Industry giant Conagra Brands has so many frozen-food items that they're competing against each other, an analyst says

Conagra recently discussed the need for a "much simpler, more productive assortment" of frozen meals.

There's a lot going on in the frozen-food aisle these days. Perhaps too much.

Conagra Brands (CAG) - which is something of a barometer for the frozen-meal universe - said Wednesday that it currently sells more than 400 single-serve meal products under brands like Healthy Choice, Evol and Marie Callender's. CEO John Brase suggested that selection could be pared down.

"I believe there's a future where we can have a much simpler, more productive assortment," he said. "That doesn't mean for a second that we don't believe in the category, that we have any plans to cede distribution, or that we're going to stop innovating. I would say just the opposite."

"We want to double down in this business, and we think an optimized assortment can help drive velocity on our most impactful SKUs," he said, referring to stock keeping units, or the unique, inventory-tracking codes companies assign to each of their products.

Conagra is a giant in frozen foods. By its own estimates, it controls around half of the U.S. frozen single-serve meal market when measured by volume, or the amount of items sold. Those gains have followed deeper investments in frozen foods to stay competitive.

But sales in Conagra's refrigerated and frozen segment fell 2.1% during its first quarter, which ran through August, the company said Wednesday. Volumes in the segment dipped 0.1%. The company stuck to its forecast for falling organic sales overall for its new fiscal year.

Zak Stambor, an analyst at eMarketer, told MarketWatch that frozen meals remain one of Conagra's strengths. Still, he said, 400 products is a lot to juggle.

"Four hundred SKUs spread across multiple brands means that Conagra has varieties that are competing against each other," he said. "They're cannibalizing their own products rather than creating incremental demand."

"What John Brase was saying is we need to simplify things and make this business make more sense," he said.

Last year, Conagra said it held pricing steady for its frozen foods and snacks, in an effort to sell more items. But in July, the company said it would make "inflation-justified" price increases to improve profitability and fund investments in the business.

TD Cowen analyst Robert Moskow said investors have also become unnerved by an expected sales dip for Conagra's ongoing quarter. The company's forecast was "due in part to frozen foods competitor Nestle not following [Conagra's] price increase," he wrote in a note to clients.

For the 52-week period that ended Sept. 6, U.S. frozen-food sales were up 2.5% year over year to around $95.9 billion, according to data from Circana. However, sales of frozen dinners and entrees dipped 0.1% to around $13.9 billion.

Frozen meals have come a long way from the blanched vegetables and rubbery, puck-shaped meat approximations found in TV dinners of the 1970s and 80s. Over the past decade, food producers and retailers have tried to expand the quality and selection of the frozen aisle. Things like frozen truffle mac and cheese and saag paneer are now commonplace.

But consumers today are pickier about what they buy in grocery stores as they navigate higher prices. To stand out, consumer-goods giants have tried to get more creative with their new products, leaning into trends like the ongoing protein craze and the frenzy around higher-fiber diets. Retailers have done the same with their own rival store brands.

Other names in the food industry are trying to recalibrate their frozen-foods businesses.

Anna Manz, Nestle's (CH:NESN) chief financial officer, said at a conference last month that frozen-foods growth in North America had been weaker, as those items played toward a "more challenged area of the consumer." Lower-income consumers have struggled more under the weight of inflation over the past several years.

But she said that faster growth had occurred in offerings geared toward international cuisine, fiber and protein, smaller package sizes and bigger family-sized packs. Kraft Heinz $(KHC)$ CEO Steve Cahillane, during a conference last month, also said "we've got some opportunities to do better and fix our frozen business."

Stambor said consumer-goods companies typically expand their selections to boost sales. That approach can work, at least in the short term.

"But it can have a mid- and long-term cost, when you realize that it's producing marginal gains," he said.

-Bill Peters