ConAgra Foods, Inc. - Company Profile, Information, Business Description, History, Background Information on ConAgra Foods, Inc.

One ConAgra Drive
Omaha, Nebraska 68102-5001

Company Perspectives:

ConAgra is one of the world's largest and most successful food companies. As North America's largest foodservice manufacturer and second largest retail food supplier, ConAgra is a leader in multiple segments of the food business and focuses on adding value for customers in retail food, foodservice, and agricultural product channels.

History of ConAgra Foods, Inc.

In 1919 Alva Kinney brought four grain milling companies in south central Nebraska together to take advantage of increasing grain production in the Midwest, and the Nebraska Consolidated Mills Company was born. More than 80 years and two name changes later, ConAgra Foods, Inc. stands as one of the world's largest food companies, holding the number one position in North America in foodservice manufacturing and the number two spot (behind Kraft Foods, Inc.) in retail food sales. The company's numerous consumer brands include Hunt's tomato products, Healthy Choice, Banquet, Armour, Bumble Bee, Louis Kemp, La Choy, Wesson, Country Pride, Blue Bonnet, Parkay, Marie Callender's, Cook's, Swift Premium, Butterball, Slim Jim, Chef Boyardee, Orville Redenbacher's, PAM Cooking Spray, Van Camp's, Peter Pan, and Swiss Miss. Approximately 80 percent of ConAgra's revenues are derived from its retail and foodservice businesses. Responsible for the remaining 20 percent of sales are the company's agricultural products businesses, which are involved in the manufacturing and distribution of food ingredients, seeds, crop protection chemicals, and fertilizers, as well as in worldwide trading of bulk agricultural commodities.

Early History: From Milling to Animal Feed to Poultry Processing

Officially formed on September 29, 1919, the Nebraska Consolidated Mills Company (NCM) was headquartered in Grand Island, Nebraska. At first Kinney concentrated on milling the bumper postwar wheat crops at his four Nebraska locations. But soon, to accommodate his growing business, Kinney added a mill in Omaha, in 1922, and moved the headquarters of the company there. He continued to run a profitable and relatively quiet company solely in Nebraska until he retired as president in 1936.

Kinney was succeeded by R.S. Dickinson. Initially, Dickinson followed his predecessor's simple but successful policy of milling grain in Nebraska. World War II and the postwar boom kept the demand for grain high and the milling business profitable.

During the early 1940s Dickinson began to use the company's profits to expand. Other successful milling operations, such as General Mills and Pillsbury, were expanding both the number of plants and the number of products they offered, and NCM followed the same trend. In 1942 Dickinson opened a flour mill and animal feed mill in Alabama. He also promoted research into new types of prepared foods that used flour, which led to the development of Duncan Hines cake mixes, introduced in the early 1950s.

The Alabama expansion was profitable, but Dickinson found that it was more difficult to gain a foothold in the prepared-foods market. Cake mixes, though only a small proportion of the total flour market, accounted for as much as $140 million a year in retail sales by 1947. But the market was dominated by General Mills's Betty Crocker brand and by Pillsbury, each with one-third of the market share, while Duncan Hines controlled only 10 to 12 percent. Unable to increase its share of the highly competitive cake mix market, NCM eventually decided to get out of prepared foods and use the money it raised to expand in basic commodities: grains and feeds. So, in 1956 the company sold its Duncan Hines brand to Procter & Gamble.

The new president of Nebraska Consolidated Mills, J. Allan Mactier, used the proceeds from the sale to expand aggressively. In 1957, NCM built the first major grain processing plant in Puerto Rico through its subsidiary Caribe Company. The $3 million plant processed flour, corn meal, and animal feeds at Catano in San Juan harbor. Production at the plant did not compete with the parent company's already existing concerns; none of the flours and feeds produced there were exported to the mainland.

