Like many in the industry, Conagra has been impacted by some behavior shifts as consumers look to stretch their food budgets, and this has elongated the expected volume recovery. T he company has recently targeted investment in frozen and was met with solid consumer response, which has caused the company to step up its activity to a broader set of key categories in the back half of this fiscal year to get volume moving in the right direction, all while free cash flows remain solid, allowing for further deleveraging.
With us from Conagra today to talk more about its go-forward approach are Sean Connolly, President and CEO; Tom McGough, Executive Vice President and Co-Chief Operating Officer; Ale Eboli, Executive Vice President and Chief Supply Chain Officer; and Dave Marberger, Executive Vice President and CFO. Sean, over to you. Thanks for being here.
Thanks, Dave. Appreciate it. Good morning to everybody here in the room in Boca and also to those of you streaming in. I want to thank everybody who joined us at our opening kickoff dinner last night. Once again, our chefs outdid themselves with an array of super delicious modern recipes. Hopefully, you enjoyed it. We are really looking forward to sharing our presentation with you this morning.
You know, 2023 was a tough year on food stocks, but the tide is turning. w hen I think about the value creation prospects I see now, I think they stack up as favorably as any CAGNY I can remember, and I've been to quite a few. Wouldn't be an investor presentation without some forward-looking statements. If you'd like to dig into this slide in more detail, you can find it on our website.
This is our agenda for our presentation this morning. I'll kick us off with the big picture as to where we stand in our company journey. Then our Co-Chief Operating Officer, Tom McGough, will provide an update on the state of our portfolio. Next up will be our Chief Supply Chain Officer, Ale Eboli, who will share some exciting work we've got going on to modernize our supply chain in order to further unlock gross margin from here.
T hen we'll bring it home with Dave Marberger, our CFO, who will share our financial outlook. At the end of our presentation today, we want you to take away that Conagra is a compelling investment opportunity for four reasons. Number one, we have curated an attractive portfolio, and it's fueled by a culture of external focus and agility. Two, we're well-positioned to return to growth in 2024.
Three, we have meaningful margin expansion opportunities ahead. Fourth, we expect strong cash flow and debt reduction near-term and an array of attractive capital allocation options long-term. Now, for those of you who are newer to our story, you should know that over the last 8+ years, we have architected a completely new Conagra Brands. It began with a vision to transform our company from a 95-year-old global holding company into a U.S.-centric branded pure play.
We invested to build capabilities that would be required to win. Then in about 2020, we pivoted into the accelerate phase of our journey, which is really all about winning in the marketplace and winning in the workplace. Across that journey and throughout all the hard work, we had to overhaul our portfolio, our capabilities, and our culture completely.
With respect to portfolio, our true north is perpetually reshaping our portfolio for better growth and better margins. We do that three ways. First, we strengthen the businesses we own. Second, we make acquisitions that make strategic and financial sense. Third, we engage in divestitures or spins that add value. When you look at what we've done, you can only see that we've done a heck of a lot.
In terms of strengthening the businesses we own, we've completely transformed our frozen business and our snacks business, and we've modernized our staples business. With acquisitions, if you look in the middle here, you can see we've done quite a lot over the years, particularly in frozen, where we are the market leader in the United States.
On the right, you can see all the divestitures and some spins that we've done over the years, very active, including standing up Lamb Weston as a very successful public company. With respect to capabilities, this is the Conagra Way Playbook. Everything we do is in service to this playbook. It starts with building superior products through perpetual modernization in our innovation program. Then we secure advantage distribution with our retail customers. We call that driving physical availability.
T hen finally, we drive with consumers what we call mental availability, which is saliency and relevancy. People need to understand our new innovations, what they do, and how they're going to benefit their lives. The capabilities we've built over the years look something like this. This is just a sampling. It's everything from demand science to e-commerce to more recently AI.
These have been fundamental in the success we've had in transforming our company. I would assert that nothing has been more meaningful in our transformation than what we've done to build a winning culture. Simply put, our culture is rooted first in external focus, which is all about relentless observation of an ever-changing consumer and constantly discovering provocative and exciting sources of inspiration on social media and in society every day. S econd, it's about agility because we've got to be fast in converting our insights into action. We've got to be fast to win.
T hroughout that work, what we've built, you can see on this chart, we are now the fourth largest food company in America. W e have curated a very attractive portfolio that spans three consumer domains: frozen, snacks, and staples, which is split between ingredients and enhancers and shelf-stable meals and sides.
