Pepsi, Conagra Still Riding Pandemic Food Wave -- Heard on the Street
October 01 2020 - 12:20PM
Dow Jones News
By Aaron Back
The eat-at-home trend isn't going anywhere, to the lasting
benefit of American food companies.
That was the main takeaway Thursday from two giants of the
industry -- PepsiCo and Conagra Brands. But beneath the surface
there were also signs that continued innovation to keep up with
health and wellness trends remains important.
Both companies reported quarterly earnings that were well ahead
of expectations. Pepsi said organic sales, which strip out
acquisition and currency impacts, rose 6% from a year earlier in
North America for both its Frito-Lay and Quaker Food divisions.
More surprising was that its North America beverage business, which
has been dragged down by weak out-of-home sales, scored a 3%
organic revenue increase on the back of price increases. That
compares with a 7% decline the prior quarter.
Conagra did even better. Its grocery and snacks division, which
includes Hunt's tomato sauce, Vlasic pickles, and Orville
Redenbacher popcorn, saw organic sales soar 21%. In its
refrigerated and frozen segment, which includes Birds Eye
vegetables and Marie Callender's, organic sales rose 19%. The
company also issued stronger-than-expected guidance for the current
quarter and unexpectedly raised its dividend.
On a conference call, Conagra argued that food consumption at
home is likely to stay elevated, even as states open back up, due
to a host of factors: Remote working arrangements are becoming more
normal, recessions tend to increase at-home dining, and families
have invested already in things such as cookware and appliances to
up their kitchen games.
Despite all this, food companies can't rest on their laurels. It
is clear that shifts in health and wellness trends that rocked the
food industry before the pandemic are still present. At Pepsi, for
instance, some of the fastest growth in beverages is coming from
newer, sugar-free products, including bubly sparkling water and
Gatorade Zero. Pepsi Zero Sugar has grown retail sales by over 30%
so far this year, Chief Executive Ramon Laguarta said. Meanwhile,
Conagra cited figures from IRI showing that retail sales of its
frozen, plant-based meat alternatives were up 36% from a year
earlier over the last 13 weeks.
Americans may keep eating more at home, but they still want to
eat healthier. Food companies need to keep adapting.
Write to Aaron Back at aaron.back@wsj.com
(END) Dow Jones Newswires
October 01, 2020 12:05 ET (16:05 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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