CHICAGO — Conagra Brands, Inc. has developed a “deluge” of product innovation for its newly acquired Birds Eye business, the billion-dollar frozen vegetable brand that is now the largest in the company’s portfolio, said Sean M. Connolly, president and chief executive officer.
Less than six months after Conagra Brands’ acquisition of Birds Eye parent Pinnacle Foods, the company is planning a multiyear pipeline of innovation and renovation to reinvigorate the business. Under previous ownership, Birds Eye was “slow to respond to key consumer trends, opting out of innovating in important growth pockets,” Mr. Connolly said.
“The differentiating capabilities that come with the ‘Conagra way’ include a well-developed innovation muscle and the know-how to identify and capitalize on consumer trends,” Mr. Connolly said during a March 21 earnings call. “Applying these capabilities to Birds Eye means that we’re not only opting in to the innovation opportunities in this key category, but opting in, in a big way.”
Work is underway for the Duncan Hines and Wish-Bone brands, too. The baking mix brand two years ago expanded into the broader snacking set with “a very innovative idea for mug cakes,” Mr. Connolly said, noting the execution of the innovation was “not up to our standards.”
“Inefficient s.k.u.s proliferated while competitors entered the space with a more provocative execution, generated better velocities and gained share,” Mr. Connolly said. “And that new innovation from the competition caused Duncan Hines to suffer. The good news is that we see the solutions here as straightforward even if they'll take a bit of time to cycle into the marketplace… Deploying the Conagra way to Duncan Hines is leading to a restage of the product with simplified branding, a larger size impression, an optimized s.k.u. range and an upgraded product with the simple addition of the hero ingredient consumers want, frosting.”
For Wish-Bone, updated labels are expected to address a poorly executed redesign last year, Mr. Connolly said.
“Despite a more modern design, the labels did not effectively communicate the flavor variety, and variety communication is absolutely essential in salad dressing,” he said. “The modernized label communication was flawed, and sales velocities declined quickly and considerably following the label change.
“Fortunately, this issue has an obvious fix.”
While Conagra Brands is focusing on fixing Pinnacle Foods’ top three brands, it also is continuing to improve its core businesses, particularly across refrigerated brands, including Hebrew National, Egg Beaters and Reddi-wip.
In frozen meals and snacks, “our rigorous approach to modernizing and premiumizing our brands through renovation and innovation has delivered impact for Conagra and for our customers,” Mr. Connolly said.
Net income attributable to Conagra Brands in the third quarter ended Feb. 24 totaled $242 million, equal to 50c per share on the common stock, down 33% from $362.8 million, or 90c, in the prior-year period. The recent quarter included an income tax expense of $67.2 million while the year-ago quarter had an income tax benefit of $91.4 million. Adjusted net income attributable to Conagra Brands was $251 million, up from $245 million the year before.
Net sales were $2,707.1 million, up 36% from $1,994.5 million. The sharp increase was driven primarily by the Pinnacle Foods acquisition. Organic net sales, excluding the sale of a production facility in Trenton, Mo., increased 1.9%.
Results reflect continued strong momentum in the company’s frozen and snacks businesses.
“Looking ahead, you can be certain that we will not take our foot off the gas in the legacy Conagra business, and we’ve already mobilized to aggressively apply our playbook to the Pinnacle portfolio, and we’ll continue to work to return those brands to growth,” Mr. Connolly said.