Milling & Baking News - January 1, 2019 - 19

Financial Results

Conagra Brands moving quickly to
address Pinnacle Foods problems
CHICAGO - Subpar innovation and the quarter, which was in line with expec"executional missteps" led to "highly dis- tations.
Conagra Brands completed the acquisiappointing" results in Conagra Brands'
newly acquired Pinnacle Foods business, tion of Pinnacle Foods on Oct. 26. The deal
said Sean M. Connolly, president and was first announced in late June. At the
chief executive officer. But Mr. Connolly time, the companies said Conagra Brands
noted during a Dec. 20 earnings call that would pay approximately $10.9 billion for
"Pinnacle's current challenges can and will be fixed."
'... I don't want there to
"We need to bring our executional capabilities to the
be any doubt. We are as
Pinnacle business now," Mr.
excited as ever to have the
Connolly said. "We now have
Pinnacle family of brands in
a clear understanding of the
source of the weakness in the
our portfolio.'
business, and we've started
- Sean M. Connolly, Conagra Brands
to take action."
Net income attributable to
Conagra Brands, Inc. in the second quar- Parsippany, N.J.-based Pinnacle Foods. The
ter ended Nov. 25 was $131.6 million, combined company was estimated to have
equal to 31c per share on the common sales of approximately $11 billion based on
stock, down 41% from $223.5 million, or both companies' fiscal year results.
In the second quarter, Conagra's legacy
55c, in the prior-year period. Adjusted
diluted earnings per share improved 22% business, which excludes Pinnacle Foods,
over the year-ago quarter, driven by in- produced results that reflect continued
creased operating profit and a lower ef- momentum, Mr. Connolly said. Conagra
fective tax rate, according to the company. Brands' refrigerated and frozen and groNet sales advanced nearly 10% to cery and snack businesses gained share in
$2,383.7 million from $2,173.4 million, the quarter behind new product launches
driven primarily by the acquisition of and brand building efforts, he added.
Net sales for the Pinnacle segment
Pinnacle Foods. Excluding the impacts of
foreign exchange, acquisitions and dives- were below expectations, due to weak detitures, organic net sales declined 1.6% in mand across the portfolio and the impact

of a product recall on Duncan Hines.
Mr. Connolly discussed the missteps
that led to market share losses for Pinnacle Foods' top brands, Birds Eye vegetables, Duncan Hines baking mixes and
Wish-Bone salad dressings.
"... Growth stalled on these three key
leadership brands in 2018," he said.
"Given this, previous share gains were
reversed. Birds Eye, Duncan Hines and
Wish-Bone have all suffered sales and distribution losses this past year, and the
weakness accounts for the vast majority of Pinnacle's current challenges.
"So what happened? Simply put, innovation and execution came up short."
Pinnacle Foods will underdeliver
against its pre-acquisition targets,
he said.
"On sales, we now estimate the
Pinnacle portfolio will end calendar
year '18 at roughly $3 billion, which
is about $160 million, or 5%, below Pinnacle's target," Mr. Connolly said. "Approximately $30 million of this miss is
driven by our post-close decisions to exit
some year-end promotions that we saw
as extremely low R.O.I."
On a brighter note, work done in the
recent weeks of integration uncovered
opportunities to exceed the company's
initial synergy target for the transaction,
he added.
"... I don't want there to be any doubt,"
Mr. Connolly said. "We are as excited as
ever to have the Pinnacle family of brands
in our portfolio." MBN

Data

U.S.D.A. says retail baking ingredient
prices mostly down from year ago
KANSAS CITY - The total cost of a "basket" of key baking ingredients this holiday
season was down 6.2% from a year ago,
according to the Economic Research Service of the U.S. Department of Agriculture.
Long-running Sosland Publishing Company bakery ingredient indexes, published
in Milling & Baking News and Food Business
News, also were mostly down from 2017.
The E.R.S. said a baking basket comprised of a dozen eggs, a pound of margarine, a 5-lb bag of flour, a 4-lb bag of
sugar and a gallon of whole milk cost
$10.85 in October, down 6.2% from $11.57
in October 2017, using U.S. Bureau of Labor Statistics average price data for October 2017 and 2018.
"This decrease is driven by lower prices
in 2018 across four of the five foods," the
bakingbusiness.com / world-grain.com

E.R.S. said. "The largest savings are found
in flour, sugar and milk - flour prices
are down 9.4%, sugar prices fell 9.3% and
whole milk prices are 7.8% lower."
The margarine price was down 6.4%.
The October 2018 average price of flour
was $2.27, sugar was $2.41, milk was
$2.91, and margarine was $1.60.
The only ingredient that was higher
than a year ago was eggs at $1.66 per
dozen, up 12c, or 7.8%.
"Due in part to prices adjusting from
lows in 2016 and 2017, egg prices have
been moving upward in much of 2018," the
E.R.S. said. "However, additional savings
could be found in December as grocers often offer discounts on holiday food items."
Values for the seven Sosland Publishing Company bakery ingredient indexes,

which track prices for bulk ingredients
used by food manufacturers rather than
retail values as did the E.R.S. in its report,
in late October were mixed compared with
a year earlier, but in December all had declined from October, and most were down
from a year ago. Also, since the Sosland
indexes are based on standard industry
formulas, none are directly comparable to
the E.R.S. "basket" of baking goods.
Five of the seven Sosland baking ingredient indexes in mid-December were down
from a year earlier, and two were up. The Sosland cake donut index, which is most comparable to the E.R.S. basket, was down 4.5%
from a year ago in late October and was
down 6.9% in mid-December, similar to the
E.R.S. findings. Changes in mid-December
from a year earlier for the other Sosland indexes were: pasta, down 18.4%; bagel, down
15.6%; devil's food cake, down 2.8%; shortbread cookie, down 0.2%; saltine cracker, up
12.6%; and white pan bread, up 0.8%. MBN
Milling & Baking News

January 1, 2019 / 19

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Milling & Baking News - January 1, 2019

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