Conagra Brands Inc.

Company Overview

Business Model: Conagra Brands, Inc. is one of North America’s leading branded food companies, combining a 100-year history of quality food production with a focus on agility, collaboration, and innovation. The Company's portfolio continuously evolves to satisfy changing consumer preferences, primarily generating revenue through the sale of branded, value-added consumer food products and foodservice items and ingredients to retail food and foodservice channels. Key brands include Birds Eye, Duncan Hines, Healthy Choice, Marie Callender’s, Reddi-wip, Slim Jim, and Angie’s BOOMCHICKAPOP.

Market Position: Conagra Brands operates in a highly competitive food industry, competing with widely advertised branded products as well as private label and customized food items. The Company differentiates itself primarily on the basis of quality, product innovation, value, customer service, brand recognition, and brand loyalty. While some competitors possess greater resources, Conagra Brands maintains a significant market presence, with Walmart, Inc. and its affiliates accounting for approximately 29% of consolidated net sales in fiscal 2025 and 28% in fiscal 2024 and 2023.

Recent Strategic Developments: In fiscal 2025, Conagra Brands completed two acquisitions: Sweetwood Smoke & Co., maker of FATTY smoked meat sticks, in August 2024 for $179.4 million, and an existing contract manufacturer of cooking spray products in July 2024 for $51.2 million. The Company also pursued divestitures, including the sale of its 51% ownership stake in Agro Tech Foods Limited in the first quarter of fiscal 2025 for net proceeds of $76.8 million. Subsequent to fiscal year-end, Conagra Brands entered into definitive agreements to sell its Chef Boyardee business for net proceeds of $601.2 million and its frozen fish business (including Van De Kamp’s and Mrs. Paul’s brands). The Company continues to implement restructuring plans aimed at improving SG&A effectiveness and optimizing its supply chain network, alongside strategic investments in automation, connected data, improved equipment, and artificial intelligence.

Geographic Footprint: Conagra Brands' operations are principally located in the United States, with 38 domestic manufacturing facilities across various states. The International segment focuses on branded food products sold in retail and foodservice channels outside of the United States, with general offices in Canada, Mexico, Panama, and the Philippines, and international manufacturing facilities in Canada and Mexico. Foreign net sales were approximately $956.5 million in fiscal 2025.

Financial Performance

Revenue Analysis

Profitability Metrics (FY2025):

• Gross Margin: 25.9%
• Operating Margin: 11.8%
• Net Margin: 9.9%

Investment in Growth:

• Capital Expenditures: $389.3 million (FY2025), $388.1 million (FY2024). Preliminary estimate for fiscal 2026 is approximately $450 million.
• Strategic Investments: Acquisitions of Sweetwood Smoke & Co. ($179.4 million) and an existing contract manufacturer of cooking spray products ($51.2 million) in fiscal 2025. Ongoing investments in automation, connected data, improved equipment, and artificial intelligence to upgrade operations and increase productivity.

Business Segment Analysis

Grocery & Snacks

Financial Performance:

• Revenue: $4,899.3 million (-1.2% YoY)
• Operating Margin: 20.8%
• Key Growth Drivers: Organic volumes decreased by 1.1% and price/mix decreased by 0.9%, with price/mix impacted by increased strategic trade investments. Acquisitions of Sweetwood Smoke & Co. and a contract manufacturer contributed $38.0 million to net sales. Gross profit decreased due to lower net sales, input cost inflation, and unfavorable operating leverage, partially offset by productivity. The segment recognized an $11.3 million benefit from insurance proceeds related to a fiscal 2023 brand recall on Armour Star.

Product Portfolio: This segment principally includes branded, shelf-stable food products such as Duncan Hines, Reddi-wip, Slim Jim, and Angie’s BOOMCHICKAPOP.

Market Dynamics: The segment operates in various retail channels in the United States, facing competitive pressures and evolving consumer preferences.

Refrigerated & Frozen

Financial Performance:

• Revenue: $4,662.3 million (-4.2% YoY)
• Operating Margin: 14.0%
• Key Growth Drivers: Price/mix decreased by 3.5% due to increased strategic trade investments, and volume decreased by 0.7%. Supply constraints affecting frozen meals containing chicken and frozen vegetable products were the largest impact to volumes. Temporary manufacturing disruptions in the Hebrew National business impacted net sales by an estimated $24 million and gross profits by approximately $10 million. Gross profit decreased due to net sales decline, input cost inflation, and unfavorable operating leverage, partially offset by productivity and lower SG&A expenses (including a $20.9 million decrease in advertising and promotion).

