ConAgra Foods Looks to Exit Refrigerated Meats Businesses; Moves to Refocus and Simplify Organizational Structure
February 02 2006 - 7:03PM
Business Wire
ConAgra Foods Inc. (NYSE:CAG), one of North America's leading
packaged food companies, announced plans to divest most of its
refrigerated meats businesses, including the Armour, Butterball,
and Eckrich brands. In addition, the company announced several
changes designed to streamline its operating structure, including
moving its Grocery Foods headquarters from Irvine, Calif., to
Naperville, Ill., and further centralizing its shared services.
"Our actions today reflect our commitment to simplify operations
and to concentrate in areas where we have the strongest competitive
positions," said Gary Rodkin, ConAgra Foods president and chief
executive officer. "They put us in a much better position to
execute and drive consistent and sustainable growth." Divesting
Refrigerated Meats Businesses The combined annual sales for the
businesses being offered for sale are about $1.9 billion. The
businesses include Armour meats and hot dogs, Butterball turkey,
and Eckrich smoked sausages, hot dogs and lunchmeats. These
processed meat products are sold to retail grocers, delis,
restaurants and other foodservice establishments. Luis Nieto,
president, Packaged Meats and Deli, will continue to lead the
combined meats business during the sale process, which is expected
to take 10-12 months. The company will continue to manufacture,
sell, promote and deliver these quality products with the highest
levels of customer service during this period, and work to assure
uninterrupted service through transition to new ownership. Neither
the company's Healthy Choice brand of meat, nor its Hebrew
National, Brown 'N Serve, Slim Jim, and Pemmican businesses are
included in the assets for sale. Last week Smithfield Foods, Inc.,
signed a definitive agreement to acquire substantially all of the
assets of the company's Cook's ham business. "As we sell these
assets, we will scale back our related corporate and shared
services infrastructure to ensure that it is the right size for our
businesses going forward," said Rodkin. "We expect a number of
people directly involved in these operations to be employed by the
new owners or offered other jobs within ConAgra Foods." Simplifying
Organizational Structure "ConAgra Foods has a number of great
brands and businesses to drive future growth. We will build on
those strengths by coupling disciplined investments in
well-positioned brands with a more streamlined operating
structure," said Rodkin. Consistent with that logic, ConAgra Foods
today announced the realignment of various operations: -- The
company's Retail and Culinary Products businesses will be combined
to form Consumer Foods. It will manage all consumer brands and
foods that are sold by ConAgra Foods to retail and foodservice
customers, as well as manage the company's international consumer
foods business. Dean Hollis, president and chief operating officer,
Consumer Foods, will oversee these businesses, which include Dairy,
Frozen, Grocery, Packaged Meats and Deli, Snacks, Store Brands, and
International. Greg Heckman, president and chief operating officer,
Commercial Products, will oversee the company's Lamb Weston brand
of potato products, ingredients brands such as ConAgra Mills,
Gilroy Foods and Spicetec, seafood brands such as Louis Kemp,
Meridian and Singleton, as well as the ConAgra Foods Trade Group's
trading, merchandising and risk management operations. -- The
ConAgra Foods Sales organization will assume responsibility for
both retail and foodservice customers, with current personnel in
culinary foodservice sales joining the company's centralized
selling organization. Doug Knudsen, president, ConAgra Foods Sales,
will oversee the combined ConAgra Foods sales organization. -- The
company's Grocery Foods headquarters will move from Irvine, Calif.,
to Naperville, Ill. which is currently the headquarters of its
dairy and meats businesses. Grocery, which manages the company's
shelf-stable products, such as Hunt's, PAM, and Chef Boyardee, will
transition people to Illinois by June 1. -- A number of people in
shared functions across the company, including product quality and
development, sales and operations planning, and transportation and
warehousing management, will be relocated to Omaha, Neb., to drive
increased collaboration, functional excellence and efficiency. As a
result of today's changes several personnel actions were also
announced: -- Gregory L. Smith, who was president, Grocery Foods,
and prior to that was executive vice president of Operations for
Grocery Foods, and who previously worked in supply chain,
manufacturing and operations capacities at The Quaker Oats Company,
will become senior vice president of Supply Chain, overseeing
customer service, transportation, warehousing, and sales and
operations planning. This position reports to Jim Hardy, executive
vice president, Product Supply, who also has responsibility for
manufacturing, procurement and engineering. -- David Palfenier, who
was president of Frozen Foods and previously held marketing and
management positions at Frito-Lay will become president, Grocery
Foods, reporting to Dean Hollis; and -- Diane Teer, who joined the
company last year as president, Culinary Products, and who
previously held key management positions with Campbell Soup, will
become president, Frozen Foods, also reporting to Dean Hollis.
Financial Impact In connection with the organizational changes, the
company expects to take cash and non-cash accounting charges. The
company also expects that it will take a non-cash charge to adjust
the book value of the assets to be sold, including related
goodwill. The timing and amount of these charges, as well as any
related benefits, are currently being analyzed and will be
announced at a later date. The packaged meats businesses that will
be sold absorb significant costs for shared services and
centralized administrative functions provided to those businesses.
An estimate of the financial impact of the divestiture on ConAgra
Foods' future operating earnings potential will take all key
factors into account, including: -- the operating profits of the
businesses to be sold; -- the extent to which the company can
reduce the cost of shared services and administrative functions
allocated to those businesses, and the timing of such reductions;
and -- the likely net proceeds from the transaction and their use.
The company will provide a full analysis of the financial impact of
the divestiture as part of its previously announced March 16
investor and analyst event in New York City. "We look forward to
sharing details of the impact of these decisions in our investors'
meeting in March," said Rodkin. "These are only part of our broader
plans to drive sustainable top- and bottom-line growth." ConAgra
Foods Inc. (NYSE:CAG) is one of North America's largest packaged
food companies, serving grocery retailers, as well as restaurants
and other foodservice establishments. Popular ConAgra Foods
consumer brands include: Banquet, Chef Boyardee, Egg Beaters,
Healthy Choice, Hebrew National, Hunt's, Marie Callender's, Orville
Redenbacher's, PAM, and many others. Note on Forward-Looking
Statements: This news release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's current views
and assumptions of future events and financial performance and are
subject to uncertainty and changes in circumstances. Readers of
this release should understand that these statements are not
guarantees of performance or results. Many factors could affect the
company's actual financial results and cause them to vary
materially from the expectations contained in the forward-looking
statements. These factors include, among other things, future
economic circumstances, industry conditions, company performance
and financial results, availability and prices of raw materials,
product pricing, competitive environment and related market
conditions, operating efficiencies, access to capital, actions of
governments and regulatory factors affecting the company's
businesses and other risks described in the company's reports filed
with the Securities and Exchange Commission. The company cautions
readers not to place undue reliance on any forward-looking
statements included in this release, which speak only as of the
date made. For more information, please visit us at
www.conagrafoods.com.
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