Acquisition of Thanasi Foods contributes to ConAgra’s Q4 growth, despite sales decline

ConAgra acquired Thanasi Foods​​, the parent company of Duke’s meat snacks and BIGS seeds, earlier this year, a deal the company said added approximately 40 basis points to Q4 2017 sales growth.

However, it reported its sales declined by 9.3% to $1.86bn in the fourth quarter, and dropped by 9.7% to $7.82bn for the full year 2017.

Net sales of ConAgra’s grocery and snacks segment also fell by 3% to $749m in Q4, while volume declined by 2% from “a reduction in promotional intensity and the planned discontinuation of certain lower-performing products,”​ the company said.

However, the Thanasi Foods acquisition added approximately 100 basis points to its grocery and snacks segment’s net sales growth rate during the quarter, ConAgra added.

Increased gross margin​

In Q4, ConAgra’s gross margin increased 10 basis points to 28.4%, and its adjusted gross margin increased 130 basis points to 29%.

The company said the increases were driven by supply chain realized productivity, improved pricing and the impact of divesting lower margin businesses (Spicetec Flavors and Seasonings, and JM Swank).

Leaner, but better

"Margin expansion has been, and always will be, a way of life in ConAgra Brands."​​

Multi-year transformation plan​

ConAgra’s CEO Sean Connolly said the company has gone through transformations over the past two years to become “a focused, pure play, branded CPG”​ company.

However, transforming ConAgra is a multi-year effort rather than just a flip of the switch.

“For the last two fiscal years (2016 and 2017), we focused on resetting our top line and cost structure​. Now that we’ve undone some of the legacy practices that inflated our volume base and have built innovation capabilities, we’re positioned to improve growth trends sequentially," ​said Connolly.

“In 2018, we’ll continue our progress of improving top line trend. We expect further accelerated growth in the future (2019 and 2020) as our innovation pipeline and new marketing programs get a hold in the market.​

“Meanwhile, margin expansion has been, and always will be, a way of life in ConAgra Brands,”​ he said.

ConAgra anticipates its organic net sales growth to be in the range of -2% to flat in fiscal 2018, and its organic net sales CAGR in the range of 1% to 2% during the 2017-to-2020 period.