Product Portfolio: This segment principally includes branded, temperature-controlled food products such as Birds Eye, Healthy Choice, Marie Callender’s, and Hebrew National.

Market Dynamics: The segment serves various retail channels in the United States, navigating challenges from supply chain disruptions and manufacturing issues.

International

Financial Performance:

• Revenue: $956.5 million (-11.3% YoY)
• Operating Margin: 15.0%
• Key Growth Drivers: Unfavorable foreign exchange rates, primarily due to the devaluation of the Mexican Peso, led to a 5.7% decrease in net sales. Organic price/mix increased by 3.9%, while organic volume decreased by 3.4%. The sale of the ownership stake in Agro Tech Foods Limited (ATFL) reduced net sales (FY2025 included $23.6 million from ATFL, down from $93.2 million in FY2024) and profit. Gross profit decreased due to the ATFL sale, input cost inflation, and unfavorable foreign exchange rates, partially offset by productivity.

Product Portfolio: This segment includes branded food products, in various temperature states, sold in retail and foodservice channels outside of the United States.

Market Dynamics: The segment is exposed to foreign exchange rate volatility and global macroeconomic challenges.

Foodservice

Financial Performance:

• Revenue: $1,094.7 million (-4.7% YoY)
• Operating Margin: 12.0%
• Key Growth Drivers: Organic volume decreased by 8.1% due to ongoing softness in restaurant traffic and lost business from the prior year. Organic price/mix increased by 3.3%, reflecting inflation-driven pricing. Temporary manufacturing disruptions in the Hebrew National business impacted net sales by an estimated $3 million. Gross profit decreased due to net sales declines, input cost inflation, and unfavorable operating leverage, partially offset by productivity.

Product Portfolio: This segment includes branded and customized food products, such as meals, entrees, sauces, and custom-manufactured culinary products, packaged for sale to restaurants and other foodservice establishments primarily in the United States.

Market Dynamics: The segment is sensitive to restaurant traffic trends and competitive pressures within the foodservice industry.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Conagra Brands repurchased 2.1 million shares of its common stock for an aggregate of $64.0 million in fiscal 2025. As of May 25, 2025, the Company had a remaining share repurchase authorization of $852.6 million.
• Dividend Payments: Cash dividends paid totaled $669.2 million in fiscal 2025. The Board authorized a quarterly dividend payment of $0.35 per share for May 29, 2025, and another for August 28, 2025.
• Future Capital Return Commitments: The Company has an authorized share repurchase program with $852.6 million remaining as of May 25, 2025.

Balance Sheet Position:

• Cash and Equivalents: $68.0 million (May 25, 2025)
• Total Debt: $8,067.6 million (May 25, 2025)
• Net Cash Position: -$7,999.6 million (May 25, 2025)
• Credit Rating: Conagra Brands strives to maintain solid investment grade credit ratings, and its senior long-term debt ratings were all investment grade as of the end of fiscal 2025.
• Debt Maturity Profile: Aggregate minimum principal maturities of long-term debt are $1,029.6 million in fiscal 2026, $776.9 million in fiscal 2027, $1,023.8 million in fiscal 2028, $1,697.1 million in fiscal 2029, and $17.1 million in fiscal 2030. This includes $1.0 billion aggregate principal amount of 4.6% senior notes maturing in November 2025.

Cash Flow Generation:

• Operating Cash Flow: $1,691.9 million (FY2025)
• Cash Conversion Metrics: Operating cash flows in fiscal 2025 benefited from the accelerated receipt of outstanding receivables, which increased cash flow from operations by approximately $140 million, and lower tax payments due to lower taxable income and additional tax deductions from IRS interactions.

Operational Excellence

Production & Service Model: Conagra Brands operates as a branded consumer packaged goods food company, focusing on value-added consumer food products and foodservice items. Its manufacturing facilities are generally well-maintained and adequate to support current operations, with utilization varying by plant based on product type and demand.

