ConAgra Foods chief Gary Rodkin today (19 February) insisted the US food group’s mix of consumer brands, own label and B2B businesses offered the company “significant growth opportunities”.
Three weeks after ConAgra announced it had completed its acquisition of private-label peer Ralcorp Holdings – a deal that made the company the largest own-label business in the US – Rodkin said the group now had a business like no other in the country.
“We have a unique portfolio in the food industry, and it’s one that we believe is incredibly compelling in today’s marketplace. The balance of consumer brands, private brands and commercial businesses provides strength in many different sectors and positions us for stronger growth with customers,” Rodkin told the Consumer Analyst Group of New York conference in Florida.
“We’re unique within our peer set with a portfolio now made up of about 45% branded, 30% commercial or foodservice and 25% private brands giving us significant growth opportunities across many platforms and channels.”
ConAgra stands out against its peers with its decision to sell brands and own label. Its US$6.8bn takeover of Ralcorp expanded its presence in the US private-label sector, a move questioned by some analysts, who believe it is difficult to drive growth by operating in both segments.
At CAGNY, ConAgra’s first public appearance since the Ralcorp deal was completed late last month, Rodkin again faced questions over the growth the company expected to achieve.
“Why can these two branded and private brands exist together? One, we’ve already been doing that with a $1bn business for quite some time, so we know how to keep them separate but together where they need to be,” Rodkin said.
The ConAgra chief was also asked how the company would improve the profitability of Ralcorp – and then retain those profits. Rodkin said ConAgra would benefit from cost savings as an enlarged business and also use the “capabilities” of its branded portfolio in own label.
“In terms of the profitability long term on private brands, short term, we’ve got to get through some of those challenges, but the long term is really all about leveraging scale and consumer packaged goods capabilities,” he said. “When we say scale, we mean things like procurement, where we will now purchase our ingredients and there is a huge overlap between what we buy as ConAgra Foods and what Ralcorp bought.
“When you take the CPG capabilities, like the innovation that you know we’ve got, like the category management expertise, fact-based selling with analytics etc, all the things that we do as a branded company and all those foundational capabilities we’ve built, when we bring that to bear over the long term, as we sell this story into our customers, there’s going to be a big win for customers to partner with a big broad-based private-label company that’s got those skill sets.”
However, there have been claims the recent increase in demand from US consumers for own label could only go so far. Last autumn, SymphonyIRI claimed the own-label category in the US had reached a “glass ceiling”.
Nevertheless, Rodkin was upbeat about the prospects for private label in the US. “Store brands or private brands have outpaced branded food in sales growth, while there will always be some ups and downs, we expect that outperformance to continue over the long term. The private brand opportunity is quite clear given customer interests and consumer appreciation of value. This value mindset is here to stay regardless of macroeconomic trends. This is particularly true of basic goods and services,” he said.
“We have great conviction about long-term private brand growth and know that there’s a long runway ahead, particularly in the US. The US is far from a mature market when it comes to private brands and we are extremely well positioned to meet those growing demands from customers and consumers. This is a real differentiator for ConAgra Foods.”