With all the unease around the Iran conflict and the shock to supply chains and food inflation, it’s precarious timing for Conagra Brands to switch CEO. Is that a reflection of the desperation flying around the US company’s board?
With that observation in mind, you only have to look at the share price, which reacted negatively in the US on Monday (13 April) to the appointment of JM Smucker chief operating officer John Brase as president and CEO.
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Beyond Monday’s 4.4% slippage, the poor performance on Wall Street over the longer term is even more revealing. The Healthy Choice meals owner’s shares have retreated almost 18% this year alone as Sean Connolly marked his departure just days after celebrating his 11-year anniversary heading up the group.
Connolly took the helm in April 2015 during a different era at what was then ConAgra Foods. He sold most of the own-label business that year to private-label heavyweight TreeHouse Foods and then split the company.
Lamb Weston emerged from that separation, along with what we know today as Conagra Brands. Applauding Connolly’s achievements in Monday’s announcement as a “pure-play food company”, the story is more telling.
Lost patience?
The past 12 months has seen 44% shaved off the value of Conagra’s shares to close on the New York Stock Exchange at $14.28 yesterday. More shockingly, they have lost 62% in five years.
Had the Conagra board lost patience? They certainly appear anxious in appointing Brase so soon as 1 June. Connolly “will step away from his leadership roles” and the board on 31 May, was the language employed.
“The suddenness of the announcement and the narrow time for transition leads us to believe that the board wanted a change in direction,” Robert Moskow, a consumer-goods analysts at TD Cowen, wrote in a follow-up note.
“We view the negative stock reaction as appropriate given the uncertainty it casts on what comes next.”
Peter McDonald, a food industry consultant and former General Mills’ executive, had a similar take.
“They are bringing in an outsider – which says either they didn’t have an internal succession plan, or the poor performance requires a fresh look from someone who hasn’t been part of it,” McDonald wrote on LinkedIn.
“The change is certainly merited,” he added, framing the comment around the 60-plus percent drop in Conagra’s share price in the last five years.
Tough spot
But what of Brase? He has no CEO experience, serving as president and chief operating officer for JM Smucker’s retail, international and foodservice business. Prior to that, he was a vice president at Procter & Gamble, the personal care and household goods products maker.
Some would argue bringing in a less-than-seasoned CEO to a food business that generated annual revenues last year of $11.6bn is a risky bet. It’s not the level of turnover at issue, it’s the risks and challenges Brase is likely to encounter at the Slim Jim snacks brand owner.
The packaged food industry – and others – is bracing for a new wave of inflation spurred by the US-Iran conflict, which has now entered its seventh week. Although a two-week ceasefire is still in place, much of the inevitable damage on the food-supply-chain is already a forgone conclusion, from the energy price shock to higher transportation and shipping costs and rising fertiliser prices.
However, all of those aspects have yet to land in the laps of food executives, who may well also have to grapple with stagflation and borrowing costs reverting to an upward trajectory. And yesterday (14 April), the International Monetary Fund warned of a global recession risk – and all that comes with it – if the war is prolonged much longer.
What a time to be taking the baton for someone like Brase without CEO credentials, especially considering food companies are only just coming out of the last inflation wave – marked by pricing – and then, a volume recovery phase, which is still ongoing.
Opportunities, vulnerabilities
Branded manufacturers like Conagra are susceptible to trading down to private label when inflation rears its head, although the frozen veg part of the portfolio, often favoured by consumers in difficult times, might be a positive.
Frozen sits within Conagra’s refrigerated and frozen reporting unit, which accounted for $4.66bn of 2025’s $11.6bn in sales and houses brands like Marie Callender’s pies.
However, the opportunity there could be offset somewhat by foodservice if consumers trim spending on eating out, as they did during the last inflation bout. The sector made up $1.09bn in sales last year.
Branded grocery and snacks – $4.86bn of Conagra’s annual revenue – could take up the slack should consumers opt to cook more at home.