Supply Chain Architecture: The Company relies on a diverse range of raw materials, many of which are commodities, and sources a significant majority of its ingredients and raw materials from North America. It employs strategies such as productivity initiatives, pricing adjustments, and derivative instruments to mitigate input cost inflation. The supply chain is subject to disruptions from labor shortages, transportation issues, and global economic conditions.

Key Suppliers & Partners:

• Raw Materials: Wheat, corn, oats, various vegetables, vegetable oils, beef, pork, poultry, dairy products, steel, aluminum, and energy.
• Manufacturing Partners: Utilizes third-party contract manufacturers and recently acquired one for cooking spray products.
• Technology Partners: Engages third-party service providers for certain information systems, sales, finance, and accounting functions.

Facility Network:

• Manufacturing: Operates 38 domestic manufacturing facilities across various U.S. states, along with international facilities in Canada and Mexico. Most manufacturing facilities are owned.
• Research & Development: Maintains product development facilities in Nebraska and the District of Columbia.
• Distribution: Utilizes stand-alone distribution facilities and warehouses co-located with manufacturing plants. Transportation equipment and forward-positioned distribution centers are primarily leased or operated by third parties.

Operational Metrics: Conagra Brands reported an Occupational Safety and Health Administration Incident Rate of 1.32 incidents per 100 full-time workers in fiscal 2025, which is below the industry average and represents an improvement from 1.40 in fiscal 2024 and 1.58 in fiscal 2023.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Products are sold directly and through distributors to a broad range of retail customers, including chain, wholesale, value, cooperative, club, and independent grocery, pharmacy and drug, convenience, and other store operators.
• Channel Partners: Products are also sold to foodservice customers such such as restaurants, bars, travel and leisure customers, schools, health care facilities, and government customers.
• Digital Platforms: The Company sells products online through various e-commerce platforms and retailers.

Customer Portfolio: Enterprise Customers: Conagra Brands serves a diverse customer base across retail and foodservice channels.

• Customer Concentration: Walmart, Inc. and its affiliates are a significant customer, accounting for approximately 29% of consolidated net sales in fiscal 2025 and 27% of consolidated net receivables as of May 25, 2025.

Geographic Revenue Distribution:

• United States: Primary market for operations.
• International: Foreign net sales were approximately $956.5 million in fiscal 2025.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The food industry is highly competitive, characterized by retail customer consolidation, a proliferation of new products, evolving consumer behavior (including retail channel preferences), and consumer price sensitivity. The growth of e-commerce has intensified competition by simplifying distribution and lowering barriers to entry.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Conagra Brands competes with other widely advertised, well-known branded food products, as well as private label and customized food items. No specific competitor names are disclosed in the filing.

Emerging Competitive Threats: The Company identifies new entrants and business models driven by the substantial growth in e-commerce as intensifying competition.

Competitive Response Strategy: Conagra Brands responds to competitive pressures through targeted investments in advertising and promotions, efforts to reduce costs through productivity gains, and a focus on introducing new and improved products to meet changing consumer preferences.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The business is exposed to risks from deteriorating general economic conditions, including inflation, rising interest rates, recessions, decreased capital availability, volatility in financial markets, declining consumer spending, rising unemployment, increased energy costs, supply chain challenges, labor shortages, and governmental initiatives. Geopolitical conflicts also contribute to global economic instability. These factors can lead to consumers shifting to lower-priced offerings and decreased demand in the restaurant business, impacting profitability. Technology Disruption: Evolving consumer preferences, including the growing use of weight loss medication, could shift demand patterns. The rise of e-commerce facilitates new competitors and business models. Customer Concentration: A significant portion of consolidated net sales (29% in FY2025) is derived from Walmart, Inc. and its affiliates, posing a risk if the relationship changes or sales to this customer materially decrease.

Operational & Execution Risks

Supply Chain Vulnerabilities: Disruptions due to labor shortages, increased labor costs, weather, natural disasters, geopolitical turmoil, or pandemics can impair the Company's ability to source ingredients, manufacture, and distribute products. Global supply constraints and disputes with significant suppliers also pose risks. Supplier Dependency: The Company faces risks from reliance on single suppliers or locations for certain products. Geographic Concentration: While Conagra Brands has no direct operations in Russia, Ukraine, the Middle East, China, or Taiwan, geopolitical conflicts in these regions can indirectly impact its supply chain, increase costs, and reduce consumer confidence. Capacity Constraints: Investments in facilities and operations may lead to periods of decreased production or increased costs, and failure to maximize manufacturing capacity could negatively impact profitability.

