Conagra's Frozen Dreams Melt Faster Than Ice Cream on a Summer Day: Axe's Take

The Frozen Food Fiasco: A Gut Punch for Conagra

Alright listen up people. Bank of America just downgraded Conagra and Peter Galbo sliced their price target like Wendy Rhoades dissecting a lying politician. Nineteen percent down this year? That's not a stumble; that's a goddamn faceplant. As I always say 'What's the point of having fuck you money if you can't say fuck you?' Well Conagra’s about to learn the answer: It means everyone else is saying it to you.

Protein Prices: The Real Meat of the Problem

Galbo's saying Conagra's facing some unique headwinds. Translation: they’re screwed. Their COGS – that's 'cost of goods sold' for you newbies – is loaded with protein that's about to get pricier than a seat at a Mayweather fight. Chicken beef pork...it's all going up. Twelve percent of their total cost? That's real money. Money they clearly don’t have a handle on. I mean come on do I have to spell it out? 'Sun Tzu said: Know your enemy and know yourself.' Conagra clearly doesn't know either.

Elasticity? More Like Inelastic Brains at Conagra HQ

And get this the 'demand elasticity' for their single serve frozen meals is maxed out. People are already balking at the price and Taco Bell’s dollar menu is looking mighty fine. Newsflash Conagra: you're competing with the siren song of late night value meals. The market is changing but Conagra seems stuck in the freezer aisle of the 1950s. Wake up and smell the profit margin burning.

Chef Boyardee: A Short Term Loss Long Term Pain?

They sold Chef Boyardee! Galbo calls it a 'positive' long term but admits the margins and cash flow were attractive. Translation: they panicked and sold a reliable earner. It's like trading a sure thing for a maybe. Rookie move. They are making so many errors that it feels like their managers are performing an Opera like Mozart is on repeat and it is a never ending loop.

Pricing Power? More Like Powerless Pricing

Galbo's not seeing Conagra passing these costs onto the consumer. 'Difficult to see an environment where the consumer can accept additional pricing,' he says. Bingo. Frozen meals aren’t some luxury item; they're a convenience play. And when convenience becomes too expensive people find alternatives. It is that simple. And when you are getting your ass kicked you need to know how to fight back something Conagra is failing at badly.

Axe's Advice: Adapt or Die (Frozen)

Here's the bottom line: Conagra needs to get their act together. They need to innovate cut costs and figure out how to deliver value to consumers. Otherwise they’re gonna end up like one of their own frozen dinners – bland overpriced and forgotten in the back of the freezer. And as I always say 'Money doesn't solve problems; it just lets you live with them in style.' But Conagra's about to find out that style doesn't pay the bills.