Early Signs of Headwinds Easing for Conagra, Which Should See Low-Single-Digit Sales Growth Return

Conagra’s business has evolved over the years, from a conglomerate, reinforced by its 2012 acquisition of Ralcorp that bolstered its private-label exposure (later divested at half the purchase price), to its present focus on brands and driving growth through increased value (rather than just boosting volume). However, food is competitive, and we don’t think it has a portfolio of leading brands and entrenched retailer relationships to warrant pricing power, a handicap relative to branded peers. In addition, it spends notably less in product development and marketing, claiming more efficient spending closes the gap. But we remain skeptical and don’t believe it will capitalize on consumer trends more effectively than competitors. A subscale portfolio lacking strong brands combined with continued underspending is likely to leave it an industry laggard, in our view.