Key Takeaways:
- Conagra Brands is set to boost investments in its supply chain to enhance resiliency, with approximately $450 million allocated for capital expenditures in fiscal year 2026, as disclosed in a July 10 earnings call presentation.
- The company faced various supply challenges in FY25, such as disruptions in chicken production, a shortage of frozen vegetables, and tariffs on tinplate steel used in canned food containers.
- CFO David Marberger mentioned that the planned investments will outweigh the impact of supply challenges in FY25. However, the specific amount designated for supply chain enhancements was not disclosed.
Insights:
Conagra’s decision to ramp up investments in its supply chain coincides with its efforts to revamp production capabilities.
The company aims to significantly increase chicken production in the next year to meet rising demand for new products and reduce reliance on third-party manufacturers, as stated during the earnings call.
Urgent upgrades were initiated in Q3 of FY25 due to quality issues detected in the chicken preparation and cooking process at the primary facility, leading to temporary production halts and reliance on external manufacturers.
Conagra’s plans to expand chicken capacity were accelerated by the overwhelming success of Banquet Mega Chicken Filets in FY25, prompting increased investment in fried chicken capacity.
The company has also addressed supply challenges in its frozen vegetable segment by enhancing surge capacity to cope with surging demand, which led to temporary out-of-stocks in stores.
Furthermore, Conagra closed its pie-filling plant in Fennville, Michigan, in a bid to streamline its supply chain operations and improve efficiency.
Despite near-term margin pressures due to inflation and increased production costs, Conagra anticipates reaping the benefits of its supply chain investments in fiscal 2027.