When it comes to consumers, make no mistake about it, they absolutely love our market-leading brands. You can see several of them here on this page. In fact, about 80% of our portfolio comes from brands that are number one or number two in their categories. Now, we like to point out that our U.S.-centricity drives what we call simplicity at scale. If you think about it, 92% of our sales are in the United States. W e know our consumers extremely well. We know our customers extremely well.
W e know exactly what it takes to keep them happy. T he thing that keeps them the most happy is winning innovation. Our innovation priorities over the years have been all about modern and premiumization of our categories, be that through reinventing big brands or extending into adjacencies or even tapping into the power of licensing.
You're going to hear from Tom McGough about some of these success stories in just a minute. Importantly, that innovation has not only delivered, it has sustained. You can see our innovation performance in terms of new products over the past five years on this chart: $1.6 billion in innovation, and each year it has proven sticky. That is phenomenal innovation performance. Importantly, that success in innovation has been a major contributor to why our earnings per share has sustained so strongly over the years.
This is our earnings per share growth CAGR since fiscal 2016 when we implemented our playbook: 11% EPS growth CAGR over that period. You can see how that compares to our nearest peers in the middle, but also the broader food group on the right-hand side.
Even if you isolate the more volatile period of the last four years, you can see how our earnings per share performance has sustained in the absolute and versus peers. If you move beyond EPS to total shareholder return, you can see that we're also very competitive against peers. If you look at the bottom of this chart, you can see the relative multiples.
I think when you consider those multiples and you consider what we're about to show you we've got in the pipeline, one can only conclude that Conagra Brands is a tremendous value, but also a super compelling investment opportunity. With that, I'm going to turn it over to Tom McGough, our Co-Chief Operating Officer, to take you through the state of the portfolio. Tom?
Thank you, Sean, and good morning. The perspective I'm going to share today comes from a unique lens given my long tenure at Conagra. Not only have I ridden shotgun over the last nine years during our transformation, but I have a vivid appreciation of how markedly different Conagra is today versus where we were in the old days. What you'll see today is we compete in very attractive categories where we hold strong leadership positions. A s Sean highlighted, we're poised to return to volume growth in 2024. T oday, I'm going to start with our portfolio and then finish outlining how we're building momentum this year.
I'm incredibly proud of how we've sculpted the portfolio for greater growth and how we've strengthened our brands. Our categories are performing better than overall food, in fact, 30 basis points higher. We also have strong leadership positions within those categories.
As Sean highlighted, 80% of our sales come from brands where we command number one or number two. We employ a very disciplined approach to portfolio management. Our businesses each have defined roles. Frozen and snacks are our largest and fastest-growing businesses. We concentrate our investment and innovation resources here to drive growth. Staples plays a very important role. It generates strong cash fueling those investments on frozen and snacks.
Let's take a look at frozen and how we've transformed not only our brands, but the category through aggressive innovation. Now, frozen is a phenomenal space. When you look broadly at frozen food, frozen is growing significantly faster than food overall, in fact, 70 basis points faster in terms of dollars and even faster in terms of overall unit growth. Why is that? Well, frozen is structurally advantaged for long-term growth.
Growth is driven by higher and higher levels of consumer acceptance and usage. What we see is consumers continue to discover frozen's quality, convenience, and superior relative value. T here's also a demographic tailwind. Millennials who've been late in family formation are now having children. W hen children are present, frozen food usage increases by 50%. We compete primarily in three large and growing frozen categories of single-serve meals, multi-serve meals, and vegetables.
I t takes scale and it takes innovation capabilities to win in frozen. W e have built both. Why is scale important? It drives margin given the fixed costs associated with the frozen supply chain. Y ou also need it to compete for limited in-store merchandising and shelf space.W hy is innovation important? Because consumer tastes in food are constantly changing.
You have to constantly innovate to keep the food not only current, but on trend, to retain not only those people in the category today, but to attract new users to the category. T hat is what we do. We've built the largest frozen food company in the United States with over $6 billion in retail sales. I can't overstate the importance of our innovation capabilities. As Sean highlighted, we generated $1.6 billion in sales last year from products that were introduced over the last five years.
The majority of those are concentrated in frozen. W hat you see on this chart, I kind of delineated it in two, is we did not pause our innovation program during the pandemic. T hat was critically important because the pandemic drove a surge in high-quality trial.