Moskow sets the scene. “After arriving at Conagra in 2015, Connolly successfully transitioned the company to a pure-play CPG model. He injected an admirable degree of energy and modernisation to the company’s culture, innovation pipeline, and marketing insights during his tenure.
“However, the portfolio’s exposure to low-income consumers, its low-margin structure, and its oddly ‘accident-prone’ supply chain created significant vulnerabilities during volatile operating climates.”
Turning around losses
Much may have changed on the external front by the time Conagra issues its fourth quarter and annual results in July, for better or for worse. While Brase will have had little influence on those results, he could well have set out his strategy by then in what probably should amount to a turnaround plan. Or that’s what the board would presumably expect.
Turning around losses might well be his first port of call after Conagra delivered a net loss of $299.3m across the opening nine months of fiscal 2026 versus an $877m profit a year earlier. Basic EPS had slumped into the red to the tune of $0.63 compared to a positive $1.87 in the corresponding period.
Sales had dropped 4.9% to $8.4bn, while operating profit was down a whopping 97.1% at $1.04bn.
Questions are being raised in the market over the timing of Connolly’s departure and the appointment of his successor Brase but the switch in CEO is not exactly unique in packaged foods.
There have been a raft of similar moves in the industry of late, perhaps as boards seek a fresh perspective in the wake of multiple shocks such as the pandemic-related supply chain disruptions, made worse by the Ukraine conflict – still ongoing – and the last inflation rollercoaster.
Nevertheless, McDonald suggests some differences, adding his own perspective to the Conagra share price weakness on Monday – and another 1.6% drop the next day – in the context of the Kraft Heinz succession move announced in December.
“It is reminiscent of the recent CEO change at Kraft Heinz, except in this case, the market did not react well. Conagra is down 6% this morning. Kraft Heinz was up almost 1% when the Steve Cahillane news broke.”
McDonald added: “Possibly because this is not the picture of an orderly leadership transition. It feels more like a ‘we’ve-had-enough’ move from the board. Markets don’t like surprises or seemingly abrupt changes.
“Conagra’s new CEO, John Brase, is a longtime industry veteran with P&G pedigree. But he will be a first-time CEO….I can see how the market has questions about both the process and the pick.”
Debt burden
TD Cowen’s Moskow questions whether Brase will reverse course on cutting Conagra’s debt should he decide to invest in the business to reignite sales growth. Connolly had gone the way of divestitures last year, selling off the Chef Boyardee Italian brand and then the seafood lines Mrs. Paul’s and Van de Kamp’s.
Net debt was still substantial at $7.3bn when Conagra reported its third-quarter numbers earlier this month, despite cutting the pile by $818m from a year earlier. Leverage stood at 3.83 times.
“We firmly believe our portfolio is structurally advantaged and built for today’s evolving environment,” Connolly said in his remarks to accompany those results. “We’re investing in the business, reducing debt, and funding our dividend. That’s the balance we’ve committed to.”
Fast-forward to this week and Brase gave an essence of his plans: “I’ve long admired what Sean and the team have built, and I look forward to accelerating the company’s track record of driving strong revenue growth, strengthening margins and generating robust cash flow to unlock the full potential of its brands and deliver meaningful value for consumers and shareholders.”
At least there was a pledge to try and restore fortunes in the Conagra share price. Markets will have to wait to see what materialises from the new CEO as Moskow suggests upping media investment might well be an option.
“We would not be surprised to see Brase raise the spending to more closely match food peers,” he said, adding some thoughts on the wider picture.
“Conagra management has made the argument that it has sufficient cash flow and growth prospects ahead to deleverage its balance sheet and sustain its dividend despite the high payout ratio of 81%,” Moskow wrote.
“In our view, the management change increases the possibility, however remote, that they will reassess their approach. For example, if incoming CEO Brase determines that the company needs to make a bigger investment in the core business to restore growth or divest older, cash-generating brands, they probably would need to cut the dividend to fund it.”
