For much of its history, the Omaha-based food giant was run as a holding company, snapping up new pieces and brands to add to its diverse operations that spanned the entire food chain.
Beef and pork production in one corner, commodity trading and buying in another, and packaged and commercial foods each operating separately — each with its own team of sales, financial, marketing and back office staffs to make things tick.
Things are different now. Much different.
ConAgra, in an effort to transition from a holding company to a single operating firm, has slimmed its portfolio considerably, focusing on an integrated mix of packaged consumer foods found in grocery stores, and commercial products, like french fries and flours found in restaurants and bakeries.
And this year, ConAgra officials increased their appetite for small to medium-sized acquisitions to help supplement the company’s core growth.
Two major players in that growth have been Andrew Ross, a Scotland native hired by ConAgra last November as executive vice president and chief strategy officer, and his lieutenant, Bill Hahn, vice president of finance, strategy and mergers and acquisitions.
During the eight months since Ross began overseeing ConAgra’s growth strategies, the company has been active in the acquisition market, completing four deals: the purchase of Del Monte Canada’s packaged fruit, fruit snacks and vegetable business, the frozen breakfast line of Odom’s Tennessee Pride, the pita chip operations from Kangaroo Brands, and, most recently, the Bertoli and PF Chang’s frozen food lines from Unilever.
The deals totaled roughly $594 million.
Add that total to the pre-Ross acquisitions of National Pretzel Co., which closed last November, and ConAgra has spent $900 million to spur top-line growth in three key areas: private label; international markets; and adjacent food categories, also known as areas where the company has similar, but not the same, type of products.
“I’m trying to help the company think about growth, and that growth has to be organic as well as through M&A (mergers and acquisitions),” Ross said in a recent interview with The World-Herald. “This is about making disciplined acquis itions that are consistent with the strategy that we’ve laid out.”
The targeted areas have one thing in common: growth.
ConAgra, Ross said, wants to move into categories like salty snacks and breakfast foods that are fast-growing, because many other areas of the grocery store have been stagnant.
Earlier acquisitions included the April 2010 purchase of Elan Nutrition, the maker of private label protein, granola and health bars for $103 million, and the acquisitions of American Pie LLC and the rights to Marie Callender’s pie brands.
The company sold Gilroy Foods & Flavors ingredient business for $246 million in July 2010.
The company has helped its lineup of private-label offerings and the company’s “second- and third-tier brands” with the addition of numerous, “less risky” moves, said Erin Lash, an analyst for Morningstar Inc.
When ConAgra was pursuing Ralcorp, Lash and other analysts thought it would be a good move for ConAgra, especially because of Ralcorp’s extensive private-label offerings incuding pastas, cookies and crackers, in addition to Post-branded cereal.
But with huge acquisitions comes additional risk. If that deal were to have gone through, Lash said, ConAgra would have taken on an increased debt load and a challenging integration process.
Instead, by executing a number of smaller deals, ConAgra has been able to be more nimble in its approach, picking and choosing less-expensive targets that will be easier to integrate, she said.
ConAgra also has room to grow internationally. Compared with larger compet itors like Kraft, H.J. Heinz, and Nestlé, ConAgra’s international sales are a relatively small share of its total.
During ConAgra’s 2012 fiscal year, which ended in May, international consumer food sales accounted for just $841.5 million of $8.37 billion in sales for that segment. Total sales for the year were $13.3 billion.
“Most of this (buying) started after the Ralcorp deal was dead” in May, Lash said. “Since then, their strategy has been to build out their private-label business and expand into international markets. Some of these have been in that realm.”
But some have not. Lash said she was surprised by the purchase of Unilever’s Bertoli and PF Chang’s frozen brands, since frozen food is an area where ConAgra already has extensive brands, including Healthy Choice, Banquet and Marie Callender.
“They do have a major frozen foods platform already, so that’s not a new business for them and it didn’t enhance their position,” Lash said. “(The move) didn’t align with their strategic objectives.”
Ross said that although the company is focused on the three target areas — international, private label and adjacencies — that doesn’t rule out other deals, like with Unilever. Those brands, he said, will appeal to a higher-income customer base that is willing to embrace newer, more unusual flavors.
While Ross and Hahn said ConAgra’s growth strategy is based on both mergers and acquisitions and increased sales from existing, or “organic,” operations, the company will continue to lean heavily on deals to spur growth in grocery stores, which have seen consumers spending less and not stocking up as frequently on pantry staples like ConAgra’s peanut butter, canned tomatoes or pastas.
Last year alone, ConAgra’s consumer sales volume decreased 5 percent...
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Source: Argentine Beef Packers S.A.
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