ConAgra

ConAgra Brands (US)

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ConAgra Brands is one of America's leading food companies, producing a wide range of brands including Healthy Choice, Marie Callender's, Orville Redenbacher and Hunt's. Unlike more international manufacturers such as Nestle, the group's background is as a commodity-based business, in flour milling and meat processing, and it only began its move into packaged goods in the 1980s. This transformation accelerated dramatically in 2002 when ConAgra sold off virtually all of its $12bn portfolio of commodity businesses. Since 2005 the group has been aggressively repositioning its traditionally value-priced products to appeal to a more discerning audience. In 2013, it finally won a long battle to acquire private label manufacturer Ralcorp, becoming the clear leader in that sector in the US. Yet poor performance led to a complete turnaround just two years and a decision to exit the private label sector altogether. Commercial wholesale operations, such as potato processing giant Lamb Weston, have also been divested. What remains is a collection of packaged foods brands that are distinctly American in focus with only minimal distribution outside North America. In summer 2018, ConAgra agreed to acquired smaller rival Pinnacle Foods, also a force in frozen meals and culinary products, for $10.9bn including debt.

Selected ConAgra advertising

Advertising

Click here for a listing of ConAgra Agency Account Assignments from Adbrands.net. The group declared advertising and promotions expense of $328m in year ending 2017. In the US, Kantar (in Advertising Age) reported measured expenditure of $207m for 2013, out of an estimated total of $416m. Biggest spending brands were Marie Callender's (measured spend $28m), Bertolli ($19m), Pam ($19m) and Chef Boyardee ($19m).

Competitors

ConAgra's main competitors are Kraft Heinz, Nestle and Unilever. See Food Sector index for other competitive companies.

Contact

ConAgra Brands
222 W Merchandise Mart Plaza
Chicago, Illinois 60654
United States
Tel: 1 312 549 5000

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 28th Jun 2018: There is further consolidation underway among US-based food manufacturers. ConAgra Brands has agreed to acquire smaller rival Pinnacle Foods, which has a similarly mixed portfolio of mainly B-list or C-list food brands. Deal price was reported as $8.1bn in cash and stock, or $10.9bn including Pinnacle's debt. Merger will create the second largest player in frozen foods behind Nestle, combining ConAgra's Healthy Choice, Marie Callender's and Banquet frozen meals and side-dishes with Pinnacle's Birds Eye, Hungry Man and Van de Camp's. The combined company will also manage an extensive collection of shelf-stable brands. Pinnacle adds Vlasic pickles, Duncan Hines bakery products and the Wish-Bone salad dressings among other to ConAgra's existing portfolio.

Adbrands Weekly Update 5th Jun 2017: Conagra continued to prune its brand portfolio with a deal to sell the Wesson cooking and salad oil brand to JM Smucker for around $285m, about the same as the brand's annual sales. Conagra will continue to manufacture the product under contract for the first year of the deal. The company could be clearing the decks in advance of a big new acquisition. Several media outlets reported that it had been negotiating to acquire US rival Pinnacle Foods, owner of Birds Eye frozen foods as well as a sizeable collection of other grocery products. Those talks fizzled out as a result of disagreements over price but Conagra is said to be keen still to tempt Pinnacle back to the table. Conagra CEO Sean Connolly had previously attempted to acquire Pinnacle when he was CEO of Hillshire Brands, but that deal fell apart following the hostile takeover of Hillshire by Tyson Foods.

Adbrands Weekly Update 19th Nov 2015: US food company ConAgra announced another major change to its structure. Hot on the heels of the sale of its ailing private label division, the company now says it will spin off food service arm Lamb Weston next year as a separate public company. The slimmed down and renamed ConAgra Brands will have sales of around $7.2bn, while Lamb Weston - which supplies potato products to McDonald's and other restaurant chains - has revenues of around $3bn.

Adbrands Weekly Update 5th Nov 2015: ConAgra finally found a buyer for its struggling private labels division, acquired at great expense from Ralcorp only two years ago. CEO Sean Connolly, appointed earlier this year, quickly identified the disposal of the business as one of his first tasks. It is to be acquired by private label specialist TreeHouse Foods for $2.7bn, little more than half what ConAgra paid for the business.

Adbrands Weekly Update 20th Aug 2015: ConAgra Foods announced the departure of EVP & chief marketing officer Joan Chow. Her duties were transferred to Darren Serrao who joins from Campbell Soup Company in the newly created role of chief growth officer.

