Conagra Brands CFO David Marberger says the past few months have been the most challenging period of his 22-year career as CFO, including Covid and Financial Crisis. why? An unprecedented level of uncertainty. Very sticky inflation in the food industry. Customs policy.
“Food companies are taking a hit from so many different angles,” Marberger said. chief executive officer Editor Dan Big Man at the opening keynote speech at the CFO Leadership Conference held in Boston on Tuesday.
For Conagra's industry, American food manufacturing – the stickiness of inflation has been a major headache. While Marberger calls this inflation a “supercycle,” brands including Slim Gym, Hunt and Bird Eye have seen a 40% increase in material costs over the past four years. This amounts to over 12 years of inflation of 2% to 3%, Marberger notes.
Ping Pong customs policies coming from Washington don't help either. Conagra products sold in the US come from US manufacturing plants, but the high tariffs on tin and aluminum, with limited US supplies, are driving Conagra's input costs up. That added to the pressure on Conagra pricing.
“Everyone in this room knows you're about to offset [inflation]At a CFO Leadership Council event, Marberger told viewers of more than 400 finance officials.
The problem is that since the inflation cycle began, consumers have become much more price-sensitive. “Consumers are growing more,” Marberger said. “We've only seen this slow decline in volume across the packaged food industry, and it's been much longer than we'd expect.”
Over the past eight quarters, Conagra has seen its sales increase. [all the way] Marberger said. “We still see behaviors that seek a lot of values” – for example, we switch to store brands or buy from discount stores.
Positive behavior
How can a company navigate these challenges?
I will continue to invest. Even if the margin is compressed, ramp-stretched cost savings are not the answer. “We need to continue innovating,” Marberger said. For producers of frozen food brands like Marie Callendar's and Healthy Choice, that means coming up with new trendy flavors. “You may have to make a little profit, but you need to invest throughout these cycles,” Marberger said.
Keep Agile. Conagra has the lowest SG&A in the food industry, Marberger said. Despite being a $12 billion revenue company, it attempts to make efficient and relatively quick decisions on re-allocating funds between portfolio products. The steering committee, including Marberger, weighs and calls for adjustments to the real contest's for and against.
Better communication. The biggest job of a leader in difficult times is to have the combination of not only being realistic about the company's situation, but also being optimistic, Marberger said. “It's a very difficult combination for some people,” Marberger said. The importance of team and function priorities has also been increased. “You better make sure everyone is clear about what they need to do,” Marberger said. But the team needs to be accountable too. “If they're not at work, you have to deal with it,” he said.
Do not leach the board. To say too much at a meeting, it's easy to provide too much information to the board and various committees. However, board members are limited in time, said Marberger, who works for the Levy Strauss committee. If the CFO wants valuable input from the board, they should cut into tracking, make points, and leave time to discuss the points. “Once you put the charts on, you're accountable for it,” Marberger said. “I've seen it many times on boards where someone goes up the charts and a 10-minute conversation breaks out. I don't seem to need to have this conversation.”
Please don't get criticized by Wall Street personally. Marberger learned not to take it personally when investors criticize the company at a meeting with him. “If investors have a good point, I'm open to it,” Marberger said. Preparing for the meeting is important. Talking to your inner circle is a way to gain perspective afterwards. “That's not always easy,” Marberger said. “I'm very competitive and I'm very proud of the people in the company.”
