Once more, the Just Food team has sifted through data sets to bring you a round-up of the week in numbers.
The quarterly financial results of publicly listed companies are rolling and, while most are reporting on their second quarters, this week Conagra booked its fourth-quarter (and annual numbers). What many of the results have in common is scrutiny of how companies are performing on volumes as inflation subsides – and Conagra was no exception.
Go deeper with GlobalData
Staying in North America, one of the more eye-catching corporate announcements was from Canada’s Maple Leaf Foods, which was to split in two, spinning off its pork business.
On our deals pages, we featured the acquisition of New Zealand-based Wedderspoon, a supplier of Manuka honey, a product set to continue to enjoy rising demand, forecasters say.
Conagra’s quest to grow volumes
The US manufacturer is not alone in its efforts to get volumes growing again and nor is it alone in finding it a challenge.
Yesterday, the Healthy Choice meals maker reported its fourth-quarter results, a period that covered the 13 weeks to 26 May. The company’s net sales declined 2.3% to $2.9bn. On an organic basis, net sales dropped 2.4%, with volumes 1.8% lower.
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By GlobalDataConagra said the latest fall in its quarterly volumes was “primarily due to continued lower consumption trends”. The 1.8% decline also matched that seen in the group’s third quarter.
Speaking to analysts after Conagra posted its numbers, CEO Sean Connolly said the company had seen signs of improvement in its sales volumes during the fourth quarter.
“I was particularly pleased to see volume consumption growth in Q4 in our snacks business, in our largest frozen business, which is frozen meals, in our refrigerated business, and in our international business, all of those posted positive volume growth in the quarter,” Connolly said.
Conagra reports its results across four divisions: a combined grocery and snacks unit; a joint refrigerated and frozen business; foodservice; and international.
Fourth-quarter volumes from grocery and snacks were down 3.1%. The refrigerated and frozen division saw volumes declined 4.1%, while foodservice volumes slid 5.7%. Volumes from the international unit were up 2.6%.
“We have seen three straight quarters of volume trend improvement in our businesses. And, in this most recent quarter, we saw snacks volume consumption that was positive. Our frozen meals consumption grew, our refrigerated business volume consumption grew, our international business grew,” Connolly said.
“Grocery has a couple of businesses, that will get more support in fiscal '25, but those investments are baked into our plans.”
Alongside the publication of Conagra’s full-year results, the group forecast its organic net sales in its new financial year would be, at best, flat, or, at worst, down 1.5%.
Analysts at investment bank Bernstein described Conagra’s guidance for the year ahead as “poor” and the company's shares were down at the close of trading in New York yesterday.
A new (Maple) Leaf
Canada’s Maple Leaf Foods is the latest food group to see value in splitting in two.
The Canada-based protein company is spinning off its pork business to form two publicly listed entities.
As you’d expect, Maple Leaf’s management, led by chairman Michael McCain (whose family is the company’s largest shareholder) talked up the move, extolling the prospects for the new, separate businesses.
“Our shareholders will be able to participate in not one, but two strong, independent, sustainable and purpose-driven businesses, each with a clear mandate and investment profile, and all our stakeholders will participate in the shared value we will generate,” McCain said.
But McCain also outlined what were perhaps the ‘push’ factors. “The challenge in keeping upstream and downstream businesses together in a portfolio becomes restrictive, for each one of them,” he told analysts.
The spun-off pork business (as yet unnamed) will be operating in a sector forecast to see steady volume growth for much of the rest of the decade.
Equity analysts covering Maple Leaf (which will be the new prepared foods and poultry group) were largely positive about the decision, although, as we explored on our analysis pages, some questions remain.
And, looking ahead, one long-term question that does tend to come to mind when companies split in two: could either (or both?) of the new businesses become a tasty morsel for potential buyers?
A sweet outlook for Manuka honey
Manuka honey maker Wedderspoon Organic Group has been acquired by New Zealand-based investor Masthead.
Wedderspoon will be incorporated into a new holding company, Florenz, set up to house the Christchurch-based investment firm’s consumer portfolio.
Founded in 2005, Wedderspoon’s honey is produced by bees feeding off the Manuka bush in New Zealand’s North and South Islands.
Wedderspoon already supplies more than 23,000 retail stores such as Walmart, Whole Foods Market and Costco in the US and Canada.
Led by CEO Rebecca Remley, who will remain with the company post-transaction, Wedderspoon supplies bottled Manuka honey, lozenges and apple cider vinegar.
Mike Tod, who will head Florenz as CEO, wrote on his LinkedIn page that the business also has a “growing footprint” in Asia, Central America and Europe.
Figures from GlobalData, Just Food's parent, suggest there will be continued appetite for Manuka honey in the 2020s, with global sales set to exceed $1bn in 2028.
Florenz will become a subsidiary of Masthead, which is owned by the Stewart family in New Zealand. Financial terms behind the Wedderspoon acquisition were not disclosed.
UK dairy’s challenge
UK dairy farmers will need to invest around £3.9bn ($5bn) in the next decade to future-proof their farms against climate change, according to new research.
However, the country's dairy market is not exactly a fertile field, with growth forecast to be hard to find as we move through the decade.
Around £472,539 per farm will be needed to build the necessary infrastructure and extra land to support climate resilience over the next ten years, Kite Consulting said this week. This requires farmers to pay £47,254 a year.
An additional 2.4 pence per litre a year across that period is likely to be needed to fund environmental compliance. This comes on top of annual production expenses.
Kite has based average costs per dairy on an average herd size of 236, housed for an approximate 30-week period.
However, GlobalData's forecasts for the combined market of UK dairy and soy food (with dairy obviously accounting for the lion's share) suggests farmers are facing a market in the doldrums through the 2020s.