Financial & Regulatory Risks

Market & Financial Risks: The Company is subject to increases in the price of raw materials, labor, manufacturing, and distribution inputs, which may not be fully offset by pricing or productivity initiatives. Volatility in commodity prices and derivative values can impact gross margins and net earnings. The Company's debt level ($8.07 billion as of May 25, 2025) could limit cash flow, increase vulnerability to adverse economic conditions, and affect refinancing capabilities or credit ratings. Regulatory & Compliance Risks: Conagra Brands operates in a highly regulated environment, subject to extensive federal, state, local, and international laws concerning food safety, labeling, advertising, environmental protection, and employee health and safety. Non-compliance can result in fines, injunctions, recalls, and reputational damage. Changes in regulations (e.g., food safety, labeling, ingredient bans) could increase compliance costs or render existing inventory unsellable. Legal Proceedings: The Company is involved in product liability claims related to cooking spray products (settled most, $25 million paid in FY2025, $185 million payable in FY2026/Q1 FY2027, with $81.8 million in insurance recovery), legacy litigation related to lead-based paint/pigment ($12.0 million paid in FY2025, $16.7 million payable in FY2026), and various other lawsuits. Accruals for litigation matters totaled $204.5 million as of May 25, 2025. Environmental proceedings related to divested Beatrice businesses have an accrual of $36.0 million.

Geopolitical & External Risks

Geopolitical Exposure: Geopolitical conflicts and rising tensions globally can lead to increased tariffs, sanctions, supply/distribution disruptions, lower consumer demand, and changes to foreign exchange rates. Trade Relations: Rapid changes in global trade policies, including increasing or fluctuating tariffs, are expected to negatively impact costs of goods sold in fiscal 2026. Sanctions & Export Controls: Geopolitical conflicts may result in export controls and economic sanctions, affecting business operations and supply chains.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Conagra Brands emphasizes innovation, organic brand growth, and expansion into adjacent categories to continuously evolve its portfolio and satisfy changing consumer preferences. Innovation Pipeline: The Company focuses on introducing new and improved products on a timely basis.

Intellectual Property Portfolio:

• Patent Strategy: Conagra Brands actively develops and maintains a portfolio of patents, though no single patent is considered material. It also possesses proprietary trade secrets, technology, know-how, and processes.
• Licensing Programs: The Company licenses trademarks such as P.F. Chang’s, Bertolli, Wendy’s, and Libby’s from others, including a licensing arrangement with Dolly Parton. It also licenses certain of its intellectual property rights, such as Alexia and Marie Callender’s, to third parties.
• IP Litigation: Conagra Brands protects its intellectual property rights through legal remedies under trademark, copyright, trade secret, and patent laws, as well as through agreements and policing of third-party misuses.

Technology Partnerships: The Company is investing in automation, connected data, improved equipment, and artificial intelligence to upgrade operations. It also outsources certain information systems functions to third-party service providers.

Leadership & Governance

Executive Leadership Team (as of July 10, 2025)

Leadership Continuity: Conagra Brands relies on its experienced management team and focuses on identifying, attracting, hiring, training, retaining, and developing qualified personnel to achieve operating goals. Board Composition: The Board of Directors and its Audit / Finance Committee actively oversee enterprise risk management, including cybersecurity risks, receiving routine reports from management and external advisors.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 18,300 employees as of May 25, 2025.
• Geographic Distribution: Employees are primarily located in the United States.
• Skill Mix: The Company faces potential shortages of employees with specialized skills, particularly in emerging technologies like artificial intelligence and data analytics.

Talent Management: Acquisition & Retention: Conagra Brands makes differential investments in recruitment tools and talent acquisition programs, leveraging data and metrics. It offers robust training and development programs to help employees reach their full potential, aiming to build knowledge and skills, and drive retention. Employee Value Proposition: The Company provides competitive compensation, including equity-based compensation for director-level employees and above, and a holistic benefits and wellness approach. This includes healthcare, mental health support, adoption assistance, family care resources, a 401(k) plan, family leave, and paid time off.