More from Adbrands Weekly Update

Brands & Activities

In the first half of the 2000s, ConAgra embarked on a mammoth restructuring designed to reduce its dependence on volatile commodity prices in favour of higher margin branded products. That laborious process was completed by the end of the decade. Next came the more sensitive task of refining the packaged goods portfolio to either weed out or strengthen failing brands. ConAgra's portfolio, though extensive, contained comparatively few market-leaders and a high proportion of slightly dated category fillers, while former high-fliers such as Healthy Choice had seen sales sag in the absence of effective product development or marketing. New CEO Gary Rodkin began a complete overhaul of the portfolio, repositioning once-tired brands with clever and often imaginative new marketing. However, the group remains heavily dependent on the US market, and the hoped-for rejuvenation of existing brands was slow. Rodkin's successor Sean Connolly launched a new streamlining drive in 2015.

As a result of the move away from commodities, ConAgra has reduced its structure from almost 90 separate businesses to what are now just two integrated divisions. Packaged foods are the group's core business. Despite that improved focus, the consumer foods division actually reported a decline in profits for 2004 and 2005 as a result of poorer than expected performance by several of its products, especially meat brands Butterball and Armour. ConAgra announced plans to improve performance by disposing of lower-margin products, and closing some of its 150 manufacturing plants. It also concentrated its resources on developing a group of key "high focus" brands including Healthy Choice, Chef Boyardee, Hebrew National, Orville Redenbacher and Pam, and set about introducing new and improved products within each brand family. In 2008, the group agreed a wide-ranging partnership with P&G to license a number of the latter's proprietary packaging design technologies, such as non-splatter nozzles for plastic bottles and more efficient wrapping systems, to make its products easier to use.

Consumer Foods

The group markets a wide assortment of shelf-stable, refrigerated and frozen grocery products for both consumers and foodservice customers. These are now collected in two groups of Grocery & Snacks and Refrigerated & Frozen. The grocery group produces and markets shelf-stable foods. Brands include Hunt's tomato and pasta sauces (#4 in the market behind Mizkan, Campbell's and Heinz), Rosarita Mexican foods, Wolf Brand Chili, La Choy Chinese foods, Chef Boyardee pasta products, Gulden's mustard, PAM cooking spray, VanCamp's Beans, and Swiss Miss hot chocolate and cocoa. In 2016, the group acquired gourmet producer Frontera Foods for $108m, including Frontera Mexican chips and sauces, Red Fork cooking sauces and Salpica Tex-Mex dips. Knott's Berry Farm jams and preserves were sold in 2008 to JM Smucker, but the group kept Peter Pan peanut butter, the US #3 brand behind Smuckers' Jif and Hormel's Skippy. A further deal was inked with Smucker in 2017 for the sale of cooking and salad oil brand Wesson. However that was blocked by regulators (Smucker already owns Crisco) in 2018, so ConAgra retains the brand.

The snacks group is a leading marketer of popcorn, specialty snacks, and other convenient food products such as Orville Redenbacher's popcorn, Slim Jim jerky, Act II popcorn and David seeds. Slim Jim is the #2 brand in meat snacks behind Jack Links with around 21% share (to Jack Links' 46%). The group acquired several other popcorn brands including Poppycock and Fiddle Faddle in 2007. Del Monte branded fruit and snacks in Canada and Kangaroo Pita Chips were acquired in 2012; the Del Monte business was sold off again in 2018 to Bonduelle. Duke's meat snacks and BIGS sunflower and pumpkin seed snacks were added in 2017 for $218m, as well as Angie's Boomchickapop popcorn.

Grocery & Snacks accounted for US consumer sales of $3.21bn in ye 2017.

The frozen foods group produces some of the nation's best-selling frozen brands including Healthy Choice, Banquet and Kid Cuisine prepared meals, as well as Alexia premium meals. It has produced Marie Callender's frozen meals under license from the privately owned restaurant chain for several years, and finally bought out that trademark in 2011. In 2012, the group acquired to acquire Unilever's US frozen foods business, including Bertollli and PF Chang's ready-serve meals, for around $265m. Blake's All Natural Foods was acquired in 2015 for $21m; Sandwich Bros frozen breakfast meals were acquired in 2017. ConAgra is the US #2 in the frozen entree/dinner sector behind Nestle, with around 25% share of single-serve products, and 22% of multi-serve. Marie Callender's was its biggest brand in single-serve, followed by Banquet and Healthy Choice; Bertolli and PF Chang's were its top-sellers in multi-serve.

