Conagra Brands, Inc (CAG) Q1 2026 Earnings Call Transcript

Conagra Brands, Inc (NYSE: CAG) Q1 2026 Earnings Call dated Oct. 01, 2025

Corporate Participants:

Matthew Neisius — Head of Investor Relations

Sean Connolly — President and Chief Executive Officer

David Marberger — Executive Vice President and Chief Financial Officer

Analysts:

Andrew Lazar — Analyst

Peter Galbo — Analyst

David Palmer — Analyst

Bryan Adams — Analyst

Robert Moskow — Analyst

Megan Clapp — Analyst

Max Gumport — Analyst

Scott Marks — Analyst

Thomas Palmer — Analyst

Presentation:

Operator

Good morning everyone and welcome to the Conagra Brands Q1 Fiscal Year 2026 Earnings Q&A Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded at this time.

I’d like to turn the floor over to Matthew Neisius, Head of Investor Relations. Please go ahead.

Matthew Neisius — Head of Investor Relations

Good morning everyone and thank you for joining us. Once again I’m joined this morning by Sean Connolly, our CEO and David Marberger, our CFO.

We may be making some forward-looking statements and discussing non-GAAP financial measures during this session. Please see our earnings release, prepared remarks, presentation materials and filings with the SEC which can be found in the Investor Relations section of our website for more information, including descriptions of our risk factors, GAAP to non-GAAP reconciliations and information on our comparability items.

I’ll now ask the operator to introduce the first question.

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Andrew Lazar from Barclays. Please go ahead with your question.

Andrew Lazar

Great. Thanks so much. Sean, Conagra expects to return to positive organic sales growth in the fiscal second half, but also mentioned recent consumption trends in pointing to a low single-digit decline expected in the second quarter. What’s driving the fiscal second half inflection? Or is it really just easy year-ago comps? And do recent consumption trends that you mentioned sort of give you any pause, particularly in light of the planned tactical pricing actions that you’re taking and I guess to what do you attribute the recent consumption weakness?

Sean Connolly

All right, good morning, Andrew. Let me tackle that in reverse order. First, I wouldn’t overly read into any recent consumption trend data. To the degree you saw any softening at the end of Q1 that was tied primarily to the two things I mentioned in my prepared remarks, which is the shift of a major Angie’s Boomchickapop promotional event to Q2 and the initial planned elasticity effect of the inflation justified pricing that we took on Duncan Hines due to cocoa costs. So that’s kind of the Q1 concept. This quarter in Q2, some of our major frozen events are planned about a month or so later than year ago based on our supply ramp up. So pretty consistent with what we would expect in the full year. Just a little bit of a shift in timing, so not much else to really discuss there.

As for the basis of our expectations for further sales progress in the second half, it will be a combination of volume momentum on frozen where we wrap last year’s supply constraints plus continued volume momentum on growing businesses like protein snacks. And then you have to also add what I’ll call dollar momentum on inflationary businesses where we’re taking price. That combination of factors reflects the horses for courses plan that we built. What I mean by that is we are investing to drive volume in frozen and snacks while maximizing cash via inflation justified pricing in staples.

Operator

Got it, got it. Thank you for that. And then fiscal first quarter came in ahead of expectations. Fiscal second quarter was moderated a bit in terms of your outlook. Net-net, do you see fiscal first half as potentially coming in a bit better than originally planned? And then Dave, how much was the benefit from trade expense timing to organic sales growth in the quarter? Thanks so much.

David Marberger

Yeah, Andrew, So taking the last part first, it was about 50 basis points of benefit in Q1, the trade timing and then that will flip to Q2, so 50 basis points in terms of sales. So in terms of first half, I would say given the kind of the flip in timing of that, given the fact that Q1 we had some benefit in inventory where we delayed some of the tariff costs and now they’re going to be coming in in Q2, I would say generally we’re still on track with our original plan for the first half. You know, there’s, there’s kind of different pieces we talked about in our guidance. We’re a little favorable in interest expense, but our tax rate’s a bit higher. So there’s obviously some puts and takes, but I think we’re pretty much on our first half plan.

