Conagra Brands hopes its upcoming $10.9 billion acquisition of Pinnacle Foods will help it become a food company of the future.
Conagra president and CEO Sean Connolly, on a fourth-quarter earnings call June 27, said he looks forward to the two brands working together to become a leader in frozen foods and expand their presence in the snack category.
“Together, the combined company will be the No. 2 player in frozen foods with $4.9 billion in sales,” he said, noting he has seen significant opportunity in frozen for a long time.
Connolly pointed to how Conagra plans to bring Pinnacle’s product lines into the fold.
“If you look at the fantastic innovation that’s come out of Pinnacle team on Duncan Hines in the last year or so, it’s really demonstrating that Duncan Hines operates well as a convenient sweet treat,” Connolly said. “We think there is real innovation opportunity still ahead there and it fits squarely with what we do in brands like Swiss Miss and Snack Pack. That’s very close to home for us.”
Condiments and enhancers, as well as shelf-stable meals and sides, both play important roles in Conagra’s center store grocery business, he said.
“We do look at it two ways,” Connolly said. “But interestingly, when you look at Millennial behavior in particular, they are very interested in condiments and enhancers as a simple way to add flavor, texture and moisture to food.”
He noted the similarities between the Wish-Bone business and what Conagra has done with brands like Hunt’s ketchup and Frontera salsa.
Frozen and snacking are the two areas where the firm will continue to put the most momentum.
“Frozen is a big piece of real estate in the grocery store that just recently [began undergoing] the kind of modernization that it needs,” Connolly said. “We have a $2 billion snack business at retail. It plays in four of the fastest growing snack sub-segments around and now we are going to be able to add some snacks assets to that mix with some of the Pinnacle snack brands.”
Conagra doesn’t anticipate any antitrust issues as a result of the Pinnacle acquisition, but the company may consider selling parts of the business in the future.
“I think it’s plausible that somebody could inquire about an asset that they covet,” Connolly noted. “And we have always been open-minded to that as evidenced by the actions we have taken on Spicetec, J.M. Swank, Del Monte and Wesson, and we will continue to be if it makes good strategic and financial sense.”
Conagra has worked aggressively to modernize its brands, and more product innovation efforts will get underway in fiscal 2019.
One example is Healthy Choice, a $400 million brand at retail that grew its top line about 20% in the fourth quarter due to Conagra updating the brand.
“We are investing with customers to make sure we get the right placement and get the product clearly in front when they are shopping,” Connolly said. “It’s unheard of to see a brand of that scale that’s been around that long that was that outdated, put up those kinds of trends.”
Connolly says the company is seeing the value of investments with e-retailers to get the brand story in front of consumers.
For the full story, go to this week’s Food Institute Report.
Grocery shopping has evolved from a Main Street event (where we go to our local market frequently to purchase food and goods) to an order most anything, from anywhere, at any time online. Online shopping, which started off slowly, was initially an underwhelming choice for consumers. As the internet grew along with smartphones, more started to shop online.read more
Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at firstname.lastname@example.org to talk about anything food-related.
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