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As part of its continuing integration of Ralcorp, ConAgra said Thursday that it would move to three financial reporting segments in fiscal 2014 – Private Brands, Foodservice and Consumer Foods.
Paul Maass, who had been leading ConAgra’s commercial operations, will be in charge of the Private Brands and Foodservice segments.
“Paul is extremely knowledgeable of marketplace dynamics, has a passion for building great partnerships with customers and has earned the reputation as a very strong and engaging leader who produces outstanding results,” ConAgra CEO Gary Rodkin told analysts on a conference call announcing fiscal fourth quarter earnings, according to transcripts of the call by Seeking Alpha.
In addition, Rodkin said that Mike Locascio will move from the Consumer Foods segment to help run the Private Brands segment with Maass.
“Mike is a veteran in the CPG space, having led many of our Consumer Foods brands, and of late, he led our customer development organization,” Rodkin said. “He built that organization from the ground up and established a team with the pricing capabilities and rigor that we've been able to apply within our Consumer Foods portfolio over the past 18 months.
“Paul and Mike bring excellent credentials and skill sets like risk management, deep commodity market understanding and pricing architecture to our new Private Brands organization.”
The Private Brands segment will include much of the Ralcorp business, along with ConAgra’s existing private brands business.
“When we look to the longer term, we’re very excited about the growth potential of bringing real scale and our CPG capabilities to the private brand space,” Rodkin said, according to the Seeking Alpha transcripts. “The potential in the private brands business is substantial, rooted in our customers' demand for differentiated and progressive retail brands. Our vision is to transition the private brands business model from transactional to strategic partnerships.
“And in our recent top-to-top meetings with almost all our major customers, I can personally attest they have a very strong appreciation for the functional expertise, scale and growth opportunities that we bring to the table with our portfolio. We're excited and continue to be highly confident that this multiyear journey will be well worth the effort, and the early work that we've done, as well as our very positive conversations with customers, have confirmed the big opportunity ahead of us.”
The Foodservice segment will include Lamb Weston, foodservice operations from ConAgra that previously were in its Consumer Foods segment, and foodservice operations from Ralcorp. It also will include specialty businesses such as Spicetec Flavors & Seasonings and J.M. Swank.
On the earnings call, ConAgra officials discussed the work they could do to improve the bottom line on the Private Brands segment, particularly the former Ralcorp business. Among the headwinds, they said, were mismanaged price caps in some categories.
“I'll tell you 2 reasons why we believe that we can impact the top line on Ralcorp,” Rodkin said. “… And those 2 reasons are, one, as we mentioned, Ralcorp's own restructuring efforts that started maybe six months or so before the acquisition frankly cut the organization too deeply, particularly on the sales front. And No. 2, as we've said before, Ralcorp got upside-down on a few key commodities and priced beyond the appropriate price gaps in some categories at some customers.
“So we are very diligently working on both issues. Obviously, it takes some time to get it right and to work through the system, including getting the pricing all the way to the shelf, but it's very much in process.”
Despite the price gaps, Chief Financial Officer John Gehring said ConAgra remained bullish on the private label future.
“We see good tailwinds that we believe in in terms of the long-term tailwinds from – and trends in private label. We think we are uniquely positioned to capitalize on that,” he said. “And when we look at the kinds of customer relationships we have, combined with the customer relationships that the Ralcorp team brings, we do think there is a 1 plus 1 equals 3.”