Sean Connolly

Yeah. And I would say, Andrew, that what I was looking for this quarter really were two things. Number one, can we get the service issues behind us and getting to 98% check? I’m feeling good about that. And second, once we did that and could start to resume our merchandising activities and rolling out our innovation, are we getting the consumer takeaway and are we seeing inflection on key businesses. And check, we saw that. So, the consumer is certainly not out of the woods yet. We’re still seeing value seeking behavior. We’re still having to deal with inflation and tariffs, but after a quarter, I think we’re feeling good about the setup for the balance of the year.

Andrew Lazar

Thanks so much.

Operator

Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

Peter Galbo

Hi, good morning. Thanks for the questions. Sean and Dave, I just wanted to maybe touch on the updated core inflation outlook that you gave. I know you talked about some of the moving pieces within kind of the animal proteins, but maybe you can just remind us a, kind of how you’re bought for the remainder of the year on some of those items. Are you kind of locked in now for the rest of the year just given that some of these cuts are very volatile and have moved, particularly chicken over the past month has maybe moved more favorably. So just want to understand the flex in that inflation guide as we get in the back half.

David Marberger

Yeah. So Peter, our original guidance, our overall inflation was approximately 7%. That split 4% kind of core inflation and then 3% gross tariffs. Then we had mitigation obviously on tariffs of about 1% to 1.5% on that. And then we have our productivity, which helps us offset our core inflation. As we’ve gone through this quarter, we’re seeing more pressure on the core inflation. There’s been a little bit of movement on the tariffs, but generally that’s immaterial. So the 3% gross tariffs we estimated at the beginning of the year about the same. The increase in the overall inflation for the year is really coming from the core inflation and that’s really driven by the animal proteins and so particularly beef, pork, turkey and then to some extent eggs, relative to our original forecast.

To your question about kind of where we are, from a kind of overall coverage perspective for Q2, we’re about 85% covered. Certain commodities are fully covered, but then the animal proteins, which has been a pressure point that’s more spot market overall. We do take positions and freeze them. So we have capability to add coverage through freezing proteins, but generally that’s more market and spot based. And so about 85% covered Q2 and then for the full year 60% to 65% coverage overall. But again those proteins were exposed. If there’s additional inflation or if the inflation moderates, we’ll see a benefit from that.

Peter Galbo

Great. Thanks for that, Dave. Very, very helpful. I wanted to pivot maybe to the balance sheet and the cash flow. Dave, I know you called out that there would be some debt pay down in the quarter. I’ve gotten a few questions this morning just on the cash flow generation in the quarter. It was a bit maybe lighter than expectations and some of the inventory build. So maybe you can unpack both the debt pay down. How we should think about that in 2Q in the remainder of the year and then just anything around kind of inventory build that happened in the quarter. Thanks very much.

David Marberger

Sure. So let me kind of start from the top. When we gave our guidance, we had forecasted that we would pay down $700 million in debt for fiscal ’26. That’s from both the proceeds from the divestitures as well as $100 million from cash flow from operations to pay down debt. So we’re still on track with that. Actually we included in our materials that we’re going to have additional favorability from the tax legislation. We are estimating that at $75 million. So we haven’t built that into our specific free cash flow forecast yet, but that’s clearly going to be a benefit. As it relates to Q1, yeah, we have and this is just solely timing. We built more inventory in the first quarter because remember we were coming off supply disruptions and so we had to get back to service levels. So that was a priority. We built built our inventory.

So our normal seasonal build affects Q1. Then we leaned in to make sure we had the right safety stocks on the areas where we had disruptions. And so you normally will see that in Q1 it’s a little bit more so our inventory on hand. We have more days on hand, but that’s been planned. That’s timing. And we still feel comfortable about our full year forecast as it relates to inventory. So I would say we are on track. Q1’s the normal build. And in the first quarter our net debt is down about a little over $400 million versus where we finished at the end of fiscal ’25. And as we said in the comments on a rolling 12, we’ve reduced our net debt by $1.1 billion. So feel really good about cash flow generation both where we are and how we’re forecasting it for fiscal ’26.