Caribe's foothold on the island led to further Puerto Rican expansion in new areas. A second subsidiary, Molinos de Puerto Rico, took over Caribe's animal feed business on the island while also developing Puerto Rico's virtually nonexistent beef industry as a market for its products. In Molinos' first five years of operation, consumption of animal feeds in Puerto Rico increased from 136,516 tons, of which 100,314 were imported, to 249,267 tons, of which only 46,723 were imported. The company also profited from an increased demand for meat and milk on the island.

Elsewhere, however, flour millers faced shrinking profits as demand leveled off in both domestic and foreign markets. European grain production had recovered from the disruption of World War II, and prosperity at home in the 1950s and 1960s allowed consumers to buy more expensive food items, leading to lower flour consumption.

Large millers turned to diversification to offset declining profitability. Industry leaders General Mills and Pillsbury developed their consumer foods lines and introduced new types of convenience foods, while the third of the "Big Three" in flour milling, International Milling Company, Inc., diversified primarily into animal feeds. Nebraska Consolidated Mills, perhaps unwilling to compete again in packaged foods after its experience with Duncan Hines, also developed the animal feed end of its business. Throughout the 1960s and into the 1970s, the company established mills and distribution centers for feed and flour in the Southeast and Northwest.

NCM also turned to another basic commodity: chicken. It developed poultry growing and processing complexes in Georgia, Louisiana, and Alabama during the 1960s. In 1965 the company also began to expand into the European market by going into partnership with Bioter-Biona, S.A., a Spanish producer of animal feed and animal health products and breeder of pigs, chickens, and trout.

Emerging As ConAgra in the 1970s

By 1971 Nebraska Consolidated Mills had outgrown its early base in Nebraska as well as its name. It chose a new name to reflect its new concerns: ConAgra, meaning "in partnership with the land." ConAgra, Inc. was listed on the New York Stock Exchange in 1973.

The new name, however, did not necessarily mean continuing success. The early 1970s, in fact, brought the company to a low point. Many of its acquisitions during the expansion of the 1960s and early 1970s were only marginally profitable at best. In 1974 the company posted net losses and suspended dividends. Heavy losses in commodity speculations brought ConAgra to the brink of bankruptcy in 1975.

ConAgra's first high-profile leader, former Pillsbury executive Charles "Mike" Harper, was named president and CEO in 1976 with a mandate to turn the ailing company around. Essential to Harper's turnaround plan were strict financial goals combined with a series of acquisitions that served to broaden ConAgra's sales base. To reduce debt, Harper first sold nonessential operations. He then began to buy agricultural businesses at the low end of their profit cycles and turn them around. Harper originally intended to stick with ConAgra's emphasis on basic commodities rather than compete with the packaged-food giants. When he purchased Banquet Foods Company in 1980, he said that the acquisition was a way to increase ConAgra's chicken capacity. ConAgra's chicken production did increase by a third, bringing the company from eighth to fifth place among chicken producers. ConAgra expanded into fish as well as poultry in the 1970s with investments in catfish aquaculture.

Creating a Diversified Food Company in the 1980s

Another of Harper's acquisitions put ConAgra back in the forefront of the flour market. In 1982 ConAgra bought the Peavey Company, a Minneapolis-based flour miller and grain trader, giving it 16.3 percent of the nation's wheat-milling capacity and a system of grain exporting terminals. Political barriers to U.S. grain exports had depressed Peavey's profits, and the acquisition was not the early success story that Banquet was for ConAgra. By 1986, however, Peavey was posting a $16.4 million profit on sales of $1.2 billion, a promising upward trend.

Harper also kept to a commodity-oriented approach by diversifying into agricultural chemicals. ConAgra expanded into fertilizers, and in 1978 acquired United Agri Products, a distributor of herbicides and pesticides. Higher grain prices, Harper reasoned, would mean increased demand for such chemicals.

But, in an attempt to counter the cyclical profit pattern of basic agricultural commodities, Harper also entered areas that did not mesh well with the company's traditional orientation: pet accessories, a Mexican restaurant chain, and a fabrics and crafts chain, among others.

