Dive Brief:
- Manufacturing disruptions hampered food production at Conagra Brands last quarter, leading to stock shortages for some products, President and CEO Sean Connolly said in an April 5 earnings call.
- The CPG’s canned pasta, beans, chili and meat products were most notably impacted solely due to issues surrounding cans, the CEO explained.
- Although these disruptions suppressed Conagra’s volume last quarter, Connolly told analysts that “the root causes have been largely resolved, and we expect volumes to rebound sequentially from here.”
Dive Insight:
Conagra has faced its fair share of manufacturing disruptions over the past year. Considering that issues “keep popping up,” according to the CEO, the food manufacturer has kept a more “conservative outlook” in its expectations.
“Whether it’s Vienna Sausage or other things, it’s a quality issue that we’ve had to deal with, getting cans where we need it to be frankly,” Connolly told analysts. “You’ve seen those kinds of issues pop up across the industry [largely] tied to labor where you’re dealing with a lot of inexperienced labor in companies and their suppliers that lead to these quality issues.”
While the company expects these issues to linger a little longer into Q4, the issue is, for the most part, contained, Connolly said. “Now we just got to get the remnant out of our system, so to speak.”
Aside from its canned food business, Conagra also saw a disruption in its frozen fish business due to a fire on Conagra’s fish frying line, Connolly added.
Last year, Conagra found quality issues with cans in its chili and beans business, alongside other supply chain-related challenges.
Regardless, Conagra remains confident on its outlook for the remainder of the year, despite some setbacks, and raised its bottom line estimates.
“We’re moving past discrete supply chain disruptions and continue to make progress on our margin expansion initiatives, such as productivity and value over volume, all within an environment that is normalizing,” the CEO said.
While Conagra’s operations are “recovering as expected,” the company continues to look for ways to advance its productivity initiatives and better its supply chain, Connolly said. Last quarter, the CPG was able to raise its inventory to enable “us to improve service levels above 90%, and we are well positioned going forward in most categories to support sustained demand.”
