Pinnacle Foods Bets on Frozen Foods for Growth Potential

Pinnacle Foods’ plant-based brands Gardein and Earth Balance have helped to increase sales after the company experienced some setbacks after cutting its Aunt Jemima frozen products.

Pinnacle Foods reported net sales of $778.8 million in Q1 of this year versus $776.1 in Q1 2017. In their frozen foods segment, sales rose 7.5 percent and their net income was $56.9 million, which is more than double the $23.1 million the company brought in a year ago.

The rise in sales due to Gardein and Earth Balance was largely the result of their appeal to younger consumers. The healthier line up, which is sold in both natural and organic outlets alongside traditional retail stores, was of particular interest. Pinnacle had experienced higher transportation expenses which has contributed to slimmer profit margins in recent years. CPG companies on the whole have been trying to deal with cost inflation in making their products. It was evident that their frozen foods were a hopeful turn around.

Birds Eye, Pinnacle’s frozen food franchise, is now seeing growth into the double-digits. Veggie Made broccoli and cauliflower fries along with tots and new Veggie Made pasta products are some of the products that are helping with the growth of the company.

Even with this bright spot, Pinnacle will still face challenges in the future. With a 9.1 percent stake in Pinnacle, the Jana Partners hedge fund says it may be looking for a potential buyer. It is said activist investors have been successful in convincing other manufacturers and retail firms recently to make changes in their operations. Whole Foods, Nestlé, and Hain Celestial are some examples of this. Jana is said to have been previously successful in this.

Pinnacle’s success in frozen foods was a contributing factor in gaining the interest of Jana. The latest numbers are most likely going to boost the company’s current position. Pinnacle has become an acquisition target for some and was almost acquired by Hillshire Brands in 2014. Conagara was even rumored to be interested last year.

In 2016, frozen food sales in the US rose to around $53 billion. One benefit to frozen foods is the convenience – they take very little time to prepare. These time-convenient foods seem to be appealing to millennials. According to a 2017 report from Acosta, 43 percent of millennial shoppers said they purchased more frozen foods that year than the previous one. Eighty-nine percent of millennials are said to see frozen foods as most valuable as quick dinner solutions. Eighty-one percent see it as convenient breakfast for kids and 72 percent as convenient lunches.

However, millennials aren’t the only consumers who see the convenience benefit to eating frozen foods. Fifty-seven percent of parents say they use frozen dinners because it saves them time and 49 percent said it was because their families really liked the meals.

Pinnacle might have to decide on selling sooner or later, as it seems frozen foods will only make them a bigger acquisition target.