A new generation of consumers tried many of our modernized brands and upgraded products for the very first time. Our innovation transforms categories, one of which is frozen single-serve meals, our largest category. For a few years, this category underperformed. Many questioned, "Is frozen still relevant?" What we saw was a category that had sleepy incumbents and lacked meaningful innovation. What we saw was, or our conclusion was, it wasn't frozen that was broken, it was the food.
Frozen, it has tremendous advantages. It's minimally processed. For example, vegetables are picked at the peak of ripeness. Literally within hours, they are flash frozen. Flash freezing locks in that freshness and taste at the optimal point without artificial flavors or preservatives. That is what's truly amazing about frozen. It is the ultimate clean label food.
Back then, when we looked at our portfolio, we saw tremendous opportunities. Our solution and our conclusion was it was about aggressive innovation. We leveraged advanced analytics to identify attractive spaces, uncover unmet needs, and pinpoint the attributes that are driving growth. We then designed exceptional products that have great taste, contemporary cuisines that are infused with modern product attributes that are all packaged and presented in very provocative ways to stand out on shelf or online.
We embarked on a mission to transform the category by modernizing the food. We started with these three powerhouse brands. Consumers responded. Collectively, these three brands have added over $600 million of retail sales since we launched our innovation program in FY18. Not only did that build our brands, but it reinvigorated the category. Category sales accelerated with our first wave of innovation in FY18.
We continue to innovate, and we continue to outperform. Now, this is an interesting chart. This is frozen meals. When you look at frozen meals over a 40-year period of time, it has a long track record of growth by winning a greater and greater share of consumers' at-home usage occasions. In fact, they've grown at a 4% rate. I've highlighted two periods on here that are really instructive about the power of innovation. The first is in gray. That was a period that I referenced that there was little category innovation.
What we saw was occasions plateaued, category growth stalled. W hat you see in blue is when we launched our innovation in FY18, growth in occasions accelerated, the category regained growth, and it has continued to grow through that period of time. Innovation moves people. It changes behavior, and that is what we do.
I think it's fair to say that over the last four years, we've all been tested with the pandemic and inflation, and we've emerged stronger. I don't say that lightly. I think there's a couple of ways that you can substantiate that. One is market share, which is a measure of brand strength. We lead Nestlé by nearly 20 share points in frozen meals, and we've extended that lead by over 300 basis points in the last four years. This is really an incredible chart.
We know in this round of inflation, volume elasticities have been relatively muted, but there are few businesses and few brands that have been able to do this. At the end of our last fiscal year, our frozen single-serve meal volumes were 2% higher than pre-pandemic levels, even after 30% inflation-justified pricing. 2% higher after 30% pricing. That's unprecedented.
That's a true testament to the strength of the connections that we have built between our consumers and our brands. We have strong connections with our customers as well. Frozen shelf space is finite, and it's very precious. This is really instructive of how you sustain growth over the long term. What you see here is that long-term changes in market share are almost identical to changes in share of shelf. Given our strong track record of innovation success, our record of driving category growth, retailers continue to reward us with more and more space, driving our shares even higher.
Now, we recognize that we compete in a much broader competitive set than frozen meals. Given the macro environment we're in today, we've invested in merchandising so that our brands and our categories stand out in-store. We tested this in Q2. Consumers responded, and we posted record shares.
We continue to see what we continue to like what we see. Our shares in December and January are even higher. Now, there's a lot of discussion about GLP-1. It's early days, and no one knows for sure. I f anything, we see opportunity within our portfolio. Numerator data indicates that consumption of better-for-you frozen meals increases 8% among GLP-1 users. You may ask yourself, "Well, why is that?" Well, frozen meals are portion-controlled. They provide vegetable nutrition, and they're high in protein.
Those are all things that those consumers are looking for. I t's evident we built a very successful and strong frozen business, and we're doing the same on snacks. Today, we have over a $3 billion portfolio in snacks with over $2 billion in permissible snacks - excuse me - and over $800 million in sweet treats. Now, snacking is the fastest-growing occasion in food.
Our largest snacking categories, meat snacks, popcorn, and sweet treats, are growing at rates comparable to snacking overall. Not only do we lead our categories with the number one position, but we have at least 50% share in almost all of these categories. That translates into large-scale positions on meat snacks, which we have a business over $1 billion, and popcorn, which is approaching $1 billion in sales. What you'll notice is these businesses are growing at strong compounded rates. These businesses have generated over $600 million of incremental sales during that period as well.
