• by Steve Ellwanger , October 2, 2019

It’s still early days for Conagra Brands’ “value-over-volume” strategy aimed at revitalizing some of the Pinnacle portfolio it acquired a year ago this month. But Conagra says innovation that had been sorely lacking when it came to such Pinnacle brands as Birds Eye, Duncan Hines and Wish-Bone is starting to show results.

Things got off to a rocky start roughly a month after the Pinnacle acquisition, when Duncan Hines — amid a multi-state salmonella outbreak — voluntarily recalled four of its signature cake mixes due to a positive finding of salmonella in a retail sample of one of the mixes.

However, on Jan. 31, the U.S. Food & Drug Administration determined “there was not enough epidemiologic and traceback information available to determine if the ill people in this outbreak had eaten the contaminated cake mix produced by Duncan Hines.”

The salmonella setback came atop a decline in Pinnacle’s distribution and sales. In a conference call with investors last December, Conagra president and COO Sean Connolly said that “growth stalled” for Birds Eye, Duncan Hines and Wish-Bone in 2018, reversing previous market share gains.

The culprit? “Simply put, innovation and execution came up short.”

On last month’s investor call, Conagra executives detailed financial results for the company’s fiscal 2020 first quarter and summed up the essence of value-over-volume as “rigorous portfolio management.” Connolly said it involves “eliminating weaker SKUs in advance of the launch of higher-performing new products and the associated brand-building investments.”

At this point, Wish-Bone is flying ahead of other Pinnacle brands in the rejuvenation formation, with retail sales rising in the first quarter, although Conagra did not specify the exact increase. Meanwhile, Birds Eye and Duncan Hines “will continue to stabilize,” Connolly said.

The newest product launches at Birds Eye include spiralized zucchini, which Pinnacle had decided not to pursue out of concern for profitability. Conagra is taking a different view despite its usual preference for margin-building innovation. “That is kind of an exception, when you have the consumer absolutely demanding an innovation and, in the short term, it requires a dilutive gross margin profile. My position is, you've got to get in the game.”

Conagra is sprucing up Duncan Hines packaging and reframing the brand as a sweet treat. Among other line extensions, it’s licensing the Oreo trademark from Mondelez for a dessert cup containing cookie chips, and licensing the Fanta trademark from Coca-Cola for another iteration of Conagra’s Snack Pack line.

Excluding Pinnacle brands, Conagra’s $2 billion snacks business logged a retail sales increase of 7.2% in the quarter, led by meat snacks (9.4%), seeds (8.5%), popcorn (6.8%) and “sweet treats” (2.7%).