More changes in store for ConAgra Foods, Inc.

LONGMONT- Gobble, gobble, gone?

ConAgra Foods Inc. had a tough fourth-quarter for fiscal 2005, which ended May 29. Results were negatively affected by its packaged meats operations, which dragged down earnings of ConAgra’s retail and food-service products divisions.

To improve company efficiency, company officials said they will concentrate on inventory reduction, head count, general reduction of expenses and improvement in manufacturing capacity utilization and plant productivity.

“All of these programs are geared to improve profit margins,” the company said in its earnings report.

“Fiscal 2005 was characterized by a solid first half followed by a weak second half,´ said Bruce Rohde, chairman and CEO in a prepared statement. “It was a year of mixed results that identified many things we can and should do better. While there were many achievements – brand growth, milestones achieved with R&D and enterprise systems, important team additions, and strong results for food ingredients – they were overshadowed by some significant shortcomings, most notably in basic execution within our packaged meats operations.”

The packaged meats section, which includes the Longmont Foods Turkey Processing plant in Longmont – representing 900 jobs – and the Mile High Turkey Hatchery in Platteville, could be closed or spun off to another company, based on ConAgra’s history. Longmont Foods provides ConAgra with turkeys for its Butterball brand.

In 2002, ConAgra sold its beef business, including Greeley’s processing plant, to Hicks, Muse, Tate & Furst Inc. and Booth Creek Management. The resulting company, Swift & Co., continues to be successful in the marketplace.

In 2003 ConAgra sold its chicken division to Pilgrim’s Pride Corp. Before the sale, ConAgra was the country’s fourth-largest chicken producer. The same year, ConAgra sold Greeley’s United Agri Products to Apollo Management L.P. UAP is now Greeley’s only public company.

With a history of dumping divisions that fail to meet the company’s goal of becoming “America’s leading packaged food company,” the future of Longmont Foods seems shaky.

The earnings report states the company “is aggressively pursuing opportunities to manufacture products more efficiently, which will most likely mean better utilization from fewer plants in the future …the program will be implemented during fiscal 2006 and continuing over the next two fiscal years.”

Chris Kircher, vice president of corporate communications for ConAgra, said the company has not made a list of what the “better utilization from fewer plants” will look like.

“We don’t have specifics about where we will develop the program, but the goal is to improve capacity and utilize manufacturing to a fuller capacity,” he said. ConAgra has about150 manufacturing plants, including a flour mill in Commerce City, that employs 80. The company will look at each plant and consolidate where it can.

“One-hundred and fifty plants is a large number and at our meeting we didn’t get into any detail about how to increase production,” Kircher said.

In previous years the company held tight to a desire to provide service “from dirt to the dinner table.” It is quite possible the high number of manufacturing plants is a reminder of the company’s past motto.

“After looking at their report it is obvious they are doing a lot of rationalization and their intent is to get lean and mean,´ said Keith Nunes, executive editor of Food Business News Magazine.

The company’s desire to be lean and mean and its focus solely on its 70-plus packaged brands allows the company to be more vulnerable to the ebbs and flows of the food industry.

“My take is that ConAgra is learning that they had a mixed agricultural product line and that some diversity strengthens the company,´ said Stephen Koontz, associate professor of agricultural economics at Colorado State University. “Once they spun out the feedlots, it’s possible they experienced the tightness of the food market.”

Koontz said he feels ConAgra will keep the turkey plant because it gives the company a cheap access to turkeys. The whole bird market is most active in November and December, but Koontz pointed out the profitability of the deli market the rest of the year.

“It will be interesting to see what happens on the ag side of things,” Koontz said. “Food companies go through a lot of gyrations, and I wonder how they plan on being more cost efficient by focusing on fewer products?”

Kim Lock is the agriculture reporter for the Northern Colorado Business Report. To suggest column ideas contact her at (970) 221-5400 ext. 222 or at klock@ncbr.com.

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