ConAgra Foods, Inc. (NYSE:CAG) Q1 2021 Earnings Conference Call - Final Transcript
Oct 01, 2020 • 09:30 am ET
[Operator Instructions] Our first question today comes from Andrew Lazar from Barclays. Please go ahead with your question.
Good morning, everybody.
I guess -- hi there -- I guess, first off, just I guess some clarity on this. You talked about, obviously in some of your key -- key segments, shipments exceeding what we would have expected around -- around takeaway -- or around takeaway, given some rebuilding of retailer inventory. Can you tell us about how much of that might have benefited overall organic sales growth in the quarter? And I assume that's really just retailers getting back to more normalized levels as opposed to volume that needs to sort of come out of future quarters.
Yeah, Andrew. Let me take that. It's Dave. Yeah, as we came out of Q4, the retailer inventory levels were below historic levels. We talked about that specifically for Birds Eye, but we also saw it in several of our grocery brands as well. So the shipments above consumption in the first quarter were clearly just getting the inventory levels back to the days of supply that they're looking for. As we sit here -- as we ended Q1 and we sit here today, retailer days of supply are still below historic levels. So, when you look at shipping above consumption, it wasn't now we're sitting here with heavy retailer inventories. We're still below historic averages. So it was a catch-up from where inventory levels were at the end of Q4.
And just as part of that, would you expect the 6% to 8% organic sales growth in fiscal 2Q to be, all in, more in keeping with what consumption trends are or above what you anticipate consumption will be because of some continued retailer inventory build? And then I've just got a quick follow-up.
Yeah. Right now, we're forecasting that shipments will pretty much be in line with consumption for Q2.
Okay. And then, you mentioned just recently, stepping up marketing spend both above and below the line where you have the capacity to do so to sustain some of these new consumers. I guess, how do we think about the -- maybe the magnitude of that step-up as it relates to how much of the -- the fiscal 1Q sort of earnings upside could well flow through to the full year? I guess I'm asking how much the Company is willing to or it feels makes sense to commit to really stepping up marketing because it would seem a small price to pay in the end if you can hold on to some of these consumers longer-term.
Yeah, Andrew, let me on give you some big picture perspective on how we think about this, and then we can talk a little bit about the year-ago period because I think it's important that you all understand what we intend to do, what we do not intend to do and why. First off, before we ever contemplate an increase in