Conagra Stock Tumbles: A Closer Look at the Factors Behind the Fall

Conagra Brands (CAG) stock took a significant hit on Tuesday, dropping nearly 6% in a single trading day. The decline came on the heels of the company's revised sales and earnings outlook for fiscal year 2025, which cited challenges in sourcing chicken and frozen vegetables. In this article, we'll delve into the specific factors contributing to Conagra's supply chain challenges and explore how the company is addressing these issues to maintain long-term success.

Supply Chain Challenges and Their Impact

Conagra Brands faced supply chain challenges in the production of frozen meals containing chicken and frozen vegetables, which negatively impacted their sales and profits. The specific factors contributing to these issues include:

1. Quality inconsistencies in chicken production: Conagra's primary chicken plant experienced "quality inconsistencies," forcing the company to temporarily shut down the facility, make adjustments, and restart it at a slower pace. This led to lower production volumes and increased expenses due to sourcing chicken from a third-party manufacturer (Conagra, 2025).
2. Soaring demand for frozen vegetables: The company struggled to meet the growing demand for frozen vegetables, with demand nearly doubling in December and early January compared to the previous year. This surge in demand outpaced Conagra's production capacity, leading to stockouts at stores (Conagra, 2025).

To address these long-term supply chain challenges, Conagra is taking the following steps:

1. Rebuilding inventories: The company is working to rebuild its inventories between now and the end of its fiscal year in May to better meet demand (Conagra, 2025).
2. Facility upgrades: Conagra is moving forward with a previously planned facility upgrade at its primary chicken plant, which will help restore production speed and consistency. This upgrade is expected to be completed in August (Conagra, 2025).
3. Increased surge capacity: To meet the growing demand for frozen vegetables, Conagra has increased its surge capacity, which should help the company better manage fluctuations in demand (Conagra, 2025).

Strategic Investments and Long-Term Success

Conagra's strategic investments in infrastructure and partnerships have been instrumental in driving the company's long-term success. As mentioned in the conference call, the company has consistently seen positive trends in its top line growth over the past five quarters, with its Frozen and Snack business showing real strength. These investments have been built into the company's plan for this fiscal year and have been working as intended.

One example of these investments is Conagra's decision to invest to drive the top line back to growth, which was implemented in Q2 last year. This strategy has been consistently paying off, as seen in the company's trend lines over the past five quarters. Additionally, Conagra's investments in infrastructure and strategic partnerships have positioned the company for long-term success, even in the face of recent challenges in servicing demand.

To navigate current supply chain challenges, Conagra is working to rebuild its inventories between now and the end of its fiscal year in May. The company is also addressing manufacturing challenges at its primary chicken facility by making adjustments and restarting the plant at a slower pace to restore consistency. These actions, along with transacting with a third-party manufacturer, have enabled the company to resume production that meets its strict quality standards.

Conagra's CEO, Sean Connolly, has stated that the company is still pleased with the strong and consistently improving demand it has experienced this year. Despite recent challenges, the company's investments in infrastructure and strategic partnerships position it for long-term success. By addressing current supply chain issues and maintaining a focus on long-term growth, Conagra can continue to navigate challenges and maintain consistent growth.

In conclusion, Conagra Brands' stock tumbled by nearly 6% on Tuesday due to supply chain challenges in the production of frozen meals containing chicken and frozen vegetables. The company is addressing these issues by rebuilding inventories, upgrading facilities, and increasing surge capacity. Conagra's strategic investments in infrastructure and partnerships have positioned the company for long-term success, and by maintaining a focus on long-term growth, Conagra can continue to navigate challenges and maintain consistent growth.