Now, one final thought on our snacking business. Again, no one knows for sure how ubiquitous GLP-1 drugs are going to become. I f anything, we see opportunity within our unique snacking portfolio. That's because meat snacks are high in protein, and popcorn is a low-calorie, high-fiber food.
Among GLP-1 users, consumption of both meat snacks and popcorn increases. Now, we'll look at our Staples business, which plays a very important role for three reasons. First, it generates strong cash fueling investments in frozen and snacks. Second, these are high-margin but low-touch businesses that don't require a lot of resources. Third, the reliable contributors that play a leading role at preparing at-home meals. More of those at-home meal occasions originate from the center of the store.
The notion that the center of the store is dying, quite simply, is a myth. Not only are our categories large, but they're growing. The categories we compete in are over $60 billion in sales today. Like frozen and snacks, our Staples are leading brands, and they have broad consumer appeal, reaching almost 90% of U.S. households.
To conclude this section, I think it's evident that the breadth of our portfolio across frozen snacks and staples are well-positioned to grow. Now, I'd like to talk about building momentum and returning to volume growth in 2024. Where are we today? Well, industry volume recovery has been elongated, but we're beginning to see top-line progress. Our approach is to invest to return to volume growth in 2024. At-home meals are well-positioned to grow. More meals are made at home.
When you look, they are the most affordable meal option. In fact, on average, it costs four times more to eat out than it does to make meals at home. We're beginning to see the impact of that disparity as food service industry traffic has recently weakened. On our business, our volume recovery is accelerating.
We see sequential progress, and our volumes are approaching year-ago levels. As we highlighted in January, we're making robust brand-building investments in merchandising, innovation, and advertising, which I'd like to go share with you. We take a principled approach to all our investments. In terms of merchandising, we're very focused, very disciplined, and importantly, we're ROI-driven. We're investing in high-quality feature and display support, and we're reinstating support on those businesses that were impacted by supply issues last year. We continue to like what we see from these investments.
In terms of innovation, there's probably nothing more important in our playbook than innovation. It's the key to driving sustainable long-term growth. The upcoming innovation we have is some of our strongest that I'd like to share with you now, beginning with frozen. This is a great case study of how we approach innovation across our portfolio.
In single-serve meals, our bowl innovation grew category volume. It increased consumption at the lunch occasion. Bowls represent just 25% of category volume, but they've contributed 60% of category growth. This is where our portfolio breadth is a real strength. We develop innovation platforms, light bowls, and then we leverage the breadth of our portfolio to reach more consumers and drive greater scale. As a result, this platform is approaching $1 billion in sales. As you can see, we're going to sustain success with a very impressive range of new items within this segment of the category.
We're taking the same approach to the dinner occasion, which is a huge opportunity for us. It's the largest meal occasion, but one in which we are underdeveloped. Like bowls, we're developing a platform, and we're going to aggressively innovate across the breadth of our portfolio.
We literally have something for everyone, beginning with these new Healthy Choice modern dinners. On Marie Callender's, we're elevating and modernizing traditional dinner favorites. F or those with hungrier appetites, we're introducing Hungry-Man combos and Marie Callender's Duos that are high in protein. EVOL has always been at the forefront of contemporary cuisine and will continue to be so with these culinary-inspired recipes. When you look at the dinner occasion, there's a solo occasion that those single-serve meals satisfy. T here's a segment called multi-serve meals. This is a different job.
Category growth in this segment is actually accelerating. Italian is America's favorite cuisine. W e're expanding our line with these premium Bertolli entrées that you can pair with these new Bertolli appetizers for a complete at-home meal that's like going out.
For those feeding larger families, we're modernizing and premiumizing Chef Boyardee, and we're moving it into the frozen category. These are unbelievably great products that consumers prepare in just 15 minutes at about $2 per serving. I continue to be excited about how we continue to build the Birds Eye brand. Americans love potatoes. Potato side dishes are growing at a strong double-digit rate. We're expanding the Birds Eye brand further into potatoes while at the same time elevating vegetables with just exquisite flavors. We take it a step further on Alexia.
These are just some exceptional products that are culinary-inspired that appeal to a younger, more affluent household. This one's really interesting. Chicken sandwiches is the hottest menu item on QSR restaurants. This is a great example of where frozen is a superior relative value to eating out.
