Is Innovation the Secret Sauce in Nomad Foods' Margin Playbook?

Innovation lies at the heart of Nomad Foods Limited’s NOMD management strategy, driving long-term growth and competitive advantage. In the first quarter of 2025, despite retailer inventory destocking and modest sales, NOMD grew its gross margin by 90 basis points year over year to 27.8%. While this growth was driven by supply-chain productivity gains and favorable year-over-year inventory effects, it reflects NOMD’s broader strategy of pairing operational efficiency with long-term innovation in high-margin categories like fish.

The relaunch of sub-brands like Fish Bar in Italy, featuring snack-sized fish fingers for younger and higher-income consumers, showcases how the company uses innovation to unlock new occasions and drive category penetration. Early results are compelling, the company’s retail sales of fish products in Italy rose 9% year over year in the first quarter. Additionally, the new Captain’s Discoveries line in the United Kingdom aims to spice up traditional frozen meals with modern flavors, appealing to evolving consumer palates. As a result, innovation is on track to increase as a percentage of sales again in 2025, reinforcing NOMD’s ability to support margins even as input costs tick up.

Rather than cutting investments, Nomad is doubling down on advertising and product upgrades. NOMD is confident that its innovation-led flywheel can keep gross margins resilient. The company’s execution in transforming traditional frozen fish into an exciting, modern meal option is evidence that its innovation pipeline is not only working, but helping buffer margin pressures.

How Are NOMD Rivals CAG & KHC Approaching?

While NOMD sharpens its margin edge through targeted innovation in frozen meals and fish, Conagra Brands CAG and The Kraft Heinz Company KHC are intensifying their own innovation strategies to stay competitive. 

Conagra continues to modernize its portfolio. Recently acquired FATTY Smoked Meat Sticks is enhancing its leading position in the high-growth, high-margin meat stick category. Conagra also focuses on aligning its frozen and snacks offerings with evolving consumer needs, emphasizing convenience and flavor.

Kraft Heinz is leveraging global trends by expanding bold flavor profiles across sauces and launching wellness-centric products like Mio & Wine, a zero-sugar hydration brand. Kraft Heinz's innovation strategy is broad, spanning global flavor fusion, ready meals and functional beverages.

NOMD’s Price Performance, Valuation and Estimates

Shares of Nomad Foods have lost around 15.9% in the past three months compared with the industry’s decline of 6%.

From a valuation standpoint, NOMD trades at a forward price-to-earnings ratio of 7.93X, below the industry’s average of 15.74X.

The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings per share implies year-over-year growth of 4.6% and 7.3%, respectively. 

NOMD stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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