ConAgra sets out bid to improve productivity and profits

ConAgra sets out bid to improve productivity and profits

ConAgra Foods, the US food group, is to cut around 1,500 jobs as part of plans to generate US$300m in "efficiency benefits" to boost productivity and profits.

The programme, announced today (1 October), will see the Hunt's ketchup and Chef Boyardee pasta maker "aggressively embrace" zero-based budgeting and "enhance" its trade spending.

The company also plans to move its headquarters from Omaha in Nebraska to Chicago.

President and CEO Sean Connolly insisted the actions were needed to build "a focused, higher-margin, more contemporary and higher-performing company". 

He said: "We are making difficult, but necessary, decisions to enhance productivity, drive standardisation and enhance flexibility to deliver improved profitability. And through our organisation redesign, we will better harness the power of our front line by deploying our talent against our largest opportunities for future growth and value creation."

The moves are set to hit around 1,500 jobs, which ConAgra said equates to 30% of its global office-based workforce. It said plant positions would not be cut. The company underlines the programme excluded any impact from its planned sale of its private-label operations.

ConAgra said around 700 staff would be located in the new head office in Chicago, including the company’s senior leadership team and some staff in its consumer foods division, which are located in Omaha and in Naperville, Illinois.

The group said it would "maintain a significant presence in Omaha", with around 1,200 employees working in administrative functions, as well as research and development and supply chain management.

Some $200m of the cost savings are expected to come from lower headcount and non-headcount costs. ConAgra will adopt zero-based budgeting and look to "simplify" its organisation. It will also look to outsource technology and back office functions. The company expects to realise the other $100m from "enhancements" to trade spend processes and tools.

ConAgra estimates it will incur non-recurring charges of around $345m over the next two to three years in connection with the restructuring.

However, the company expects the plan to provide "a modest benefit" to fiscal year 2016 earnings. More than half the savings are anticipated to be realised by the end of fiscal year 2017 with the balance achieved in fiscal year 2018. ConAgra said these savings are in addition to the $150m in cost reductions achieved by the company over the past two years.

The group, which is looking to rejuvenate its consumer foods business, said the moves would "enhance the company's cost-competitiveness, margins and agility, while also providing fuel for future brand-building and innovation initiatives".