It has taken over a year for ConAgra Foods, the US food group, to get its man and one can understand the satisfaction it had last week in announcing to the market it had struck a deal to buy private-label manufacturer Ralcorp Holdings.
Fourteen months after ConAgra threw in the towel and walked away from Ralcorp after having a number of takeover bids rejected, CEO Gary Rodkin was last Tuesday able to tell the industry it had secured agreement from its target and was set to become the largest own-label player in the US.
The acquisition of Ralcorp, Rodkin said, was an "exciting step" for ConAgra that would make it one of the "most attractive" food suppliers in the US market.
The deal apparently had the support of the investment community; ConAgra's share price increased on the day the deal was announced and Wall Street analysts, in the main, welcomed the acquisition.
However, there were some concerns. Some own-label firms have struggled to grow earnings on an organic basis. Others asked how easy it would be for ConAgra to grow brands and own label. There were also questions over the growth trajectory for private label in the US, where demand for own label has increased in recent years but still only accounts for 18% of packaged food sales. SymphonyIRI last month said private label could have reached a "glass ceiling" in the US.
Speaking to just-food after the deal was announced, Doug Knudsen, president of sales at ConAgra, insisted private label in the US has "a lot of room for growth" and argued the fastest-growing retailers in the US were more "private-label oriented". Knudsen also brushed off concerns ConAgra would struggle to grow both its brands and private label.
The ConAgra sales chief, however, was coy about whether the company would further underline that confidence and continue its acquisition spree in private label. After the Ralcorp announcement, analysts touted ConAgra has a potential buyer of private-label firm TreeHouse Foods (which itself added to its business with an acquisition on Friday).
It would be a surprise if ConAgra makes such a sizeable deal so soon after the Ralcorp transaction. However, the US own-label sector is fragmented and the direction of travel for ConAgra seems to be moving more towards private label. Brands remain the largest part of the business but its branded roster contains some products that are not category leaders; could it offload some of those to fund its next big push in private label?
Until next time...