In a dramatic change of direction during the 1980s, ConAgra decided on prepared foods as a better way to balance cyclical profits in the food industry. The company's stringent financial goals were being met: return on equity averaged 20 percent, annual growth in trend-line earnings were over 14 percent, and long-term debt was held to below 35 percent of total capitalization. With the company on firmer financial ground, ConAgra began a series of acquisitions that would ultimately make it the nation's second largest food company.

ConAgra moved into the prepared seafood market in 1981 with the purchase of Singleton Seafood, the largest shrimp processor in the country, and Sea-Alaska Products. In 1987 ConAgra bought Trident Seafoods and O'Donnell-Usen Fisheries, the producer of Taste O' Sea frozen seafood products, thus positioning the company to compete against the leading frozen seafood brands, Mrs. Paul's Kitchens, Gorton's, and Van de Kamp's.

In 1982, during a low in the poultry cycle, ConAgra moved to take first place in the chicken industry by forming Country Poultry, Inc. By the next year, Country Poultry was delivering more than a billion pounds of brand-name broilers to markets, making it the biggest poultry producer in the country. In 1986, the company formed ConAgra Turkey Company and in 1987 it acquired another poultry company, Longmont Foods, further strengthening its position in the field. But ConAgra's poultry concerns no longer focused on the basic bird Harper purchased Banquet for: Country Poultry introduced a number of higher-profit convenience poultry products, such as marinated chicken breasts, chicken hot dogs, and processed chicken for fast-food restaurants.

ConAgra moved into another area of processed foods in 1983 when the company purchased Armour Food Company, a processor of red meats such as hot dogs, sausage, bacon, ham, and luncheon meats. The acquisition also included Armour's line of frozen gourmet entrees, Dinner Classics, which complemented Banquet's line of frozen foods. As with many of his other acquisitions, Harper bought Armour in a down cycle for book value ($182 million). By waiting to complete the deal until Armour closed several plants, Harper painlessly eliminated about 40 percent of Armour's major union's members. Some Armour plants still have unions, but without a master contract labor costs were slashed. Harper then reorganized the company, emphasizing new marketing strategies (reintroducing the familiar Armour jingle to take advantage of consumer recognition) and refocusing product lines. The Dinner Classics line was hurt by price competition and the introduction of new brands of premium frozen dinners. Armour as a whole was still unprofitable through the early 1990s, but profits for the Classics line increased.

In 1986, Harper increased ConAgra's presence in frozen foods by purchasing the Morton, Patio, and Chun King brands. The following year, the company expanded in red meats with its purchase of E.A. Miller, Inc., a western producer of beef products, and Monfort of Colorado, Inc. Almost a decade earlier, ConAgra had tried to purchase MBPXL Corp., the number two beef packer in the country, only to be blocked at the last minute by the privately owned Cargill Inc. The Monfort deal, for $365 million in stock, made ConAgra the third largest U.S. beef producer. Health-conscious consumers began eating less beef in the late 1980s and ConAgra responded by working to create new, leaner beef products as it developed new poultry products. Another 1987 acquisition, 50 percent of Swift Independent Packing Company, a processor of beef, pork, and lamb, made ConAgra a leading meat processor as well. Harper rounded out his changes at ConAgra by developing the company's international trading position and by forming its own financial services subsidiary.

By the late 1980s, ConAgra had grown into a well diversified food company, better able to absorb the ups and downs of the industry. The year 1987 was a banner one for ConAgra's poultry division, which posted $130 million in operating profits due to a tremendous (and ultimately unsustainable) upswing in the poultry market. The poultry division's operating profits plummeted the following year to $20 million, but by then ConAgra's other divisions were strong enough to make up the difference. The company posted net earnings of $155 million, about 5 percent higher than the previous year. The late 1980s also saw ConAgra lose a prolonged takeover battle to poultry rival Tyson Foods, Inc. over Holly Farms Corporation; had ConAgra acquired Holly Farms it would have gained the top position in the U.S. chicken market.

