A shortage of cans in its grocery portfolio created out-of-stocks at grocery stores and impacted Conagra’s fiscal third quarter, company executives reported this week.
“We experienced manufacturing disruptions in certain categories that led to out of stocks in the quarter. Most notably impacted were our canned meals and sides businesses, specifically canned pasta, canned beans, canned chili and canned meat, all part of our grocery portfolio,” CEO Sean Connolly told financial analysts in an earnings call for the company’s third quarter, which ended Feb. 26.
A number of improvements “allowed us to rebuild inventories to appropriate levels and support most of the strong demand from our customers, but there were exceptions as we experienced temporary manufacturing disruptions in certain categories that prevented us from being in stock.
“Whether it's Vienna Sausage or other things, it's a quality issue that we've had to deal with, getting cans where we need [them] to be. You've seen those kinds of issues pop up across the industry, in large part tied to labor. [Suppliers] are dealing with a lot of inexperienced labor in companies and their suppliers that lead to these quality issues that sometimes you find before you produce the product, sometimes you find them after you produce the product.
“So that impacted Q3 and it will drift a little bit into Q4,” the CEO continued. “The good news is we've gotten to the root cause of those things, and we've got them contained.”
Connolly noted one other supply problem: A fire on a fish frying line led to out of stocks during the peak Lenten season. “The manufacturing friction that we've run into, this is part of the reason why we've had a conservative outlook all year long as these things keep popping up.”
While growth slowed in all product categories in the third quarter, sales still grew. Conagra delivered 6% organic net sales growth in that period, to just over $3 billion, and adjusted gross margin was up 28%. Company executives project 7-7.5% sales growth for the fiscal year, which ends in May.
