ConAgra Foods plans to refocus a clutch of brands that have weighed on the US group’s consumer foods business, a central factor in the company’s two profit warnings in the last five months.
Gary Rodkin, ConAgra’s chairman and CEO, said the business had tried to broaden the consumer base for three brands – Chef Boyardee, Healthy Choice and Orville Redenbacher’s – without success.
Speaking at the Consumer Analyst Group of New York conference in Florida yesterday (18 February), Rodkin said ConAgra would try to improve the performance of the brands by focusing on their “core users”.
He admitted: “There is a common theme on these brands, besides their under-performance. We have spent too many resources on these brands trying to penetrate new consumer segments by overcoming their perception barriers, and frankly, it hasn’t worked.”
Last week, ConAgra announced it was lowering its forecast for annual earnings. The profit warnings followed a similar move in September.
ConAgra said “lower-than-expected volumes” from its consumer foods business was a reason for the move, as well as issues within its B2B commercial foods and retail own-label divisions.
Rodkin told CAGNY it would “take a bit of time” to revitalise the Chef Boyardee, Healthy Choice and Orville Redenbacher’s brands but insisted the company could “stabilise” their share with “a maniacal focus” on their core consumers.
He pointed to Healthy Choice, which has seen sales suffer from a declining category but also from trying to target new consumers.
“We are changing our focus from trying to reach new users to focusing on the Healthy Choice core. Baby boomers have already represented more than 60% of this category’s volume. This is a growing segment of the population and Healthy Choice actually plays really well with his audience, it over indexes and always has,” Rodkin said. “So rather than spend millions of dollars on resources on trying to get new users like millennials, who simply don’t represent enough of this category’s volume for us to chase, we are focused on driving more profitable purchases from that core user.”
ConAgra CFO John Gehring also told CAGNY the company expects earnings from its 2015 financial year to not grow at the rate it had indicated.
“While we expect to see significant progress against our specific business challenges during fiscal 2015, we do expect that higher incentive and a full year of Ardent Mills-related dilution as well as other factors will impact fiscal 2015 EPS growth. We continue to expect EPS growth for fiscal 2015, but we currently expect that it will be less than the double-digit rate we’ve previously estimated. We will provide more specific comments about fiscal 2015 outlook, in connection with our fiscal 2014 year-end release, when our plans have been completed,” he said.
Ardent Mills is the milling venture ConAgra plans to form with Cargill and CHS. The deal is in front of the US Department of Justice, which is looking at the possible impact on competition of the agreement, which will create the largest miller in the US. ConAgra wants to merge its milling arm with Horizon Milling, a Cargill-CHS joint venture formed in 2002.
Rodkin told the conference ConAgra had confidence in the long-term outlook for the company despite the challenges it is working through.
“While there are short-term challenges in each of our segments, we expect to be past them soon and our near-term executional issues should not be confused with the strategic fundamentals of where we’re headed,” he said. “Our conviction about our long-term opportunities continues to be strong and well-founded.”