Ralcorp Holdings is poised to build on its position as a major private label foods processor. The St. Louis-based private label powerhouse has identified approximately $10 billion in additional annual sales representing 50 individual companies that meet its initial criteria for strategic acquisition, ranked by margins and cost saving opportunities with its existing business.
In a conference call with analysts Nov. 29, Ralcorp officials said they are pleased with the private label acquisitions they have made, such as American Italian Pasta, and see growth potential ahead.
“As the leader in private brand foods, we continue to be excited about the opportunities that exist in the private brand or store brand market,” said Kevin Hunt, Ralcorp’s co-chief executive and president in the conference call.
The private label manufacturing world remains highly fragmented, presenting acquisition opportunities for Ralcorp. “Our management team has a strong track record of identifying, acquiring and integrating store brand companies, which is a significant advantage for us as we go forward,” Hunt told analysts.
Private labels won’t give up market gains they’ve achieved during tough economic times, even when the economy picks up, he said. But a Morningstar analyst on the call countered that CPGs such as General Mills and Kellogg are devoting more money toward product innovation and marketing to draw consumers, which could further pressure Ralcorp’s cereal sales.
But once Ralcorp’s Post spinoff is complete in January 2012, Hunt said it should be in an even better positioned to expand in private label.
“As a standalone company, Ralcorp will be better positioned to implement our strategic plan of focusing on enhancing our position as a private brand leader with a diverse product, customer and input array,” he said.