What Big Food Can Learn From Its Covid Bonanza

(Bloomberg Opinion) -- You probably need only look inside your own pantry to have some idea of what a blockbuster spring it has been for the packaged food industry. General Mills Inc. reported Wednesday that organic sales, a measure that excludes currency fluctuations and other factors, shot up 16% in the quarter from a year earlier as people loaded up on Gold Medal flour, Cheerios, and Pillsbury rolls to ride out the pandemic. A day earlier, Conagra Brands Inc., corporate parent of labels such as Duncan Hines and Marie Callender’s, reported similarly robust growth, with quarterly organic sales rising 22% percent from a year earlier..My colleague Tara Lachapelle has written that this sector shouldn’t get too comfortable with these kinds of results, and she’s right. The panic-buying at the beginning of the U.S. Covid-19 outbreak was a one-off spasm of spending that won’t be repeated, and the long-term shift toward healthy eating and fresh ingredients isn’t going away. .But the pandemic is bound to change our eating habits in some ways that stick. Many Americans will be keeping their new routines for months to come if their workplaces don’t reopen and kids don’t return to in-person schooling. That provides ample opportunity to reinforce habits that could outlast stay-at-home guidelines. The latest earnings results from Conagra and General Mills offer some clues as to where the industry may be able to build durable sales growth. .General Mills saw an especially strong sales increase, 75% percent from a year earlier, in its U.S. meals and baking category. I’m not optimistic it can hang on to much of the growth in its Progresso Soup business, given that canned soup has generally proved an extremely tough sell to younger shoppers. But the company has products in this portfolio that aren’t necessarily out-of-sync with pre-pandemic eating values and make even more sense for families now that more meals are happening at home. For example, a shelf-stable Old El Paso taco dinner kit helps make a quick dinner that includes fresh beef and produce. With some marketing around that message, there’s no reason this product couldn’t become a go-to in many more homes. .General Mills also reported that sales of Gold Medal flour, Pillsbury refrigerated baking items and Betty Crocker desserts were especially robust in the quarter – no surprise given the surge of interest in baking. There’s a chance General Mills could keep some of these newbie bakers engaged by pummeling them with recipe ideas on Pinterest and reminding them in commercials that baking is a way to spend time with their kids that doesn’t involve staring at a screen. .Conagra, meanwhile, said Tuesday that retail sales of frozen vegetables, which includes its Birds Eye brand, surged 26.5% from a year earlier in the quarter. The company said the demand for such products outpaced supply in the quarter, which led it to seek out external manufacturing partners to ramp up production. This is a smart area of investment. Frozen veggies very much fit with a healthy eating ethos, so Conagra should be able to retain a piece of the recent sales growth it notched from new and lapsed customers..Packaged-food companies still face deep challenges in returning to relevance, but they should not resign themselves to thinking the pandemic is simply a temporary boon to their business. It is a time when longstanding eating habits are breaking and new ones are forming. They have only themselves to blame if they don’t leverage this moment to claim more permanent space in America’s cupboards and refrigerators..This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners..Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post..©2020 Bloomberg L.P.

Bloomberg

Company

Financial Products

Enterprise Products

Media

Customer Support

Communications

Industry Products

Media Services

Follow Us

Bloomberg Customers

BloombergQuint

BloombergQuint

What Big Food Can Learn From Its Covid Bonanza

Bloomberg Quint