Restructurings and More Acquisitions in the 1990s and Beyond

In 1988 Harper boasted that ConAgra was probably the only food products company to "participate across the entire food chain." In the grocery store, however, the majority of its packaged food products were found in the frozen foods section, where it held the top market share in the country. In 1990, sensing that even greater diversification was necessary to ensure steady earnings growth, Harper led the purchase of Beatrice Company, which produced top brands such as Hunt's Tomato Paste and Butterball Turkey and had annual sales of more than $4 billion. The Beatrice purchase gave ConAgra a broader portfolio of products and provided a strong sales and distribution system in the "dry goods" segment. ConAgra paid $2.35 billion for the company and assumed a debt of about $1 billion in the process.

In the early 1990s ConAgra expanded at a rate of about 35 acquisitions and joint ventures a year. The company's international presence grew as it formed joint ventures in Japan, Thailand, France, Canada, Chile, and Australia. Key acquisitions included the malt and wool businesses of Elders IXL Ltd. and 50 percent of its beef business, known as Australia Meat Holdings. On the home front, ConAgra made its first foray into the kosher foods business with the purchase of National Foods and also entered the private label consumer products market with the acquisition of Arrow Industries, a clothing manufacturer.

Around this same time the company enlarged its frozen foods market share further with the introduction of Healthy Choice, a low fat, low sodium, and low cholesterol line of frozen dinner entrees. By 1993, the Healthy Choice line numbered 300-plus products. By 1993 Healthy Choice posted sales of over $1 billion and was lauded as the "most successful new food brand introduction in two decades" by Advertising Age.

The company also reorganized some of its divisions in the early 1990s, creating ConAgra Grocery Products Companies to unite its Hunt-Wesson companies with its frozen food businesses and ConAgra Meat Products Companies to bring together its branded package meat business and its fresh red meat businesses. Sales for 1992 surpassed $20 billion for the first time, as the company posted its 12th consecutive year of record earnings.

In 1993 Harper resigned his post at ConAgra to become chairman and CEO at RJR Nabisco Holdings Corp. Phil Fletcher, ConAgra's longtime president and chief operating officer, assumed Harper's post. In his first two years at the helm, Fletcher cut operating costs by enforcing stricter cost-control measures and fostering greater communication and cooperation between the company's six dozen individual units. Continuing Harper's acquisition strategy, ConAgra began expanding globally, with new ventures in China, Australia, Denmark, and Mexico. Earnings for 1994 reached $437 million on sales of $23.5 billion. That year also marked ConAgra's 75th anniversary, and, as part of the company's celebration, $200,000 was donated to a museum in Grand Island, Nebraska, for the erection of a replica of the original Glade Mill, one of the four mills merged to create the company in 1919.

During the mid-1990s, ConAgra was involved in two separate lawsuits. In 1995 the company agreed to pay $13.6 million to settle a class-action suit brought by fish distributors and processors who claimed that ConAgra's Country Skillet Catfish Co. and six other catfish wholesalers conspired to fix prices for nearly a decade. While some of the smaller defendants had admitted guilt in the case, neither ConAgra nor the other major defendants—Hormel Foods Corporation and Delta Pride Catfish Inc.—admitted responsibility. Two years later ConAgra agreed to plea guilty to a felony charge of wire fraud as well as misdemeanor charges of misgrading crops and adding water to grain in a federal case involving ConAgra's Peavey grain elevators in Indiana. ConAgra employees at the elevators had been accused of cheating farmers who sold crops to ConAgra and of spraying water on grain before selling it in order to increase its value (since it was sold by weight). Four former ConAgra employees pled guilty to criminal charges, and ConAgra agreed to pay $8.3 million in criminal penalties. ConAgra said that top executives at the company were unaware of the alleged activities of the elevator employees.