Sean Connolly

Just one other piece of perspective on that inventory build. Several of the peers in center store grocery have really struggled in the last year to generate consumer pull against their brands even when investing. We have not had that problem. So you may recall we had six or seven quarters of straight line top line improvement as we invested out in the pursuit of volume last year and we returned to growth in Q2. So we’ve got clear evidence that the brands and the innovation are working for consumers. But we ran into the supply interruption and we had to pull a lot of our merchandising. So now that we’ve got service levels back, armed with that confidence that we can generate consumer pull because of these products, we are absolutely convinced having inventory in place so we don’t fall out of stock again and fail to keep up with consumer demand, particularly going into holiday season is absolutely the right thing to do.

Peter Galbo

Awesome. Thanks, Dave.

David Marberger

Thank you.

Operator

Our next question comes from Tom Palmer from JPMorgan. Please go ahead with your question. Mr. Palmer, is it possible your phone is on mute. And just to confirm the speaker room, are you able to hear me?

Sean Connolly

Yes, yes, we can hear you.

David Marberger

Okay, it looks like we’ve got Palmer number two in the queue. So why don’t we go there and we’ll come back to Tom in a bit.

Operator

All right. Our next question comes from David Palmer from Evercore ISI. Sir, please go ahead with your question.

David Palmer

Okay, thank you. Good morning. Frozen entrees. Obviously it’s been a great long term category for Conagra. Just looking at the recent data and I know there’s reasons for this, maybe some overhangs from some of the past supply chain stuff, but wondering what is your state of the union with with that category? It looks like you guys are losing share and the category is declining. You know, for years you guys were driving the majority growth in a category that was oftentimes growing at least a little bit. So wonder what your frozen outlook is. Frozen entrees in particular outlook is through the rest of the year and I have a quick follow up.

Sean Connolly

Sure. All right, David. Yeah, our outlook is positive. You know, the simple way to think about frozen meals is the category goes as Conagra goes. That’s been the rule for the last seven or so years. When we didn’t innovate back in the day, the category didn’t grow. When we committed to innovating frozen, the category grew steadily for a long, long time. So including, by the way, in our Q2 last year, I think our frozen business was up in the ballpark of 3%. So we’re coming off of a back half of last year where we had major service interruptions in that business. We walked away from major merchandising and that hands our merchandising to competitors who then get in the plans, customer plans, for a period of time while we’re working to get service levels back.

That contributed obviously to us being a share donator, which is the first time that’s happened in years and years and years. But that’s obviously a temporary phenomenon tied to our supply interruption. So what you’re seeing now is our innovation is rolling into the marketplace, our service levels are back to 98%, and we’re getting kind of back in the queue on these major events and feel extremely bullish about it. We’ve got some absolutely fantastic innovations that we rolled out last year that were interrupted. We’re rolling out new ones this year and they’re already off to a particularly strong start. I will draw your attention to the new Dolly Parton frozen meals and frozen desserts that are new in the marketplace and performing extremely well.

And what’s encouraging about that as well is they’re not only performing well, that’s a premium priced product. So that’s good mix for us too. So, I have tremendous confidence in our frozen business. To win in frozen, you’ve got to have scale and you’ve got to have an innovation machine. And we’ve got the best in the business. So we’re looking forward to continued momentum on that business as we go through the year and wrap some of the weak spots in the last year of second half.

David Palmer

Thank you for that. And just very general big picture question. You’re going to have those easier comparisons in the second half of the year and you’re going to be more on your front foot. I’m wondering what are some, I don’t know if there’s exact metrics you can share, but what are the things you’re going to be looking for in the second half that will really tell you that you could get back to balanced sales and profit growth in fiscal 2017, if that is the goal here is to get back to it on [Indecipherable] in ’27. What would kind of let you know you’re there? You’re not clearly growing against some of these comparisons may not be enough for that. So, perhaps give us a sense of what you think would be “good enough” in the second half to show us you’re really on track again. Thanks.

Sean Connolly

You know, David, you once had a good piece of wisdom for me. You said your hero business has got to be heroes, meaning frozen and snacks need to grow. And I think that is well said. I think, for this company, frozen and snacks are clear growth categories. It represents about 70% of our retail business. We’ve had tremendous momentum on both of those businesses leading up to the supply challenges we had last year. And by the time we exit this year, I want to see real momentum and inflection on those businesses. We’ve already got it within the key strategic snacks businesses.