Refrigerated dairy products include Reddi-wip cream, Fleischmann's, Blue Bonnet and Parkay margarines, and Egg Beaters egg products. It is the US #2 in margarines and dairy spreads, far behind Unilever but ahead of Boulder Brands, with 20% market share (IRI, 52 weeks to Jan 2017, all retail channels, Grocery HQ). Until recently, the company was also the US #3 in cold cooked meats with brands including Butterball, Armour, Cook's Ham and Eckrich. That business was sold in 2006 to Smithfield Foods for $575m. ConAgra retained kosher frankfurter brand Hebrew National.

Refrigerated & Frozen contributed US consumer sales of $2.65bn in ye 2017. In addition, another $1.08bn was generated from foodservice accounts for both grocery and frozen foods, and $816m in international sales (almost entirely to Canada and Mexico).

In total across all reporting divisions, frozen & refrigerated meals accounted for 47% of revenues (or around $3.7bn) in 2017, snacks & sweet treats for 23% (or $1.8bn), condiments & enhancers for 18% ($1.4bn) and shelf-stable meals & sides for 13% ($1.0bn). In the snacks & sweet treats segment, meat snacks accounted for around $660m, popcorn for $525m, sweet treats for $400m and seed-based snacks for the remainder.

In 2016, the group disclosed its three biggest brands to be Marie Callender's (sales of approx $1.1bn), Banquet ($850m) and Hunt's (approx $650m). There were four brands between $250m and $650m: Slim Jim (approx $575m), Healthy Choice (approx $380m), Chef Boyardee and Orville Redenbacher's.

Commercial & Divested Operations

The consumer business is partnered by the last remnants of what was once a substantial Commercial Products division. However the group has been steadily exiting this business. Its Gilroy Foods division, the world's largest supplier of dehydrated garlic, onion and capsicums, was sold in 2010, and flour processing division ConAgra Mills was folded into a joint venture with Cargill and others, now trading as Ardent Mills. ConAgra retains a 44% holding. Ardent Mills reported revenues of $3.2bn in 2017, with net income of $162m. ConAgra accounts for only its proportional share of profits from the business.

One of ConAgra's biggest commercial units was Lamb Weston, America's largest potato wholesaler. Among other contracts, the company supplies French fries to McDonalds, tortillas to Taco Bell, burgers to Burger King and Wendy's and chicken to KFC. ConAgra Food Ingredients Company manufactures and distributes a variety of ingredients to food and beverage processors. Lamb Weston was spun off to shareholders in November 2016; so too were most of the remaining spice and seasonings operations.

Another divested business was an ill-fated excursion into private label foods through the acquisition of diversified group Ralcorp. An initial offer for Ralcorp was declined, as was a higher offer in Sept 2011 of $5.2bn. In the mean time, Ralcorp won over its own shareholders by spinning off the Post business to them. It eventually accepted a third offer from ConAgra of $5.0bn in November 2012, or $6.8bn including Ralcorp's debt. That deal completed in early 2013. The combination of Ralcorp with ConAgra's existing private label business created the clear market leader in that sector. However performance declined significantly over the following two years, with sales falling from around $4.5bn at the time of the merger to $4.06bn for ye 2015. The division was put up for sale in 2015, and was eventually acquired by private label specialist TreeHouse Foods for just $2.7bn.

The company's once considerable meat processing operations have also been sold off. At the beginning of the 2000s, ConAgra was the country's #2 processor of beef, lamb and pork. In 2001 these operations contributed sales of almost $8bn. The red meat business in the US and Australia was sold in 2002 to investment group Hicks Muse Tate & Furst, becoming Swift & Company. The poultry business was sold in 2003 to Pilgrim's Pride. The group also sold off its processed cheese brands (to avoid too direct a conflict with Kraft) as well as canned seafood production.

Financials

Despite the many changes to ConAgra's portfolio over the past three years, reported revenues have remained flat, with any increases in continuing operations offset by the loss of revenues from divested units. For the year ending May 2015, topline was virtually unchanged at $15.83bn. After net income of $303m the year before, the group posted a net loss of $253m as a result of a $1.6bn impairment loss against the private label business, subsequently divested. Revenues for the year to 2016 slipped to $11.64bn, reflecting the sell-off of private brands. Net losses more than doubled to $677m after a huge impairment charge against discontinued operations.

The spin-off of Lamb Weston prompted another steep decline in revenues in the year to 2017, to $7.83bn. However the group was back in the black at last, with attributable net income of $639m. The group has operations around the world, but generates almost 90% of its sales in the US, and most of the remainder in Canada, Mexico, Puerto Rico and the Caribbean. Its biggest single customer is Walmart, which accounted for 24% of sales in fiscal 2017.

Management

Gary Rodkin was recruited from PepsiCo in 2005 to become CEO & president, and he initiated the shift towards a dedicated packaged foods business. He was succeeded in Feb 2015 by Sean Connolly, former head of Hillshire Brands. Steven Goldstone is non-executive chairman.