Meanwhile, moving to improve profitability, ConAgra launched a major restructuring in mid-1996. Approximately 6,300 employees were cut from the workforce, representing a 7 percent reduction, and more than 50 production facilities were closed or sold. A pretax restructuring charge of $507.8 million was taken, leading to a reduced net income figure for fiscal 1996 of $211.8 million (on sales of $24.32 billion). The company hoped to eventually realize more than $100 million in annual cost savings from the job cuts and plant closings.

In August 1996 Bruce C. Rohde was named president and vice-chairman of ConAgra, having been the company's chief outside counsel since 1984. In September 1997 Rohde was named CEO, and he then added the chairmanship the following year. Acquisitions continued during this period of management transition, with Gilroy Foods, a California-based processor of dehydrated garlic and onion products and other spices, purchased in 1996, and GoodMark Foods Inc., maker of the Slim Jim brand of meat snacks, bought in 1998. Also acquired in 1998, for $400 million, was the margarine and egg substitute business of Nabisco, Inc. Among the brands gained through this deal were Parkay, Blue Bonnet, Fleischmann's, and Chiffon margarines and the Egg Beaters egg substitute product.

ConAgra announced another major restructuring in May 1999, which resulted in 8,450 employees losing their jobs. By the end of the 2000 fiscal year, 31 production plants and 106 nonproduction facilities had been shut down and 18 noncore businesses had been divested. The restructuring resulted in pretax charges of $440.8 million and $621.4 million in 1999 and 2000, respectively. This latest restructuring was part of a larger program called "Operation Overdrive," which aimed at generating $600 million in annual cost savings. In addition to the cost cutting, Operation Overdrive also involved a reorganization of the company by customer channel—an abandonment of the decentralized structure installed by Harper in 1980s in favor of a more centralized approach—and an increase in marketing expenditures, including a new emphasis on cross-selling among the various company brands.

Acquisitions continued in 2000. In January 2000 ConAgra acquired Seaboard Farms, the poultry division of Seaboard Corporation, for about $360 million. Seaboard Farms, which had annual sales of $480 million, was a producer and marketer of value-added poultry products primarily to foodservice customers. ConAgra in July 2000 acquired Lightlife Foods, Inc., a leading producer of premium vegetarian and soy products. Lightlife's product line was a good fit with ConAgra's blockbuster Healthy Choice brand. Then one month later, ConAgra completed one of its largest acquisitions in history, a $2 billion deal for International Home Foods, Inc. ConAgra gained a number of well-known consumer brands, including Chef Boyardee pasta products, PAM cooking spray, Gulden's mustard, Bumble Bee seafood, and Jiffy Pop popcorn. International Home Foods had posted 1999 revenues of $2.1 billion. With the company continuing its transformation from its agricultural origins to its position as primarily a producer of packaged foods, the decision was made to add "Foods" to the company name, resulting in the introduction of the ConAgra Foods, Inc. name in September 2000. Plans were also laid to elevate the company's profile with the public as most consumers recognized the company's brands but not the company itself. The new name was slated to be placed on more than 100 brand name products produced by ConAgra.

In its 75-plus-year history, ConAgra had evolved from a low-profile flour miller into an international food company with sales of more than $27 billion. It gained its stature through a remarkable mix of conservative fiscal management and aggressive expansion through acquisitions and joint ventures. Building on the work of his predecessors, Rohde was transforming ConAgra into a leaner, more efficient company, and was likely to seek additional acquisitions in a food industry that was rapidly consolidating at the turn of the millennium.

Principal Operating Units: ConAgra Foodservice Company; ConAgra Grocery Products Companies; ConAgra Frozen Prepared Foods; ConAgra Dairy Case Companies; ConAgra Refrigerated Prepared Foods; ConAgra Meat Companies; ConAgra Poultry Company; ConAgra Food Ingredients; United Agri Products Companies; ConAgra Trade Group.