For example, Slim Jim right now is tracking really well. C-Store is coming back. That’s very encouraging. And our new innovation on Slim Jim, which is our new Buffalo Wild Wings, Buffalo Chicken Slim Jim is performing really well out of the gates. That’s a very positive sign. On frozen, it’s all about getting back in the queue on merchandising events with customers and then making sure that innovation that we work so hard to build performs. And so far it looks good. So those businesses with a positive trajectory as we move through the year I think is a very, very positive sign for next year when we’ve got some of these margin clawback opportunities in front of us. So that’ll be a combination of good looking top line and an improving gross margin line as well. And I’m looking forward to that.

David Palmer

Thank you very much.

Operator

Our next question comes from Bryan Adams from UBS. Please go ahead with your question.

Bryan Adams

Hey, morning guys. Thanks for the question. Maybe just first a quick housekeeping one following up on David’s question there. So 1Q volume performance for refrigerated and frozen came in a lot better than I think maybe scanner trends would have suggested. And I think in the prepared remarks you said volumes for frozen itself were up like 3% or so. Was there any like elevated shipments in the 1Q as you were finishing up restoring supply itself or is this pretty consistent with the consumption trends that you were seeing?

Sean Connolly

Hey Bryan, the 3% number that was, I was referring to Q2 last year when we — frozen was back growing strongly in Q2. So shipments were a little bit ahead in the quarter, which is, is pretty typical at a time when you’ve been out of stock and you’re kind of replenishing. I wouldn’t overthink this because if you look at our company on kind of a rolling four quarter basis shipments and consumption are almost always equal. So for us it doesn’t really amount to much. So I wouldn’t overthink that piece.

Anything you’d add to that.

David Marberger

The only thing I would say just if you’re just early looking shipments to consumption within the quarter for R&F, that hebrew obviously because prior year shipments were really strong. So there’s a little bit of benefit shipments versus consumption related to Hebrew within Q1 for R&F.

Bryan Adams

Okay, awesome, thanks. Yeah, not my best reading comprehension I guess there. On the margin clawback opportunities that you just actually spoke to, can you kind of just like run through those high level for us as we think about ’27 because some of the stuff, like some of the costs you’ve had this year, like tariffs, like that’s not necessarily something you can assume goes away. But then I also know you have some work in process on the chicken and then I’m not really sure the puts and takes on SG&A, but do you mind just running through those Sean, as you see them today?

Sean Connolly

Absolutely, yeah. I’ll tick off five things that I mentioned last quarter that remain intact. It starts with productivity. So in fiscal ’26 this year, between core productivity and tariff mitigation, that number is just over 5% which is very strong. And by the way, Q1 came in right above that level which is a super strong quarter. So that will continue. Supply chain team is doing a nice job. Second, at some point we’re going to get inflation relief. Somebody mentioned proteins a little bit ago. Hopefully back closer to our typical 2%. If you look back 100 years as we have any time we’ve had these kind of runaway inflation cycles like this, there’s always been relief on the other side of the hill. So at some point that will happen. We obviously can’t call exactly when.

Third, the advancement of our supply chain resiliency investments, including the chicken plants, will enable us to repatriate some of that outsourced production going forward at lower costs. Fourth, we are taking pricing in certain categories. So after you get past the initial lag of inflation hits and you wait 90 days or so to get pricing in, you start to get the benefit of that. And then fifth, I mentioned last quarter we were kicking off an ambitious initiative to re-engineer our core work processes, leveraging technology, including AI. We have kicked that work off to accelerate growth and lower costs. We’ll have more to report on that going forward, but that’s an exciting possibility. So between those actions and our ongoing efforts to reshape the portfolio for faster growth and better margins we do expect good margin expansion following fiscal ’26.

Bryan Adams

Okay, really helpful. Thanks, Sean. Thanks, Dave. I’ll pass it on.

Sean Connolly

Thank you.

Operator

Our next question comes from Robert Moskow from TD Cowen. Please go ahead with your question.

