Shoppers may not be panic buying frozen food, canned soup and peanut butter like they did at the height of the COVID-19 pandemic back in March, but keeping cupboards consistently full as coronavirus fears fluctuate continues to power the financials of some of the biggest packaged food makers.
“The way I would describe it is think back to March and April, there was this incredible pandemic stock up where you saw an incredible spike of consumers buying everything off the shelves and stocking their pantries and freezers. Then things got to a more normal rate where people were eating down their inventory and replenishing it on the go. We have stayed in that mode,” said Conagra Brands (CAG) CEO Sean Connolly on Yahoo Finance’s The First Trade.
The ongoing effect of the pandemic on shopper behavior was etched all over Conagra’s most recent quarter. Fiscal first quarter sales surged 12% on the back of demand across Conagra’s vast portfolio of brands (Slim Jims, Healthy Choice frozen dinners, and Duncan Hines cake mixes). Organic sales rose 15%. Adjusted earnings surged 62.8% from the prior year.
The company sees organic sales rising 6% to 8% and earnings up by as much as 10% — estimates that could prove conservative given Conagra’s eye-popping growth over the last two quarters and a recent resurgence in the pandemic.
“In the last couple of weeks we saw an uptick in eating occasions at home,” Connolly added. “It has been a modest uptick over what is a pretty strong baseline. Some thought there would be more deceleration. We’re seeing sustained strength in terms of at-home eating.”
So are others that play in the supermarket aisles.
Beverage and snacks giant PepsiCo (PEP) blew away analyst earnings estimates again in the third quarter a week ago. The company reported diluted earnings per share of $1.66 and net sales of $18.09 billion, beating estimates of $1.49 per share and net sales of $17.23 billion.
Sales were powered by demand for the aforementioned Rica-a-Roni, Tostitos, Quaker Oats oatmeal, Gatorade and the core Pepsi soda business.
“Overall the beverage business did strongly and the snack food business continues to deliver the strength we have had in recent months,” PepsiCo CFO Hugh Johnston told The First Trade. Johnston added PepsiCo can’t keep its new Cheetos Mac ‘n Cheese on the shelf the demand is so strong.
The tone was similar at Lucky Charms cereal and Blue Buffalo pet food seller General Mills.
General Mills’ (GIS) reported on Sept. 23 that fiscal first quarter sales gained an impressive 9%. Adjusted earnings rose 27%. Some of the biggest gains for General Mills came in its baking mix, soup and dessert mix categories — which it attributed to consumers continuing to eat more at home during the pandemic. Blue Buffalo sales increased 6%.
“It has definitely been a ride as we move through the pandemic. We have seen the heightened trends that we saw during the spring, those categories have picked back up over the last few weeks because families have gotten back in the back-to-school routine and as outdoor dining winds down in parts of the country. We’re seeing categories pick up. At the same time, retailers are bringing in an extra day or two of supply. So we are operating full steam ahead right now. Actually some categories we haven’t been able to catch up, such as soup and baking mixes. We have such elevated demand. It will be a few months before we get back into a normal routine,” explained General Mills North America retail president Jon Nudi in an interview.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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