ConAgra launches 23 ready meal and dessert products

ConAgra launches 23 ready meal and dessert products

ConAgra Foods' move to step up innovation is a sensible response to disappointing first-quarter sales. But, as the innovation pipeline kicks in, will this be enough to retain consumers won over to the US food group's ready meals and meal solutions during the downturn?

Profits at ConAgra have come under pressure from declining branded sales. Reporting its first-quarter numbers in September, the Hunt's ketchup and Healthy Choice ready meals owner cut its full-year earnings forecasts. ConAgra said it expected its diluted earnings per share to be US$2.34-2.38 in its current financial year, which runs until the end of May. In June, ConAgra had forecast earnings per share of around $2.40 for the year.

"The softer-than-planned first-quarter comparable EPS performance principally relates to the consumer foods segment, where difficult conditions for some branded retail categories and some customers have negatively impacted sales and profits," ConAgra said. "Unit volumes for that segment in the fiscal first quarter were below year-ago levels and below the company's original plans."

To improve the results from its consumer foods business, ConAgra said it was making changes to merchandising, promotion and pricing. The company also appears to be looking to innovation to shore-up sales.

When the economic downturn hit the US in 2008-09, a lot of consumers from across the socio-economic spectrum changed their eating and buying habits. But trading down in the US meant something different to what we have seen in many other markets.

Elsewhere, in Europe and Australia for instance, trading down has meant cutting your grocery bills by opting for private label over brands or tight pantry management to reduce food waste. In the US, trading down meant buying ready meals over eating out. Branded manufacturers, rather than being squeezed by the downturn, frequently benefited from an increasing willingness from consumers to eat at home.

According to figures from the World Bank, in 2009 the US's GDP shrank by 3.1%. By 2010, the country's economy had returned to growth. GDP expanded by 2.4% that year, 1.8% in 2011 and 2.2% in 2012. The result is consumer confidence is coming back - and more affluent consumers are once again eating out more frequently.

"As the US economy continued slowly to recover in 2012, many higher income consumers felt more comfortable eating out in restaurants. These affluent consumers, who have been less affected by the recession than lower income groups, were able to replace some of their at-home dining, including ready meals, with dining out. Consequently, volume sales of ready meals were negatively affected, as Americans who could afford it preferred to eat out rather than in," Euromonitor International analysts suggest in their research report into the sector.

When ConAgra announced a swathe of product launches under its Bertolli and P.F. Chang's brands yesterday (4 December), it would seem the company is attempting to appeal to these more affluent consumers and retain their loyalty.

Can ConAgra best its food service competitors? Herein lies the rub.

Other developed markets have continued to see volume pressure resulting from weak consumer confidence. Even as economic conditions have eased, consumers have not returned to their old buying patterns, suggesting the financial crisis may have had a deeper impact on the collective psyche.

In the US, the confidence of upper-tier consumers has proved more elastic. The result has seen ready meals sales come under a degree of pressure - and not just at ConAgra. Nestle, the market leader, saw sales of its frozen ready meal brands dip by around 3% in 2012, a year when it launched fewer new products to the market.

ConAgra's bet on innovation is a prudent move. While US economic prospects are looking somewhat brighter - the medium-term outlook does remain uncertain. Time-pressured consumers seeking out convenient meal options may well look to ready meals over restaurants - provided they are given the incentives to do so.

ConAgra has hit on a number of "on" trends in its latest innovation wave. Its 23-product innovation assault sees ConAgra expanding its line-up of meals that are convenient, supposedly "restaurant quality" and certainly a lot cheaper than eating out (with some meals for two costing around US$5.99).

The company is also flaunting the "international" credentials of its Italian and Chinese ready meals in a bid to appeal to consumers who are increasingly seeking out more "exciting" meal options. Including dessert options in the range also extends the appeal and enhances the group's attempt to mimic a restaurant experience.

ConAgra has reacted to pressure on its consumer foods business with a decisive move. Whether it will pay off, depends on economic pressure on consumers and their response to it.

For details on ConAgra's P.F. Chang's and Bertolli NPD click here