Conagra Brands has reported a 5.1% increase in net sales to $2.9 billion during the third quarter of fiscal year 2022, which ended on February 27. Organic net revenues rose 6%, driven by an 8.6% improvement in price/mix, which was partially offset by a 2.6% decrease in volume. Operating margin decreased 387 basis points to 12.3% and adjusted operating margin declined 230 basis points to 13.7%. All percentage comparisons are against the prior-year fiscal period.
“Our business delivered another quarter of strong net sales growth as our brands continued to resonate with consumers. Our focus on strategic innovation and our intentional approach to investment helped us capture share across each of our domains – frozen, snacks, and staples,” commented Sean Connolly, president and chief executive officer of the Chicago, Illinois-headquartered packaged foods company.
He added: “We experienced higher than expected cost pressures as the third quarter progressed, and expect those pressures to continue into the fourth quarter – particularly in certain frozen, refrigerated and snacks businesses. In response, we have taken steps to implement additional inflation-driven pricing actions. We will begin to see the benefits of these actions in the first quarter of fiscal 2023. Consumer demand has remained strong in the face of our pricing actions to date, but there will continue to be a lag between the timing of the incremental inflation and the benefits of our mitigating actions.”
$1.2 Billion in Refrigerated & Frozen Sales
Net sales for the Refrigerated & Frozen segment increased 2.9% to $1.2 billion in the quarter, reflecting a 1.0% decrease from the impact of sold businesses and a 3.9% advance in organic net sales.
On an organic net sales basis, price mix increased 8.4% and volume decreased 4.5%. The price/mix increase was driven by favorability in inflation-driven pricing and favorable brand mix. The volume decline was primarily due to the elasticity impact from inflation-driven pricing actions coupled with supply constraints. In the quarter, the company gained share in categories such as frozen single serve meals, frozen multi serve meals, and frozen desserts.
According to IRI tracking, Conagra’s Gardein Ultimate Plant-based Chick’n products ranked among top selling new SKUs in the frozen meat alternative category. In the frozen vegetable sector, one of its Birds Eye Stir-Fry Veggies & Sauce offerings was also a top selling new SKU.
Operating profit for the segment decreased 26.4% to $158 million in the quarter. Adjusted operating profit decreased 20.6% to $176 million primarily due to cost of goods sold inflation, elevated supply chain operating costs, and the lost profit from the sold businesses. These impacts were partially offset by the benefits of supply chain realized productivity, higher organic net sales, lower Covid-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition.
Results in Other Segments
Net sales for the Grocery & Snacks segment rose 6.2% to $1.2 billion in the quarter, reflecting a 0.8% decrease from the impact of sold businesses, and a 7.0% increase in organic net sales.
Net sales for the International segment edged up 0.1% to $241 million in the quarter reflecting, a 0.1% decrease from the impact of the Sold Businesses, a 0.8% decline from the unfavorable impact of foreign exchange; and a 1.0% increase in organic net sales.
Net sales for the Foodservice segment rose 18.9% to $235 million in Q3, reflecting an 18.9% gain in organic net sales. On an organic net sales basis, volume increased 10.5% as restaurant traffic continued to improve from the impacts of the coronavirus pandemic, partially offset by the elasticity impact from inflation-driven pricing actions. Price/mix was favorable at 8.4% in the quarter driven by inflation-driven pricing and favorable product mix.
Operating profit for the segment decreased 63.9% to $5 million and adjusted operating profit increased 14.8% to $15 million in the quarter as the benefits of higher organic net sales and favorable supply chain realized productivity more than offset the impacts of cost of goods sold inflation and elevated supply chain operating costs.