Conagra's Lack of Moat Makes It Harder to Compete in Challenged Consumer Environment

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 growing through building brands (rather than just boosting volume). However, food is competitive, and we don’t think it has a portfolio of enough leading brands or entrenched retailer relationships to drive pricing power, a handicap relative to branded peers. In addition, it spends notably less in product development and marketing, and we're skeptical better efficiency closes the gap. A subscale portfolio lacking strong brands combined with continued underspending is likely to leave it an industry laggard, in our view.