Principal Competitors: Archer Daniels Midland Company; Campbell Soup Company; Cargill, Incorporated; Cenex Harvest States Cooperative; Groupe Danone; Dean Foods Company; Del Monte Foods Company; Farmland Industries, Inc.; Frito-Lay, Inc.; General Mills, Inc.; Gold Kist Inc.; H.J. Heinz Company; Hormel Foods Corporation; IBP, Inc.; Kraft Foods, Inc.; Land O'Lakes, Inc.; McCain Foods Limited; Nestlé S.A.; Perdue Farms Incorporated; The Pillsbury Company; The Quaker Oats Company; Sara Lee Corporation; Schwan's Sales Enterprises, Inc.; Smithfield Foods, Inc.; Suiza Foods Corporation; Tyson Foods, Inc.; Unilever.


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Further Reference

Andreas, Carol, Meatpackers and Beef Barons, Niwot, Colo.: University Press of Colorado, 1994, 225 p.Bailey, Jeff, and Richard Gibson, "ConAgra to Cut 6,500 Jobs, Close Plants," Wall Street Journal, May 15, 1996, p. A3.Blyskal, Jeff, "'The Best Damn Food Company in the United States,'" Forbes, October 24, 1983, pp. 48+.Brandon, Copple, "Synergy in Ketchup?," Forbes, February 7, 2000, pp. 68-69.Burns, Greg, "How a New Boss Got ConAgra Cooking Again," Business Week, July 25, 1994, p. 72.Byrne, Harlan S., "A Growing Presence: From Farm to Table, ConAgra Is on the Move," Barron's, June 20, 1988, pp. 13+.Cahill, William R., "Cultivating Profits: ConAgra Is on a Seven-Year Winning Streak," Barron's, March 2, 1987, pp. 49+.Campanella, Frank W., "Fish and Fowl and Flour, Too, Prove Profitable Mix for ConAgra Inc.," Barron's, May 4, 1981, pp. 52+."ConAgra: Buying a Frozen-Food Maker to Get at Its Chickens," Business Week, December 1, 1980, p. 124."ConAgra's Quantum Leap in Buying Beatrice Co.," Mergers and Acquisitions, September/October 1990, p. 54."ConAgra: The Payoff Could Be Huge from Its Risky Bet on Armour," Business Week, December 19, 1983, pp. 85+.Epstein, Victor, "A Game of Chicken: ConAgra Beating the Drumstick for Poultry Sales," Omaha World-Herald, September 3, 2000, p. 1M.Gibson, Richard, "ConAgra, Hormel Pay a Pretty Penny in an Ugly Catfish Price-Fixing Case," Wall Street Journal, December 29, 1995, p. A3.Henkoff, Ronald, "A Giant That Keeps Innovating," Fortune, December 16, 1991, p. 101.Ivey, Mike, "How ConAgra Grew Big—and Now, Beefy," Business Week, May 18, 1987, pp. 87-88.Kilman, Scott, "ConAgra, International Home Foods Join Food Sector's Consolidation Bandwagon," Wall Street Journal, June 26, 2000, p. B14.———, "ConAgra to Pay $8.3 Million to Settle Fraud Charges in Grain-Handling Case," Wall Street Journal, March 20, 1997, p. B12.Miller, James P., "ConAgra to Cut 7,000 from Work Force," Wall Street Journal, May 13, 1999, p. A3.Neiman, Janet, "ConAgra Fertilizes Plans for Branded Foods Growth," Advertising Age, September 6, 1982, pp. 4+.Rasmussen, Jim, "Rohde Ready to Lead ConAgra," Omaha World-Herald, July 12, 1997.Sachar, Laura, "An Eye on Your Stomach," Financial World, April 21, 1987, pp. 26+.Saporito, Bill, and Cynthia Hutton, "ConAgra's Profits Aren't Chicken Feed," Fortune, October 27, 1986, pp. 70+.Taylor, John, "ConAgra Adds Big Brands to Larder," Omaha World-Herald, June 24, 2000.———, "ConAgra Aims to Widen "Sea of Green,'" Omaha World-Herald, December 8, 1996, p. 1M.———, "Foreign Flavor: ConAgra Adapts Products for International Tastes," Omaha World-Herald, March 30, 1998.

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