Top line sustained momentum
Conagra Brands (CAG) sustained its sales growth momentum in fiscal 3Q18. Conagra Brands posted total revenue of $2.0 billion, which improved 0.7% on a YoY (year-over-year) basis but remained a shade lower than the analysts’ estimate. Notably, the company’s organic sales remained weak and decreased 2.2% on a YoY basis, reflecting lower volumes, partially offset by improved pricing and a favorable mix. Lower shipments and retailers reducing inventory, primarily in the Grocery & Snacks segment, adversely impacted its volumes in fiscal 3Q18.
Besides improvement in pricing and mix, Conagra Brands’ top line benefitted from favorable currency rates, which added 0.5% to its sales growth rate. Moreover, the company’s acquired brands including Duke’s, BIGS, Angie’s, and Sandwich Bros contributed 2.4% to its top-line growth rate.
The packaged food manufacturers in the US are focusing on acquiring fast-growing brands to optimize their product portfolio and drive growth as demand for traditional packaged foods moderates. For instance, Kellogg’s (K) top line is benefitting from increased sales of its acquired brands including Parati and RXBAR.
Meanwhile, Campbell Soup (CPB), General Mills (GIS), Hershey (HSY), and McCormick (MKC) have recently acquired fast-growing brands to optimize their product portfolio and better align with consumers’ changing preference towards healthy snacking options.
Conagra Brands reiterated its guidance and expects its organic sales to be at the higher end of the previous guidance. Earlier, Conagra projected its organic sales to either remain flat or decline 2.0%.
Conagra Brands’ sales are expected to benefit from its portfolio optimization efforts and incremental sales from the above-mentioned acquired brands. Besides, improved pricing is likely to support its top line. However, investments to drive consumption and a tough retail environment are expected to remain a drag.