ConAgra to Deal-Seekers: Good Riddance

It reads like a list of some of deal-seekers’ favorite discount brands, that you could often purchase for next to nothing: Chef Boyardee, Snack Pack pudding, Banquet frozen meals, Marie Callender’s, PAM cooking spray. But if it seems to you that there are fewer deals on these products lately, you’re not imagining it. The company that owns these brands says the days of deep discounts on these items and others, are over – and so are the days of catering to deal-seekers instead of shoppers who are willing to pay full price.

ConAgra says a plan to raise prices on several key products, and cut back on heavy promotions, is now well under way. And the company has no plans to look back.

“We’ve been overly reliant on deep discounting,” ConAgra CEO Sean Connolly told investors last week. So now, “we are focusing our efforts on practices that support value over volume and walking away from our previous practices that concentrated on volume over value.”

In other words, instead of promoting lower prices to send products flying off the shelves, the company is happier now to sell fewer products at higher prices – even if it means spurning some of the brands’ most frequent buyers.

Connolly said it was time to cut off what he impoliticly called “price-obsessed consumers”, echoing what he said during his last talk with investors back in June, about “consumers who are not brand loyal, who only buy on hot deals and who contribute virtually nothing to our profitability.” By catering to deal-seekers, he said the company was underserving other shoppers “who would be willing to pay more for more contemporary, higher-quality offerings.”

So ConAgra has been working to refresh some of its historically budget-priced brands like Banquet. “For a long time, our brands communicated deal. We are a deal brand,” Connolly said. But “locking a brand into a $1 price point for decades is just not a good business decision.” Raising Banquet’s prices allowed the company to improve the quality of the food, he explained, with the side benefit of retraining loyal customers who had learned to wait for a good deal before buying the brand at all.

Connolly also mentioned Chef Boyardee, Snack Pack and Marie Callender’s as brands that are now higher-priced with fewer promotions.

And then there’s PAM. “There was a period of time in our past where our PAM business was heavily promoted and the only trick in the book that we turned to was dealing,” Connolly said. But retailers “are asking us for growth and innovation. They want to see us evolve our brand so that we’re not competing on price, so that we’re competing on quality.” So PAM began innovating. Now there’s olive oil PAM, coconut oil PAM and organic canola oil PAM. “These are relevant modern-day attributes that changed the discussion with the consumer to be about something that they value, and they will pay more for, and not about deep discounting.”

Still, announcing that your products are going to be pricier can be a risky strategy. Especially as food prices overall are on the decline and, as one analyst told Connolly on last week’s investors’ call, “large retailers are beginning to demand more reinvestment in price and promotional activity, which seems to be the opposite direction from where you’re going.”

Not to mention that couponers and deal-seekers typically don’t take kindly to being insulted by CEOs of companies whose products they like to buy.

So far, ConAgra is taking some lumps in its earnings reports. Sales volumes are indeed down, but Connolly is confident that will change over time. “What we’re doing is a bit like, if any of you have ever remodeled a house,” he told investors. “The process is a bit messy, but if you want to get to the desired outcome, you’ve got to go through the process.”

The big question is whether enough shoppers will be willing to go through the process of paying more for budget brands – or whether they’ll be seeking their deals somewhere else.

Image source: ConAgra