ConAgra: 74% of consumers are more open to buying private brands than they were two years ago

By Elaine WATSON

- Last updated on GMT

ConAgra Foods: 'We've talked about leveraging our capabilities to take private brands a bit more upmarket.'
ConAgra Foods: 'We've talked about leveraging our capabilities to take private brands a bit more upmarket.'

Related tags: Private label, Conagra foods

While ConAgra Foods has been on a “very steep learning curve” since it acquired private label giant Ralcorp, bosses are more confident than ever that demand for store brands “is not only here to stay but will play a leading role in the industry's growth”, said CEO Gary Rodkin yesterday.

The integration of Ralcorp, which has made Omaha-based ConAgra the largest private brand packaged food manufacturer in the US, dominated ConAgra’s third quarter earnings call yesterday, with Rodkin admitting that nine weeks after sealing the deal, it was experiencing some “normal disruptions​”.

Some of these relate to businesses that Ralcorp acquired before it was taken over by ConAgra in January, and is still trying to integrate, said Rodkin.

Tactical pricing adjustments, supply chain efficiencies, organizational development work…

Meanwhile, Ralcorp had also “gotten upside down on several key commodities​”, he added, noting that the immediate propriety was working on “tactical pricing adjustments and supply chain efficiencies, as well as organizational development work”

He said: “We've already identified some product sourcing opportunities where the existing ConAgra Foods businesses can add value to Ralcorp products.”

As for customers, he said, “there's the normal customer impatience, I would, say with, hey, the deal is done. We want to see all the benefits of it today”.

Customer meeting ‘gave us a really good feeling that we're on the right track’

conagra-HQ

However, a recent meeting with a major customer had given senior managers a “really good feeling​” that their instincts about the potential of private label were right, he added.

From a customer standpoint, we've had one major top-to-top recently, really talking about our story of trying to move from a transactional or procurement-based model in private brands to a much more strategic partnership long term that would leverage the… scale we have, and it was extremely positive, very engaged, and gave us a really good feeling that we're on the right track.  

“We clearly believe that the consumer and customer demand for private brands is not only here to stay but will play a leading role in the industry's growth. That's the primary reason for the Ralcorp transaction.

“Our research says that 74% of consumers now are more open to buying more private brands than they were two years ago.”

We've talked about leveraging our capabilities to take private brands a bit more upmarket

Meanwhile, more retailers are seeking to develop a more sophisticated private label operation that creates three tiers of ‘good, better, best’ for store brands, he said.

“You're starting to see more of this tiered business, so as we've talked about leveraging our capabilities to take private brands a bit more upmarket, you see that in some accounts, but that's a trend that we see continuing to see.”  

Marie Callender's “continued on its winning streak”

banquet-conagra

André J. Hawaux, president of ConAgra’s consumer foods division, said frozen food brand Marie Callender's “continued on its winning streak”​ in Q3, while Ro*Tel Tomatoes, Hunt's, PAM cooking spray and Reddi-wip toppings also performed well.

Meanwhile, the Banquet brand was beginning to “turnaround pretty significantly”,​ he said, although a “little bit more work​” was needed on Orville Redenbacher's microwave popcorn.

Q3 2013 highlights

Costs related the acquisition of Ralcorp hit ConAgra’s bottom line in the three months to February 24, with net profit down 56% to $123.4m, but it maintained its full-year earnings forecast.

Sales rose 13% to $3.85bn, with Ralcorp contributing $292m. (Analysts on average had expected total revenue of $3.87bn.)

ConAgra is best known for its branded grocery products such as Hebrew National hot dogs and Hunt's canned vegetables, but it also supplies frozen potato, vegetable, spice and grain products to restaurants, foodservice operators and commercial customers.

Ralcorp is best known for its private-label foods for retailers and frozen bakery products for in-store bakeries and foodservice customers.  

Related topics: Manufacturers

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