Conagra CEO Sees More Price Hikes Amid ‘Atypical’ Inflation
(Bloomberg) -- Conagra Brands Inc., the maker of Slim Jim jerky and Hunt’s tomato sauce, has already raised prices on canned goods, and an increase for other products is coming soon.
“This is an atypical level of inflation,” Chief Executive Officer Sean Connolly said in an interview. “It’s the highest inflation level our company has seen in as many years as we can remember.”
The company sees its cost inflation at about 9% for the current fiscal year, which began in June. That’s about double the rate it experienced in the previous year, according to Chief Financial Officer David Marberger. In a typical year, it’s about 3%, he added. The higher costs are being driven by edible fats and oils, proteins, packaging and transportation.
The company raised prices on its canned goods at the end of the fiscal fourth quarter, Marberger said. He expects the “next big wave” of price hikes to materialize by the end of the current quarter. It will cover products impacted by the higher costs for oils and proteins.
Current inflation levels offer Conagra an opportunity to “catch up” on pricing to better reflect higher investments in products, Connolly said. Ultimately, the higher prices should benefit profit margins, he said.
Inflation has become a major economic issue in the U.S., with prices paid by consumers in June surging the most since 2008. The consumer price index jumped 0.9% in June and 5.4% from the same month last year, according to Labor Department data, topping all forecasts.
Conagra shares fell as much as 5.1% on Tuesday, the most intraday in six months, after the company posted an earnings outlook that fell short of estimates.
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