In line with its efforts to reshape portfolio, Conagra Brands, Inc. CAG concluded the sale of its Direct-Store-Delivery (DSD) snacks business to Utz Quality Foods, LLC. This divestiture agreement was inked last month and should help the company focus better on areas with higher growth potential.
Notably, the DSD snacks business became part of Conagra’s portfolio with the acquisition of Pinnacle Foods in October 2018. The divestiture of this business will lead to the exit of brands like Tim's Cascade Snacks, Hawaiian Snacks, Erin's, Snyder of Berlin and Husman's from Conagra’s kitty.
Nonetheless, Conagra continues to boast a robust snacking portfolio worth about $2 billion even after the divestiture deal. It is also on track with innovating this category, including the introduction of meat snacks with bold flavors and optimized packaging. Further, the company continues launching salty snacks in new markets and reframing the sweet treat brands.
Portfolio Refinement on Track
Notably, the DSD snacks divestiture is in sync with the company’s efforts to restructure portfolio. In this regard, it is focused on acquiring high-margin businesses and divesting the less profitable ones. Keeping in these lines, Conagra exited private-label brands and non-key businesses — the Wesson oil business, Gelit, the Trenton production facility and the Canadian Del Monte business. Also, in 2016, Conagra concluded Lamb Weston’s LW spin-off.
On the flip side, the company took over Angie's Artisan Treats, LLC (October 2017), which is strengthening the snacking business. The Sandwich Bros. buyout (February 2018) has also been a valuable inclusion in Conagra’s frozen business. These endeavors are expected to facilitate the company’s transformation into a pure-play branded food company.
We expect such well-chalked initiatives to fuel this Zacks Rank #3 (Hold) stock, which has rallied 28.5% so far this year compared with the industry’s growth of 13.4%.
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J&J Snack Foods JJSF, with a Zacks Rank #2, has an impressive earnings surprise record.
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