These new Banquet Mega chicken fillets deliver a QSR experience, but you get six fillets for the price of one QSR sandwich. That is an incredible value, both in terms of quality and the price value. Talking about sandwiches, Handheld is an emerging platform for us. We built over a $100 million business with Sandwich Brothers. Now, this may be a brand that many of you aren't familiar with. It's traditionally been sold in the club channel.
W e built capacity, and we're now in a position that we can expand the distribution in the grocery channel. T here is a long runway of growth for us in this platform. I don't know about you, but when I saw Jaws as a kid, I was absolutely terrified to go into the water. T hat's not the case with kids today.
They can watch Shark Week now with these Van de Kamp's Shark Bites. Angie's BOOMCHICKAPOP is a great ready-to-eat popcorn. W e also see that frozen novelties is a category that's growing at a double-digit rate. W e have this incredibly loyal following on the Angie's brand. W e're expanding Angie's and the frozen novelty with these Angie's BOOMCHICKAPOPs. Slim Jim. It's the number one brand in meat sticks. Our goal is to show up everywhere snacks are sold.
When we look at our distribution, we have about 50% of the distribution that our leading meat snack competitor has. There is a long runway of distribution growth on Slim Jim that we are unlocking by having the right product, the right package, and the price for each retail location. This is an interesting one, and you may have seen it last night at our reception.
Popcorn seasonings are the category that's growing at an 18% rate, and it is high margin. We introduced Orville into this category back in the fall. In just a few short months, we've captured 20% share of the category that continues to grow. We've generated nearly all the category growth within this segment. This one's really cool. Swiss Miss Hot Chocolate Bombs. It's essentially a milk chocolate ball filled with marshmallows that melts when kids pour milk over it.
It makes not only a great hot chocolate drink, but it's a cool experience for kids to do when they're home from school, which seems to be more and more often. Now, Pickle Balls is America's fastest-growing sport. We're jumping into the craze and expanding in the salty snack with these Vlasic pickleballs. This one's a diamond in the rough. Andy Capp's is approaching $100 million in sales.
It's growing at a double-digit rate, nearly 50% faster than salty snacks overall. It kind of has a cult following among the 420 crowd. And we're kind of literally fueling the heat with these Fire Fries. If that's not enough heat, we have Vlasic with Frank's RedHot. T his one, you look at the labels, and they have these little designations on how hot. Well, this is RO*TEL with Ghost Pepper. I made this for the Super Bowl, and it's the spiciest queso that I've ever had. You will not be disappointed about the heat and the flavor.
We continue to look for new opportunities to build categories. W e see one as consumers now, two-thirds of consumer households now have an air fryer. When I use an air fryer, the food sticks, and it's a hassle to clean.
We specially formulated PAM for air fryers to make that easier, unlocking new usage occasions within that category. T his one's been an absolute home run. This is a great example of how we modernize and premiumize categories. Wendy's has generated nearly 100% of the chili category growth over the last year. Now, I never thought I would do this, but I'm going to introduce Dolly Parton with a special message for all of us here today. Roll the video.
Well, hello from Nashville. It's Dolly, and I am down here announcing my exciting new partnership with Conagra Brands. We've had a very successful couple of years baking up amazing southern flavors with Duncan Hines' collaboration. Now, I'm ready to expand beyond the bacon aisle with them. Now, in the coming months, you look for our new exciting innovations in other parts of the store. I hope y'all enjoy CAGNY, and I'll see you in the kitchen with Dolly. See you later.
We started with Dolly, and we made a line of baked goods inspired by her recipes. N ow, as she said, she's partnered with Conagra exclusively to develop her brand in food. This is a new innovation platform for us. Our next step is to move Dolly into the frozen category with baked goods and frozen meals. We're just getting started here. There's a lot more to come in the upcoming years. Unquestionably, we have tremendous opportunities to drive growth through innovation.
Our pipelines for the next couple of years are very, very robust. We're also looking to build our brands and build our categories through advertising. T wo of those I'd like to share are on Healthy Choice and Birds Eye. Healthy Choice is a phenomenal brand.
As you can see, over the last four years, we've extended our shared leadership in better-for-you single-serve meals by nearly 700 basis points. Y ou probably don't have an appreciation for what was before the pandemic; we were about $100 million smaller than Lean Cuisine. Today, we're about $150 million larger. There's a huge opportunity on this brand because you don't have to sacrifice taste for great; you don't have to to get health, you don't have to sacrifice taste. W e've developed advertising that will not only build our brand but build the category. Please show the work.
