ConAgra has maintained annual profit forecast despite challenging US conditions

ConAgra has maintained annual profit forecast despite challenging US conditions

ConAgra Foods CEO Gary Rodkin has warned that the pressure on volume sales in the US is being felt across the industry.

Speaking at the Consumer Analyst Group of New York investor conference, Rodkin said the whole food sector was being affected by consumer caution in the face of rising prices.

"The same numbers you all are seeing, we are seeing as well. We are seeing that across companies, categories and retailers," Rodkin said yesterday (21 February). "It's clearly an industry-wide issue that we are all seeing."

The squeeze on sales is a hot topic among food manufacturers and investors and was highlighted last week by JM Smucker, which reported falling volumes, and by General Mills, which blamed a profit warning on "weak" US volumes in December and January.

Rodkin said manufacturers had increased prices in recent months to offset higher commodity costs but it was not until the last couple of months that it had hit consumption.

"It's very difficult to pinpoint a real specific issue as to why that sharp slowdown post Thanksgiving. "Our best stab at a rationale is probably the cumulative impact of pricing that has taken place across the last six to nine months has finally had its full impact on elasticity."

Despite the squeeze on volumes, ConAgra told CAGNY it was maintaining its forecast for annual earnings. It expects earnings per share to increase by a "low- to mid-single digit" rate.

In a note to clients, Barclays Capital analyst Andrew Lazar welcomed that announcement. "Our primary takeaway from the presentation [was] that ConAgra reaffirmed its full-year guidance in a tough operating environment amidst expectations that a potential cut was likely, which is a clear positive, in our view."

When asked why ConAgra was able to stick to its guidance, Rodkin said the company had been "realistic" at the start of its financial year, which runs from June to May, that the company would have a "fairly challenging" 12 months. The year, Rodkin said, "had gotten even a bit tougher" but he added: "We see in the second half our growth concentrated in Q4 and that's why we've stuck where we are."

Looking ahead, ConAgra outlined to the investors and analysts at CAGNY how it would look to grow its business. Rodkin said the company would continue to look to acquire private-label firms to tap into what he saw as a growing sector. In November, ConAgra bought US own-label firm National Pretzel Co. Last year, it acquired snack bar manufacturer Elan Nutrition.

"We are not interested in all private-label categories but only value-added categories where we can leverage our CPG capabilities and where we see a clear path of profitable growth," Rodkin said. "What we don't want is to be in low-growth segments where it comes up for bid every six months and it goes to the lowest-price bidder. We intend to be in categories, like we've done with Elan and National Pretzel, that are value-add, where we can leverage our capabilities and infrastructure and drive top- and bottom-line growth."

The ConAgra chief also said the company wanted to double its international sales in the next "three to five years". At present, ConAgra's reported sales outside the US account for 10% of its around $13bn turnover. Rodkin added that its share of international ventures and the contribution from its recent acquisition of Del Monte Canada added around $500m in sales to that figure.

Rodkin noted that ConAgra saw opportunities to grow its consumer foods operations in India, where it is the majority shareholder of local firm Agro Tech Foods.

However, ConAgra is also looking to grow its Lamb Weston arm that supplies the likes of McDonald's and Yum Brands.

Rodkin said ConAgra saw "big opportunities" to expand in China on the back of plans by its quick service restaurant customers to open more outlets in the country.