Nielsen market share data for August 31 probably looked no
different than normal to most people. But I took note of declines
in frozen dinners, peanut butter, canned pasta, and popcorn. It was
not particularly because
), which is a big player in these categories, had announced
disappointing results the day before. It was more because total
private label food sales increased 2.7% in the four weeks ended
August 31, combined with units being down 2.5%. So private label
prices were up, which they have been for a few quarters relative to
Yet here is ConAgra with pasta (Chef Boyardee), popcorn, and peanut
butter, three inexpensive foods, priced at relatively low premiums
to private label, taking it on the chin during a period when its
relative price gap is narrowing versus private label. Frozen
dinners, while not cheap food, and while not losing out to private
label alternatives I believe, were losing out in distribution
points and mostly in the lowest priced brands as only Healthy
Choice Steamers were strong.
Then I read that one analyst's analysis of Nielsen data concludes
that food price promotions are becoming less effective at driving
sales for packaged food companies, having declined for 20
consecutive months. Not surprisingly ConAgra's promotions have been
some of the most ineffective.
This is an ugly, though not unexpected, development. It means that
some consumers have become so squeezed financially that they have
had to get smart enough to look at the real price differentials in
food and not react to shorter-term changes in relative percentage
price differentials. ConAgra, which has weaker brands than other
food companies, should be the first to feel this, but it will
likely be a trend that hurts others. The result can logically only
be overall price reductions.
Right now, a number of companies are seemingly in the bargain bin
after an investor rush for dividend yield earlier this year.
ConAgra at $30 discounts zero EPS growth in perpetuity, but one
would need a definitive
(NYSE:RAH) acquisition opinion to buy.
) discounts a 3% five-year growth rate at its present $60 price,
but it is in a declining gross margin trend while not selling much
cereal, another cheap food that is not growing much for branded
) stock at its $48 price discounts only 3% long-term EPS growth.
Most other food companies are still more highly priced, but I think
that this consumer pressure will spread to most of them.