Say goodbye to tasteless protein and hello to delicious with Healthy Choice Power Bowls packed with tastefully selected ingredients to power your day, like nourishing fire-roasted corn and veggies, dark leafy greens, all-natural adobo chicken, and whole grains, delivering a meal with 26 grams of protein that's all bold and no bland. Make the smart choice with Healthy Choice Power Bowls.
Vegetables is a huge addressable market. In fact, on an annual basis, there are 30 billion eating occasions of vegetables that deliver over $30 billion worth of sales. F rozen has just 11% of that. What we do is incredible in vegetables. As I highlighted earlier, we pick vegetables at the peak of ripeness. We flash freeze them, locking in that freshness and taste at the optimal point with artificial flavors or preservatives. That is a huge, huge benefit. We're going to highlight the superior relative benefit of frozen versus fresh and canned. Let's take a look at the work.
Did you know over 8 million tons of the fresh produce that's grown ends up in here? Ooh, and that really stinks. At Birds Eye, we pick our vegetables at their peak of ripeness. Then we use our awesome Stay Fresh Flash Freezing process to freeze them. Y ou get all the taste and nutrients of fresh with no waste of money tossing produce that's gone bad. T hat puts a lid on that. From farmer to freezer, Birds Eye. Canned vegetables?
They don't even sound good. At Birds Eye, we pick our vegetables at their peak of ripeness and then use our Stay Fresh Flash Freezing process to lock in all that Mother Nature goodness so you get the taste and vibrant color you don't get with canned. Delicious Birds Eye vegetables. They do things that cans just can't. From farmer to freezer, Birds Eye.
When you put it all together, we're incredibly excited about the growth in our portfolio, and we're poised to return the volume growth in 2024. Now, please welcome Ale, our Chief Supply Chain Officer.
Thank you, Tom. Good morning. Before I show how we make all that great food, I'll start with a quick personal story. Three years ago, I got a call from Sean. He invited me to join Conagra. After 25 years at Unilever, that was not an easy decision to make. Here he is. Sorry. That was not easy to decide to leave Unilever and join Conagra. There are two things that Sean mentioned to me during that conversation that led me to accept the invitation.
First, the opportunity to take the supply chain of a great company with great brands to the next level. S econd, the value that can be created by the concept that he shared this morning about simplicity and scale, the value that can be created to consumers, customers, and shareholders by Conagra's unique ability to move fast and at scale.
I'm three years into the job now. I'm more excited today than I was in day one of the job. What I'll be sharing with you right now is the journey that we are going through in supply chain. Starting with the key message. Yes, we are on track to deliver the $1 billion cost savings that we committed at our last investor day. Not only that, the supply chain is well positioned to continue to drive margin expansion while delivering world-class customer service.
All that's supported by the construction of a digitally connected supply chain. Over the next 10 minutes, I'll be sharing with you how we are doing that. Let me start by the results that we have already delivered. Managed supply chain over 30 years in different geographies and businesses, there is one lesson that I learned.
To properly evaluate the value of a supply chain, you have to look through three different lenses. First, to support growth through great customer service. Second, to expand margins through a relentless focus on cost. And third, releasing cash by effectively managing your working capital.
You want those three metrics to be moving in the right direction simultaneously, not one at a cost of another. As you can see, that's what we are doing. We are moving the three value drivers in the right direction. Our service levels are up 16 points in case filled, 10 points in on time. Our productivity agenda is approaching 4% of COGS, and our working capital is reducing by reduction in inventories. I'm super proud of these results. Really happy. Happy, but not satisfied. I'm sure that there is more value that we can deliver over the coming years.
What I'll be sharing with you right now is how we are implementing a digitally connected supply chain that is at the core of the results that we have already delivered. It 's the base of my confidence that there is more value to come. This is the programming that we are implementing in the digitally connected supply chain. It's based on three pillars: connected shop floor, the digitization of our factories. Connected network, the digitization of the end-to-end network from customers to supplier.
F inally, connected people, that captures the investments that we are making to our people so that they can create value today and in the future. Now, what I'm going to do is just give a quick overview of each one of those three pillars so you can get a flavor of the work that we are doing. Start with connected shop floor.
It's focused on our factories. That's the place that we make all that great food that consumers love that Tom shared with you. Connected shop floor is based on three elements: line connectivity, materials efficiency, and performance management. Line connectivity basically is the installation of sensors in every piece of equipment of a given line. Those sensors, they feed real-time data into the cloud. F rom the cloud, you can extract insights and drive performance. We have also implemented image processing capabilities in many lines that are helping us drive performance, for example, in our quality results.