Robert Moskow

Hi. Thanks. I have a phasing question about 2Q volume, Dave and Sean. I’m just looking at comparisons versus year ago on volume and it would appear that the volume growth comp would get tougher in 2Q compared to 1Q because of the Hebrew comparison and also because you had a lot of frozen vegetable volume in 2Q. So should I assume that volume growth is or volume declines are similar in 2Q as in 1Q because of those comps or is the merchandising activity enough to provide some sequential improvement in volume?

David Marberger

Yeah. Rob, this is Dave. We have obviously a ton of brands and so there’s a lot of moving pieces, a lot of dynamics on merchandising. Generally speaking, the volume that we had in Q1 should be similar in Q2. And when you net it all together for total company.

Operator

In terms of growth. Okay.

David Marberger

Yeah. In terms of volume…

Robert Moskow

Yeah. Thanks a lot.

Sean Connolly

Yeah. And just for perspective, Rob, on the year to go basis, we had strong investment profile in merchandising last year. We had to pull back on some of that in the second half. We have a very strong investment in merchandising behind this innovation for the year to go period as well. And you know, as I mentioned, some of those innovations which just are getting growing now are already performing quite well. So we’re looking forward to that. And you saw in the promotion chart, I shared in the prepared remarks that while we’ve had some of the merchandising restored in Q1, there is room to go as we move through the back half of the full year.

Robert Moskow

Got it. Thanks, Sean.

Operator

Our next question comes from Megan Clapp from Morgan Stanley. Please go ahead with your question.

Megan Clapp

Hi. Thanks. Good morning. I wanted to start with maybe a follow up, Sean, to Andrew’s second question at the beginning, just around how the quarter played out and how you’re tracking so far. You made a comment last quarter that you viewed the fiscal ’26 guide as prudent given the operating environment. And you’ve talked a lot about a lot of encouraging things that you saw in 1Q. At the same time, consumer sentiment is weak. You talked about value seeking behavior, cost, inflation’s a bit higher. So just putting all those puts and takes together, I guess when you think about the fiscal ’26 guide today you reiterated it. Would you still characterize it as prudent and maybe where is the guide in your mind, the most conservative. Thank you.

Sean Connolly

Well, I think it remains prudent. As I mentioned to somebody this morning, the two things I was really looking for in this quarter is we got to get service back, right? Because we had a lot of momentum. That momentum was very materially interrupted in the back half of last year because of service. And we’ve got confidence if we get service back we will get the consumer takeaway. And so we got service back to 98%. That’s good. And the fact that the innovation is off to as strong a start this year, actually stronger than what we had last year. So we had a very strong innovation performance last year in terms of not only customer acceptance but the velocity of that innovation right up to the point where we pulled our merchandising particularly frozen. And so it’s good to see the innovation out of gates this year performing even higher level in terms of units per store per week, velocities, things like that. So that’s a positive.

And between that and the plans we’ve got calendared out for the balance of the year, I think, I think the outlook is prudent and we’re pretty optimistic about building that momentum that I talked about with Dave Palmer a few minutes ago as we move through the year. Specifically this is a horses for courses annual operating plan that we built. There are some businesses where we’ve planned out the year to invest to drive volume growth specifically frozen and snacks. We’re seeing movement in the right direction there. I expect to see more of that as we get to the back half. There are other businesses that we are facing more acute inflation because of things like tin play tariffs where we’re taking more inflation justified pricing. There it’s about dollars. So between the volume plans we’ve got and the dollar plans that we’ve got, I think it comes together and puts us in a prudent position.

Megan Clapp

Okay, great, thanks. And that’s a good segue to my follow up which is as you think about implementing tariff-related pricing which I think you said will come on late in the second quarter. Have your views on elasticity and the expected elasticity changed at all just given you’re still seeing some value seeking behavior with the consumer and if we just think bigger picture around the macro, the consumer is going to be seeing a lot of, it seems like inflation driven pricing start to roll in around the same time. Thank you.

David Marberger

Good question. We track elasticities weekly and we’ve kind of built in a historical elastic expectation in categories as we built the plan. Specifically, what we’ve seen is within our categories, Conagra’s average elasticity is a bit better than our competitors across channels. And then further at a company level, if you look at just total pricing versus total volume change, you’ll also see that our elasticity has been a bit better than most peers over the past year. So I don’t feel like we are assuming anything heroic in terms of elasticities going forward, even in the face of the pricing actions that we’ve got.

