Conagra benefits from sustained and elevated at-home demand in Q3 2021
The company experienced a 9.7% increase in organic net sales across its core retail segments —refrigerated/frozen (12.1%), snacks (+13.1%), and staples (+15%) – driven by a 6.1% increase in volume and a favorable price/mix impact of 3.6%. Organic net sales were partly offset by a continued downturn to Conagra’s foodservice business, the company noted.
‘Consumers are largely maintaining the habits they’ve acquired over the past 400 days’
The company predicts that the event-driven changes in consumer behavior (i.e. a massive shift from away-from-home to at-home eating) adopted over the past year will persist long after the pandemic.
“Psychology experts assert that it takes on average, 66 days for a new behavior to become habitual. As you all know, we are nearly 400 days into the COVID-19 pandemic. Consumers have adapted to at-home eating and formed new habits that we expect to sustain well beyond the current conditions. And early data supports our hypothesis,” said Conagra CEO Sean Connolly on the company's Q3 2021 earnings call.
Looking at retail sales data from the US states that have been the most open in terms of COVID-19 restrictions, Conagra found that two-year growth rates in retail sales are higher than pre-pandemic levels with sales remaining at fairly consistent elevate levels as states reopen.
"So while people are starting to leave their homes more frequently, they are still choosing to eat at home," said Connolly.
Brand building
As Conagra says more consumers are engaging with their modernized brand portfolio, which brands under its umbrella are leading the pack in new consumer engagement?
According to the company, legacy brands including Slim Jim, PAM, Hunt’s, P.F. Chang’s, Birds Eye, and Orville Redenbacher are continuing to see strong consumer demand.
“Slim Jim is just one example of how we are connecting with the consumer. Since the onset of COVID-19 last March, we’ve gained the equivalent of more than four years worth of incremental new buyers. COVID has effectively supercharged new trial at a level rarely seen in our industry,” said Connolly.
Snacking, he added, has been among the strongest drivers of growth for Conagra with retails up 17% from the previous quarter.
“We generated double-digit retail sales growth on a year-over-year and two-year basis in snacking, led by impressive increases across popcorn, sweet treats, and meat snacks. And as consumers continued snacking at elevated rates, we capitalized with strong Q3 velocity growth across our leading brands,” he said.
Gen Z flocks to big CPG
Younger consumers such as Gen Z buyers are engaging more with Conagra brands, bringing new life to some of the company’s legacy brands, claimed Connolly.
“Nearly half of our new buyers are millennials and Gen Z. These new buyers are even more likely to repeat purchases across many of our key brands. They are discovering our modernized portfolio and developing new habits and include our products.”
Connolly added that the company is outpacing its peers in the industry in terms of repeat purchases and household penetration rates.
“We continue to believe that we are very well positioned to capture the benefits of consumer behavior post-pandemic.”
Frozen opportunity
Connolly noted how the company's frozen portfolio continues to grow in sales and household penetration as consumers use frozen products as part of their everyday mealtime routine.
According to Conagra (based on data from The NPD Group from March 2020-February 2021), frozen accounts for 1 in 5 dinner occasions and 1 in 6 lunch occasions among consumers.
Outside of main daypart meals, the frozen category has been a contributor to at-home snacking behavior. In its 2021 State of Snacking report, IRI found that along with increased at-home snacking in typical categories such as salty snacks and chocolate indulgence, consumers satisfied their snacking cravings in the frozen set as well.
Frozen appetizers and snack rolls (+23%), frozen fruit (+26%), frozen soft pretzels (+18%, and frozen dips (+22%) all experienced double digit gains in the past year, according to IRI, who also found that 43% of consumers say that frozen snacks offer nutrition that is as good as fresh (+4 pts vs. 2019).
"Our frozen portfolio over indexes in these occasions by offering hyper-convenient meals and sides perfect for a quick lunch or a family dinner. In addition to enjoying more food cooked together at home and including frozen as a key part of those meals, consumers are making what we believe is a significant and lasting shift to at-home entertainment," said Connolly.