Materials efficiency is the first use case of connected shop floor, basically because that's where we identify the biggest value opportunity. Through a precise and immediate identification of potential sources of losses, we can immediately take action and reduce material waste.
All that information then is available for the leaders of the sites that can identify priority areas and drive expertise to quickly address any potential issue. All that combined is driving our efficiencies in a way that is improving our asset utilization, reducing material waste, and helping us identify additional opportunities for cost optimization, for example, the repatriation of volumes that we currently make at co-manufacturers.
By the end of fiscal year 2024, our expectation is to have delivered $160 million in manufacturing savings. We have already implemented connected shop floor in 9 sites. I n the next 2 years, it will be 13. T hose 13 sites will represent more than 50% of the volume that we currently manufacture at Conagra's facilities. Moving on to the second pillar, connected network.
Value supply chain is created not only by the perfect execution of each one of its subprocesses, but more importantly, in how well you orchestrate and you synchronize the end-to-end network. Connected network then is built on three elements: network agility, customer integration, and supplier integration. Network agility is a way to measure how fast the supply chain can react to changes in demand or challenges in supply. Our approach to agility starts with the implementation of advanced analytical tools for forecasting.
Leveraging AI and machine learning, we are able to capture consumption data and many other data and send a demand signal to the supply chain that can quickly react to it. We have also implemented Digital Twins in many of our lines. Those Digital Twins will allow us to compress the lead time of innovation and increase our speed to market. The second element is customer integration.
It starts with the implementation of customer supply chain teams that sit at our key customers. Not only that they can leverage their data and technology, but more importantly, they can collaborate and understand our customers' priorities and secure that the entire supply chain is lined up behind them. All that's supported by an integrated and automated logistics network that is driving efficiency and customer service. Finally, on the supplier integration front, we are leveraging technology so that we can build resilience and cost optimization opportunities both in our raw materials as well as in commodity management.
A deeper understanding of our cost drivers is allowing us to identify additional cost optimization opportunities, for example, in inbound logistics. Our agility program and our demand-driven planning process have already delivered substantial results both in working capital and customer service.
By the end of fiscal year 2024, we expect to have delivered $120 million savings in logistics and $370 million in materials efficiency. Finally, moving to our connected people. In a world where technology and knowledge change constantly at an unprecedented speed, more important than running our assets and technology well today, it's how we develop our culture where people can learn, unlearn, and relearn, constantly adapting to the ever-changing environment. Connected people then is composed of three elements: our data and technology infrastructure, the digitization of our front lines, and our leadership development programs.
Our technology and data infrastructure starts with the implementation of the ERP that is now fully completed. We have then implemented world-class applications across the different functions of supply chain, like planning, transportation, warehousing, just to name a few. Those applications then feed the data lake that is also fully implemented.
From the data lake, we can then develop, implement, and quickly roll out all the different cases of machine learning and AI, some of those that I shared with you this morning. The second element is the digitization of our front line. We have already delivered 2,200 iPads to our front-line colleagues, and we have 5,000 to implement over the next coming years.
That technology allows them to communicate and perform their activities very efficiently, leveraging data analytics, image processing, and avoiding known value-added activities. Finally, one of the ways to keep the momentum of our cultural transformation is by investing in our leaders. Our development program here is focused on our supply chain leaders so they can lead the new generation that is now joining the workforce.
A few examples of the programs already implemented are the Supply Chain Academy, the Manufacturing Leadership Program, and the Supply Chain Early Career Program. In summary, this is how we are implementing the digitally connected supply chain: three pillars, three elements in each pillar: simplicity at scale. Now, if you go back to the beginning of my presentation, you will remember that I told you that I'm happy with the results delivered so far, happy but not satisfied. I also said that I believe there is more value to be created.
The fair question to be made now is, how much value? To answer that question, I come back to my value drivers. Our ambition is to deliver another two points of case-filled improvement. We want to continuously progress our productivity initiatives to be consistently at least at 4% of COGS.
We want to continue to release cash by reducing our working capital 3 days per year over the next 3 years. Well, that's it. I hope you have enjoyed this quick tour through the supply chain. I'll hand over to Dave Marberger. Dave, the floor is yours.