Megan Clapp

Awesome. Thank you.

David Marberger

Thank you.

Operator

Our next question comes from Max Gumport from BNP Paribas. Please go ahead with your question.

Max Gumport

Thanks for the question. Sean, I’m curious for an update on the value seeking behavior that you’re still seeing. In a few years now so I’m just wondering how you see this cycle playing out and how you’re positioning Conagra to come out of this cycle in a better place. Thanks very much.

Sean Connolly

Yeah, I mean, I think you’re probably hearing the same thing from just about everybody in consumer packaged goods on this is it is kind of this barbell economy where you’ve got higher income consumers that are showing more resiliency and they’re still spending. You’ve got lower income consumers across different age groups that are being more discerning. They are absolutely doing what they’ve got to do to kind of maximize their household balance sheet. So we’ve got to deal with that. But clearly there is more value seeking behavior. That is evident in the lower income group. So our job is to give those consumers the value they’re seeking. And with the portfolio scope that we have, there are a lot of great value choices. And that’s a big part of why sales are improving and so are shares.

So going forward, we’ll continue to put that value lens on our innovation and marketing effort because it matters. And if you weren’t seeing this kind of behavior, I think if you look at our innovation slate over the last 10 years, you’ve probably seen it skewed toward more premiumized products. But when you have a large cohort of consumers that are value oriented, you take a different lens around your innovation for both price pack architecture and the kinds of innovation that you want to deliver. Why? Because the benefit of superior relative value is a benefit that’s going to move the sales line. And so you should imagine that we not only have a good slate of great value offerings already out there. But it does inform our innovation pipeline going forward to make sure that we’ve got products that are very provocative, not because of maybe an ultra premium benefit, but because of a value benefit.

Max Gumport

Great. And then as a follow up, it was nice to see service levels get back to 98% and then that enabling a recovery to some degree in quality merchandising and improved volume share performance as well. As we look to the remainder of the year, is there any color or guardrails you could provide on how you expect your promotional levels and your volume share performance to progress from here? Thanks very much.

Sean Connolly

Yeah, I’ll point to some data that I shared last quarter, which is if you look across the group, specifically the near end kind of center store peers, what you’ve seen is that promotional levels in terms of percent of total volume sold on promotion has kind of migrated back to just about pre COVID levels. It’s uncanny. It’s all almost pre COVID levels, company by company. And so we’re a little lower than that because we’re still, we’re recovering from supply interruption, but moving back toward that. But I have not seen promotional levels go above that kind of pre COVID norm. So that’s a positive sign, I think.

And then the second metric we track is kind of depth of discount. Are we seeing this more broad based desire to have a return to volume growth now leading to deeper discounts? And the answer is no, we’ve not seen that. And that’s been that way for several quarters running. And I think that’s positive because I think what it shows is that it’s a rational environment. Everybody is to some degree investing margin in the service of volume. And I think that kind of keeps your feet on the ground here. So it’s been a rational environment and I think there’s room for us to do more in terms of merge. We moved back in the right direction, but we’re not back to where we were. But obviously do it in a very rational way. So that’s our intent.

Operator

And our next question comes from Scott Marks from Jefferies. Please go ahead with your question.

Scott Marks

Hey, good morning, Sean, Dave, thanks so much for taking your questions. First thing I wanted to ask about coming back to some of the recovery of the supply chain disruption from earlier this year you’ve spoken about, obviously recovery in your own service levels, rebuilding of your own inventories as well, wondering how you’re seeing it from the retailer side in terms of their inventory levels relative to where they were prior to the disruption on frozen vegetables and some of the chicken products. Thanks.

Sean Connolly

Good question, Scott. It’s probably not a lot of drum in the answer, though. We’re not seeing anything particularly noteworthy. So I would say pretty typical. And nothing that I can report that would really be of any real news. Anything you’d add to that, Dave?

David Marberger

Yeah, no. When we use the term service levels, they’re very specific metrics in terms of where they are with their levels and inventory and so customers are kind of back where they need to be, generally speaking.

