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ConAgra Brands is one of America's leading food companies, producing a wide range of packaged foods under 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 portfolio to appeal to a more discerning audience. What remains is a company that is distinctly American in focus with only minimal distribution outside North America. 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.
Selected ConAgra advertising
Click here for a listing of ConAgra Agency Account Assignments from Adbrands.net. The group declared advertising and promotions expense of $371m in year ending 2016. 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).
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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.
Adbrands Weekly Update 2nd July 2015: The steady dismantling of food giant ConAgra looks set to continue under new CEO Sean Connolly, who joined the company from Hillshire Brands earlier this year. Having already sold off what were once significant meat processing operations to focus on packaged foods, ConAgra set about expanding its remaining private label manufacturing in 2011 with a takeover battle for rival Ralcorp. That struggle took two years and cost more than $7bn in cash, fees and assumed debt. Yet the experiment failed, and ConAgra's private label sales and profits have declined steadily ever since. This week Connolly announced plans to exit the sector altogether. "It has become clear," he said, "that the time and energy the company is devoting to the Private Brands turnaround represent a suboptimal use of our resources. To prevent further distraction, we are pursuing the divestiture of our Private Brands operations." Instead ConAgra intends to focus on its collection of (rather unglamorous) packaged foods - Chef Boyardee, Healthy Choice, Hunt's, Reddi-wip etc - and foodservice. Revenues for the year to May 2015 were virtually unchanged at $15.8bn. The previous year's profit turned into a net loss of $253m, after a large impairment charge against the private label business.
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 packaged 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.
The Consumer Foods division makes a wide assortment of shelf-stable, refrigerated and frozen grocery products for both consumers and foodservice customers. These are in turn broken down into product groups. The grocery group produces and markets shelf-stable foods for grocery and foodservice customers. Brands include Hunt's tomato and pasta sauces (#4 in the market behind Unilever/Mizkan, Campbell's and Heinz), Rosarita Mexican foods, Wolf Brand Chili, La Choy Chinese foods, Chef Boyardee pasta products, HomeStyle Bakes ready meals, Gulden's mustard, PAM cooking spray, VanCamp's Beans, and Swiss Miss hot chocolate. In 2016, the group acquired gourmet producer Frontera Foods for an undislcosed sum, including the Frontera, Red Fork and Salpica brands.
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. ConAgra is the US #2 in the frozen entree/dinner sector behind Nestle, with around 26% share, equivalent to $1.7bn (IRI, 52 weeks to Jan 2015, all retail channels, Grocery HQ). Pinnacle is the #3 in multi-serve with the Birds Eye brand; Heinz is #3 in single-serve with Weight Watchers.
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 and Land O'Lakes, with sales of $282m in 2015 and 19% market share (IRI, 52 weeks to Jan 2016, all retail channels, Grocery HQ). 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.
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 and Act II popcorn. The group acquired several other popcorn brands including Poppycock and Fiddle Faddle in 2007. Del Monte branded fruit and snack in Canada and Kangaroo Pita Chips were acquired in 2012. Consumer foods accounted for sales of $7.23bn in ye 2016.
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.
The consumer business is partnered by a Commercial Products division, a leading supplier and broker of branded and unbranded food products to restaurants, bars, entertainment venues and institutions. Combined sales were $4.42bn in ye 2016. Its Lamb Weston subsidiary is America's biggest 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. 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. Lamb Weston was itself spun off to shareholders in November 2016.
The 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.
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 imapirment charge against discontinued operations. Walmart was the biggest customer, accounting for 16% of sales.
According to research from Nielsen, Marie Callender's is the group's single biggest brand overall, accounting for around 13% of annual revenues. Banquet contributes another 10%, followed by Hunt's (9% of revenues), Slim Jim (7%), Chef Boyardee (6%) and Healthy Choice (5%).
The group has operations around the world, but generates 90% of its sales in the US, and most of the remainder in Canada, Mexico, Puerto Rico and the Caribbean.
Gary Rodkin was recruited from PepsiCo in 2005 to become CEO & president. He was succeeded in Feb 2015 by Sean Connolly, former head of Hillshire Brands. Steven Goldstone is non-executive chairman. Other senior officers include John Gehring (EVP & CFO), Tom McGough (president, consumer foods), Tom Werner (president, commercial foods) and Dave Biegger (EVP & chief supply chain officer). Jon Harris is SVP & chief communications officer. EVP & chief marketing officer Joan Chow left the company in summer 2015. Her duties were absorbed by Darren Sarrao, with the new title of chief growth officer.
Other marketers include Erin Kuhlmann (manager, global marketing & media), Kate Briganti (director of content & marketing), Jon Shen (senior director, interactive marketing & consumer promotions), Laura Puente (strategic marketing manager, multicultural & consumer promotions) and Laura Berger (shopper marketing manager).
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 13th April 2016
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