Thank you, Ale. Good morning, everyone. I crack up every time I see that Dolly Parton video. I love how she says, "CAGNY!" She's a great person and a great partner for us. I 'm going to bring us home here. I'm going to make up a little time. H ere we go. Our model for creating value starts with our Conagra Way Playbook for driving growth and is fueled by our productivity programs, both of which you heard a lot about today.
This results in strong cash flow, enabling us to invest in the business while providing attractive cash returns to our shareholders. Now, Sean talked about the Conagra transformation. This summarizes the strong performance across various financial metrics from fiscal year 2017, which was the first year we were a pure-play branded food company, through fiscal 2023.
During that period of time, we've gone from being $7.8 billion in sales to over $12 billion in sales. Our adjusted EPS has increased 59%. Our adjusted EBITDA is up over $900 million. Our EBITDA margins have improved to 20.5%, a 60 basis point improvement. We've done all this while providing cash returns to our shareholders in the form of share repurchases and dividends, which were up 44% per share during this period. This summarizes our first-half financial performance.
Our organic net sales were down 1.9%, but the rate of volume decline improved from the first quarter to the second quarter. Both our operating profit and operating margin increased on lower sales because our supply chain operations were normalized and our productivity programs were back on track.
Our EPS was negatively impacted as we wrapped on record profit performance from our Ardent Mills joint venture in the year-ago period. Ardent Mills continues to do very well this year. In fact, they're generating increased cash returns in the first half of this fiscal year. O verall free cash flow for Conagra for the first half came in at $641 million, a significant increase versus the prior year. Today, we're reaffirming our full-year fiscal 2024 guidance.
We expect organic net sales of -1% to -2%. We expect adjusted operating margin of approximately 15.6% and adjusted EPS in the range of $2.60-$2.65, reflecting the acceleration of our trade merchandising and advertising investment in the second half compared to the first half.
We expect our net debt to EBITDA leverage ratio to approximate 3.55x by the end of fiscal 2024, as we expect to continue paying down debt in the second half. We follow a balanced approach to capital allocation. We invest in the business to drive returns above our cost of capital. We are always open to portfolio transactions that drive value based on our strategic and financial criteria. As Sean highlighted, we've executed smaller modernizing acquisitions and larger synergistic acquisitions over the last seven years.
We've divested various businesses as they were no longer a strategic or financial fit. O ur priority now is continuing to pay down our debt to strengthen our balance sheet. We also provide returns to our shareholders in the form of opportunistic share repurchases and dividends. We target a 50%-55% payout ratio on our dividend.
As always, we're committed to maintaining an investment-grade credit rating. I just talked about our free cash flow. Free cash flow in the first half increased $500 million. That's a free cash flow conversion of 97% for our first half. That's the highest in recent history. That was driven by our improved operating profit, improved cash flow from our Ardent Mills joint venture, and a reduction in our days-on-hand inventory, which Ale talked about.
We expect our cash flow to continue to be strong in the second half. W e expect our free cash flow conversion to come in around 100% for full-year fiscal 2024. Not only is our free cash flow conversion very strong, but our free cash flow yield for the 12 months ended our second quarter is the top among the peer group.
We're going to continue to focus on driving cash down to get to our long-term leverage target of 3x by the end of fiscal 2026. Our long-term financial algorithm remains unchanged. In an environment where supply chains are more stable and we're experiencing inflation that's much more moderate than what we've experienced in the last 3 years, we're confident that the Conagra business can deliver this financial performance that's outlined in this algorithm.
Before I finish, I want to reflect on what this business has navigated the last 5 years: integration of a major acquisition in fiscal 2019, the onset of COVID in fiscal 2020 as we were still integrating that business and delivering over $300 million in cost synergies from it, and then fiscal 2021 to fiscal 2023 where, like others, our supply chain was strained, consumer demand was inconsistent, and we experienced cumulative inflation of over 30% requiring us to take our prices up.
A s we approach fiscal 2025, we're confident that we can drive profitable growth. Why? Because our supply chain is stable and normalized, our productivity programs are on track, and our volumes are moving in the right direction. A s you saw, our free cash flow generation is very strong.
That allows us to invest in the business, strengthen our balance sheet, and provide attractive cash returns to our shareholders. T hat's why we believe Conagra is a compelling investment opportunity. That concludes Conagra's comments for this morning. Appreciate your time. We're going to take questions in the breakout room. Thank you.
Please join me in thanking Conagra for the reception last night. We'll see you in the breakout.