Diversity & Development:

• Diversity Metrics: Conagra Brands emphasizes leveraging diversity of thought, skills, and lived experiences to maintain a competitive advantage and strengthen its portfolio.
• Development Programs: Employees have access to functional development programs, on-demand learning content, targeted leadership programs, and a cross-functional Opportunity Marketplace for on-the-job learning. The "Invest in You" program encourages dedicated learning time.
• Culture & Engagement: The Company fosters a caring and performance-driven culture guided by six timeless values. It uses a structured employee survey program and supports eight employee-led Employee Resource Groups (ERGs) to promote an engaged and inclusive culture.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Conagra Brands acknowledges the growing concern over climate change and its potential adverse impacts on agricultural productivity, water supply, and operational costs. The Company is taking steps to mitigate climate risk and adapt to evolving policy, legal, and regulatory changes, including monitoring emissions and improving energy efficiency. Supply Chain Sustainability: The Company has expectations for its supply chain regarding ethical sourcing.

Social Impact Initiatives: Conagra Brands' culture is built on values such as integrity, external focus, broad-mindedness, agility, leadership, and results. Its Employee Resource Groups support personal growth, professional development, and community impact.

Business Cyclicality & Seasonality

Demand Patterns: Demand for certain Conagra Brands food items is influenced by holidays, seasonal changes, or other annual events. For example, frozen food sales tend to be marginally higher in winter, and pie sales peak in November and December due to holidays. Industry Cycles: Production of certain products is seasonal, occurring during or immediately after the purchase of agricultural crops.

Planning & Forecasting: Due to these seasonal and cyclical factors, sequential quarterly comparisons are not considered a reliable indicator of future performance. The Company's planning and forecasting processes account for these patterns.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Conagra Brands operates in a highly regulated food industry, subject to extensive federal, state, local, and international laws and regulations. Key oversight bodies include the United States Department of Agriculture, the Federal Food and Drug Administration, the Federal Trade Commission, the Consumer Product Safety Commission, the Occupational Safety and Health Administration, the Environmental Protection Agency, and the Department of Labor. These regulations cover aspects such as processing, packaging, transportation, storage, distribution, advertising, labeling, quality, and safety of food products, as well as employee health and safety and environmental protection. International Compliance: The Company is subject to various international authorities and multi-jurisdictional requirements in countries like Canada and Mexico.

Trade & Export Controls: Conagra Brands is subject to trade sanction and export laws and regulations, and geopolitical conflicts can lead to export controls and economic sanctions that impact its business.

Legal Proceedings: The Company is involved in material litigation, including product liability claims related to cooking spray products (with $25 million paid in FY2025 and $185 million agreed for FY2026/Q1 FY2027, partially offset by $81.8 million in insurance recovery), and a legacy litigation matter related to lead-based paint/pigment ($12.0 million paid in FY2025, $16.7 million payable in FY2026). The total accrual for all litigation matters was $204.5 million as of May 25, 2025. Environmental proceedings related to divested Beatrice businesses have an accrual of $36.0 million.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The effective tax rate was approximately 0.3% in fiscal 2025, significantly lower than 43.0% in fiscal 2024. This decrease was principally related to a $225.8 million tax benefit in fiscal 2025 from the release of a valuation allowance due to a federal audit settlement.
• Geographic Tax Planning: A deferred tax liability of $28.6 million is recorded on approximately $109.1 million of undistributed foreign earnings that are not considered indefinitely reinvested or cannot be remitted in a tax-neutral transaction.
• Tax Reform Impact: The "One Big Beautiful Bill Act," enacted July 4, 2025, will be applicable to Conagra Brands starting in fiscal 2026, allowing accelerated tax deductions for qualified property and research expenditures. The Company is evaluating the impact of this Act.
• Future Outlook: The Company expects its effective tax rate in fiscal 2026, exclusive of any unusual transactions or tax events, to be approximately 23%.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Conagra Brands maintains a cyber insurance policy for security incidents and has secured insurance recoveries for certain litigation matters, such as $81.8 million for cooking spray product liability claims.
• Risk Transfer Mechanisms: The Company utilizes derivative instruments, including commodity futures and options contracts, to economically hedge a portion of anticipated commodity input costs for periods of up to 36 months. It also uses forward exchange or option contracts to reduce exposure to foreign currency exchange rate changes and may use interest rate swaps to manage interest rate risk.