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Conagra Brands Inc CAG Stock Quote

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Morningstar‘s Stock Analysis CAG

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Conagra Continues to Gain Market Share, Despite Private-Label Strength; Shares Look Appetizing

Rebecca Scheuneman, CFA Senior Equity Analyst

Analyst Note

| Rebecca Scheuneman, CFA |

Our primary takeaway from Conagra’s fiscal first-quarter results is that its brands are performing better than we expected in the face of consumer trade-down to private label. Although private brands have been gaining grocery market share since January, Conagra continues to gain share. The total company gained 10 basis points of share during the quarter, with its priority snack and frozen categories (63% of U.S. retail sales) gaining 70 basis points. We attribute these gains to the turnaround efforts employed under CEO Sean Connolly, including a reshaped portfolio to focus on differentiated, higher-growth categories, innovations based on data-driven consumer insights, and more effective marketing investments. While we applaud these actions and acknowledge that Conagra has several leading brands, its relative underinvestment (3% spent on marketing and R&D collectively compared with 6% for peers) lowers our conviction that it can maintain this brand strength over the long term, resulting in our no-moat rating.

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Business Description

Conagra Brands is a packaged food company that operates predominantly in the United States (over 90% of revenue and profits). It has a significant presence in the freezer aisle, with brands such as Marie Callender’s, Healthy Choice, Banquet, and Birds Eye. Other popular brands include Duncan Hines, Hunt’s, Slim Jim, Vlasic, Orville Redenbacher's, Reddi-wip, Wish-Bone and Chef Boyardee. While the majority of revenue is sold into the U.S. retail channel, 9% of fiscal 2022 sales were to the food-service channel, down from 11% in fiscal 2019 due to the pandemic.

222 W. Merchandise Mart Plaza, Suite 1300
Chicago, IL, 60654
T +1 312 549-5000
Industry Packaged Foods
Most Recent Earnings Aug 31, 2022
Fiscal Year End May 29, 2023
Employees 18,000

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