Scott Marks

Got it. Thanks for that. And then follow up question just on some of the chicken facility modernization, I know you made the comment that you’re still expecting the baked chicken facility to be completed in Q2. I think you’re still working through a fried chicken modernization that’s expected a little bit later. How should we be thinking about maybe cadence of recovery of the margin. Let’s say I know you spoke about some benefits in H2, but just trying to gauge how we should be thinking about the restoration of margin from that perspective. Thanks.

Sean Connolly

Sure. Well, the baked chicken project, that’s the one we kind of started with. So that’s farther along. And then the fried chicken is kind of a newer development because the demand for fried chicken has just exploded in the last couple of years. And we had tremendous success last year with our banquet mega fillets. So that’s an investment that will go on a little bit longer. And in the meantime, it’ll be an investment that moves some of that production out of house, which has kind of a double-whammy in that we lose the absorption of not producing it ourselves and we pay a tolling fee for that. But that’ll correct as we go forward as well. So baked comes on first in terms of the benefit and fried will follow that.

I mean, the good news here is we sell a lot of healthy meals in frozen and these days the ones that contain protein are the ones that, not surprisingly, people are really buying. Unfortunately, it’s also been the inflationary part of the basket. So we’ve got, that’s where we had a decision to make in terms of what are we after short term volume or margin. And we fundamentally believe that the best thing for the future cash flows of our frozen business is to keep that consumer pull strong and keep our market share strong. And that’s why we, we’re investing some margin in the short term to really get that volume cranking.

Scott Marks

Got it. We’ll pass it on. Thanks very much.

Sean Connolly

Thank you.

Operator

And our next question comes from Tom Palmer from JPMorgan. Please go ahead with your question.

Thomas Palmer

Hey, thank you. Is round two here? You can hear me?

Sean Connolly

We got you, Tom.

Thomas Palmer

All right. A third Palmer on the call. I wanted to just ask on the timing of inflation and kind of how it plays out over the course of the year. I think from the materials, it seems like to start off the year maybe it was a little bit favorable to that kind of 7% plus. Is 2Q just given what we’re seeing with protein maybe heightened or just I guess any help on kind of the cadence over the next three quarters as you see it today?

David Marberger

Yeah, Tom, It’s Dave. The Q1, the real favorability there was for tariffs and timing on tariffs. The core inflation was kind of where we thought it would be, actually a little bit tad bit higher. So when you kind of look at Q2 through Q4 and you look at overall inflation, it’s pretty consistent from a percentage perspective to the full year guide of slightly above 7%. There’s no, there’s no material change in the year on year percentage of the inflation.

Thomas Palmer

Okay, understood. Thank you for that. And then Sean, I just wanted to kind of clarify, I guess one item and I know it’s been asked about already a little bit, but it seems like you are seeing benefits from promotional activity. But at the same time as you have kind of taken some pricing initially, maybe you noted a little bit lower elasticity than you might see in the past. I mean, look, I get some of this is maybe we’re talking about different products where these two are applied. But I guess in the current environment, are you guys kind of baking in that one of these two sides shifts a little bit to converge?

Sean Connolly

I think what we’re baking in, Tom, is that as we roll out our innovation and our marketing support, including our advertising and our major merchandising events, Click we’re going to have the kind of consumer pull that we’ve seen in the past. So that’s on the more volume-oriented businesses and then on the more dollar-oriented businesses, I think we’ve baked in a historically accurate elasticity level. Usually that’s around a minus one and we have not seen any elasticities to suggest that that is an overly optimistic point of view at all.

So I think in total, the outlook for both sides of the horses for courses concept is that it’s prudent and I expect good consumer response in the areas where we’re investing to drive volume on frozen and snacks as the year progresses. And I expect there will be an elasticity effect on canned goods and some other things that we’re taking price on. But they should be fairly predictable effects consistent with history.

Thomas Palmer

Thank you for that.

Operator

And ladies and gentlemen, at this time, we’ll conclude today’s question-and-answer session. I’d like to turn the floor back over to Matthew Neisius for closing remarks.

Matthew Neisius

Thank you, Jamie. And thank you all for joining us today. Please reach out to Investor Relations with any additional questions. Have a great day.

Operator

[Operator Closing Remarks]