal year ended May 26. Operating income also improved year-over-year, climbing 4% to $1,096.5 million in fiscal 2013 from $1,053.3 million in fiscal 2012.
“Many of our brands grew sales, shares and volumes,” Gary Rodkin, chief executive officer, told analysts as part of a June 27 conference call to discuss fourth-quarter and full-year earnings. Specifically, Mr. Rodkin said the division benefitted from increased investment in brands.
“We’re using point of difference communication, along with strong innovation, to increase consumer pull for our brands,” he said. “Last quarter, we talked about our canned tomato portfolio, Hunt's and Ro*Tel, and that point of difference advertising that is really resonating with consumers and driving sales, volume and share gains and category growth. Similar messaging has been very effective for Pam and Reddi-wip as well. Emphasizing new usage occasions, and promoting from new locations in the store, are also driving more demand for a number of our brands. Effective marketing will be a key driver in the success of the innovations we’re launching this summer.”
Mr. Rodkin said ConAgra is especially excited about new desserts and frozen breakfasts that are on tap. Despite the fact frozen breakfast sandwiches have driven significant frozen breakfast category growth over the past five years, the frozen breakfast sandwich segment is still an underdeveloped breakfast option, he said.
“That’s where Marie Callender’s and Banquet come in,” he explained. “Building on capabilities we acquired when we bought Odom’s Tennessee Pride, and adding some strong culinary and cooking innovation, we have developed lines of breakfast sandwiches that break new grounds in term of convenience and quality.”
Mr. Rodkin said the company’s innovation extends beyond the frozen aisle as well.
“We’re building on the terrific equity of Marie Callender’s, and introducing Marie Callender’s Easy Sides, a shelf-stable pasta dish that cooks in about four minutes with no clean up, and delivers terrific flavors like alfredo, Parmesan and stroganoff,” he said. “National TV support begins soon. When we take into account our innovation, the brand investment we’ve made, and the fact that we’re turning the corner in terms of volume performance, we believe we’re on solid footing for a healthy top-line performance from consumer foods in fiscal 2014.”
Looking ahead to fiscal 2014, John Gehring, chief financial officer, said ConAgra expects low-single-digit organic volume growth and mid-single-digit operating profit growth in the Consumer Foods segment. He said the estimates reflect modest gross margins improvement in the segment, driven by mix improvements and strong cost savings, partially offset by modest inflation.
“For fiscal 2014, we expect cost savings of about $230 million in our Consumer Foods business,” he said. “And we expect a modest increase in our advertising and promotion costs to support our consumer brands and new product introductions. As a reminder, fiscal 2013 was a period of significant reinvestment, supported by our margin expansion. So that, while we expect the increase in fiscal 2014 to be more modest, our marketing spend in 2014 will reflect continued support of our brands.”