Other senior officers include David Marberger (EVP & CFO), Derek de la Mater (EVP, president, sales), Tom McGough (president, operating segments), Dave Biegger (EVP & chief supply chain officer), Brian Davison (SVP, strategy & business development) and Jon Harris (SVP & chief communications officer).

EVP & chief marketing officer Joan Chow left the company in summer 2015. Her duties were absorbed by Darren Serrao, with the new title of chief growth officer. Other marketers include Barry Calpino (VP, innovation), DeLu Jackson (VP, precision marketing), Don Bordeau (VP, marketing & ecommerce), Annie Reyes (senior director, content & strategy), Jennifer Kosse & Rebecca Shapiro (marketing directors, disruptive innovation), Casey Richards (brand dir, Marie Callender's), Tara Rozalowsky (brand director, Healthy Choice, Bertolli, PF Chang's), Brett Castle (brand director, PAM), Amanda Perry (brand director, refrigerated brands), Kristen Kessler (brand director), Jill Dexter (brand director, meat snacks), Suzanne Schlei (senior brand manager), John Pawlowski (senior brand manager, beans & sauces), Yael Steinhart (senior brand manager), Brian Evangelista (senior brand manager, emerging brands, Frontera), Carina Sarbaugh (senior brand manager), Audrey Ingersoll (senior brand manager), Caitlin Davy (brand communications manager), and Erin Kuhlmann (manager, global marketing & media).

Background

ConAgra began life as Nebraska Consolidated Mills in 1919, when Alva Kinney grouped together four of that state's separate grain mills. So the business remained for the next 30 years, despite an excursion into Alabama in the 1940s, when the company opened a new mill. In the early 1950s, Consolidated developed an instant cake mix and began to market it under the brand name Duncan Hines. But this consumer sideline was at odds with the main business, and Duncan Hines was sold to Procter & Gamble in 1956. Instead the company diversified into animal feed and later into poultry processing. In 1971, the business adopted the name ConAgra (supposedly Latin for "in partnership with the land"), and expanded further into fish farming, fertilizers and other areas. That expansion quickly damaged the company's core business, while highly risky futures trading pushed the group close to collapse. New chairman Mike Harper, a former Pillsbury executive, was appointed to rescue the business from bankruptcy in 1976. He sold off many non-core operations, but the group stayed with fertilizers, acquiring agricultural chemicals business United Agri-Products in 1978.

In the 1980s, Harper initiated the first leap into packaged foods, acquiring ailing Banquet Frozen Foods in 1980 from RCA Corporation. This marked a major shift in direction away from the more volatile world of food commodities, and brought added stability to the business. Harper revitalized Banquet, expanding its product range by almost 100 new product lines in two years and then went on to acquire a string of other declining foods businesses, nursing each one back to profitability. Over the following years the packaged foods division expanded rapidly, acquiring a string of other brands including Singleton Seafood, Armour Meats and Foods (from Greyhound), and the Del Monte frozen foods division of Nabisco. Between 1980 and 1986 Harper made around 60 separate purchases, increasing the company's size by almost 700%. At the same time the group's chicken processing business also grew rapidly, supported by a sudden increase in demand from fast food restaurants following the successful introduction of McDonald's Chicken McNuggets. The group moved into red meat processing later on the decade, buying up pork packer Swift & Company, Monfort Beef and EA Miller.

The packaged foods portfolio swelled still further during the 1990s with the purchase of Beatrice Foods in 1990 and Golden Valley in 1992 among others. At the start of the decade the company also introduced Healthy Choice, an enormously successful range of low fat meals and side-dishes ranging from soups to frozen dinners and no-fat ice cream. The buying frenzy reached a peak in 2000 with the acquisition of International Home Foods for $2.9bn, which added Chef Boyardee, Gulden's, Libby's, PAM and Louis Kemp to the portfolio. At around the same time, the group began consolidating its divisions as profits began to shrink.

In 2002 the group agreed to sell its substantial beef, lamb and pork processing operations to a consortium controlled by investment firm Hicks Muse Tate & Furst. The sale was delayed a few months when beef produced at the company's huge Colorado plant was found to be infected with e.coli bacteria. This resulted in several reported illnesses and at least one death, forcing the company to recall 19m pounds of ground beef, the second-largest beef recall in US history. The group was affected once again by salmonella contamination during 2007. It was forced to issue two recalls as a result of separate contamination scares in its Peter Pan peanut butter and Banquet pot pies.

Last full revision 2nd March 2018


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