GIS General Mills Inc

By Annie Gasparro 

Conagra Brands Inc. said it is investing in added manufacturing capacity and marketing, aiming to maintain pandemic-driven sales momentum.

The coronavirus pandemic has brought big food companies back into millions more homes, giving Conagra and its peers a chance to win over consumers who had dropped their brands for newer or trendier ones.

Companies such as Campbell Soup Co. and General Mills Inc. also have said they want to capitalize on the momentum by investing in marketing and added production capacity.

Conagra Chief Executive Sean Connolly said Thursday that he expects the new enthusiasm for cooking and packaged foods to continue "well into the future." That has prompted Conagra to add more production capacity for popcorn and some frozen meals.

"Critical to our ability to sustain our growing relevancy with consumers is the physical availability of our products," he said on a conference call. Conagra is also spending money on marketing and to modernize some of its recipes and packaging.

Mr. Connolly said consumers, especially younger ones, would likely continue eating at home more as they have developed skills in the kitchen and work remotely more often. That would boost Conagra's grocery business, though the company said it expects its sales to food-service outlets would continue to struggle.

In its latest quarter, Conagra's sales rose 8% on a comparable basis. The company said its Marie Callender's frozen meals, Orville Redenbacher popcorn and Duncan Hines cake mixes have benefited from people eating more at home. Conagra said it expects comparable sales for the current quarter to rise 6% to 8%.

Shares of Conagra fell 2% to $35 on Thursday. Conagra's shares were up 6.6% over the past year through Wednesday, compared with 2.2% for the packaged-foods and meats index, and 15% for the S&P 500.

Demand for packaged foods at grocery stores has moderated since the beginning of the pandemic last spring. Still, sales growth at many companies is at least quadruple levels they reported before the pandemic.

Credit Suisse food analyst Robert Moskow said in a note to investors this week that Conagra might be too optimistic about the potential for brands such as Chef Boyardee and Duncan Hines that were unpopular before the pandemic to maintain sales momentum after it ends.

Conagra's projected operating margin for its ongoing quarter was lower than analysts expected. Some, including Mr. Moskow, have questioned Conagra's decision to spend more on nontraditional advertising such as social media.

Mr. Connolly said higher-quality foods with more provocative marketing will sell better than outdated foods that aren't marketed well online. He said that in the latest quarter, Conagra gained market share.

Overall for the quarter, which ended Nov. 29, Conagra reported a 6.2% rise in sales to about $3 billion. Its profit rose to $380 million from $262 million a year earlier. The company's adjusted profit of 81 cents a share beat the 74 cents a share analysts predicted.

(END) Dow Jones Newswires

January 07, 2021 11:11 ET (16:11 GMT)

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