Dive Brief:
- After a slew of major internal changes, ConAgra Foods and CEO Sean Connolly are renewing their focus on the company's brands to find ways to boost sales while continuing to improve overall margins.
- ConAgra's biggest challenge is overcoming the status of several of its brands: second-tier names that can't always compete with larger competitors that are leading the way for innovation and adapting to consumer trends. But ConAgra's brands also have to contend with private-label brands selling at lower prices.
- Last quarter, ConAgra increased its advertising and promotions budget by 18% with an eye on improving sales numbers for Banquet frozen meals, but overall sales saw a 1.4% decline, below analysts' expectations.
Dive Insight:
Part of the reason for the drop in sales was a revamp of the trade spending strategy, in which ConAgra offered retailers money to give discounts to consumers, such as a 10-for-$10 promotion for Banquet products. But over time, ConAgra reduced quality to make up for inflation and, after recognizing this was "a losing equation," discontinued the program, Bloomberg reported.
ConAgra lags behind fellow processed foods companies by not having many organic products or reduced artificial colors and flavors across its portfolio. However, the company reintroduced organic Hunt's tomato products last month. Overall, ConAgra's brands haven't seen much change in years, which has led these brands to become "stale," Connolly told Bloomberg. But the forward-looking CEO still says these brands "are wired for growth. We just haven't gotten behind them."
One notable strategy for ConAgra is to pay attention to investors and their ideas. That plan is not readily accepted by other food and beverage executives. Mondelez CEO Irene Rosenfeld told The Wall Street Journal in December, "I'm frustrated with investors' fascination with activists. I'm successfully running Mondelez for all shareholders — without the activists' help."
Connolly has taken a different approach, according to Bloomberg, noting investors aren't a distraction and that the company wants to hear them out.
For now, Connolly remains firm in his brand-focused strategy, but that hasn't stopped speculation that ConAgra could be making changes to prepare for a sale. Connolly said that such a move "is not something we're going to obsess about."