ConAgra Foods, Inc.

founded: 1919 as nebraska consolidated mills

Contact Information:

headquarters: 1 conagra drive
omaha, ne 68102-5001 phone: (402)595-4000 fax: (402)595-4702 url: http://www.conagra.com

OVERVIEW

ConAgra Foods, Inc., headquartered in Omaha, Nebraska, is a foodservice manufacturer and retail food supplier. It ranks as the top food service manufacturer (meat and poultry, French fries, and dough-based products) in the United States. It is ranked second as a food company (behind Kraft Foods), and a frozen foods company (behind Nestle USA) and in meat and poultry sales, behind IBP, Inc. Its annual sales reach approximately $27 billion.

The general public knows ConAgra best through its numerous and well known brand names that include Banquet, Chef Boyardee, Healthy Choice, and Van Camp's. Indeed, consumers are likely to see ConAgra products wherever they turn. In supermarkets, the products are found on the shelves, in the dairy case, the frozen food section, at the deli, and in the fresh and prepared meat case. Products can also be found at restaurants and hotels, convenience stores, and vending and snacking areas.

ConAgra Foods has been called a brand "powerhouse," as it boasts more than 80 brands. These include 25 food brands that record annual retail sales exceeding $100 million. One brand, Healthy Choice, has retail sales of about $1.5 billion dollars.

The company's major business subdivisions include agricultural products, packaged foods, and refrigerated foods. The agricultural business segment processes and distributes ingredients for food and beverage products and meat and poultry production. Also, the segment distributes crop protection chemicals, fertilizers, seeds, and information systems at wholesale and retail levels.

The packaged food segment produces shelf-stable foods, frozen foods, dairy case products, and foodservice products for retail, foodservice, and specialty markets. Shelf-stable products include tomato products, pasta products, cooking oils, popcorn, soup, puddings, meat snacks, canned beans, canned pasta, tuna, canned chili, cocoa mixes, and peanut butter. Frozen food products include dinners, pizzas, entrees, snacks, ice cream, and seafood. Dairy products include tablespreads, cheeses, egg alternatives, and dessert toppings. Foodservice products include potato products, ethnic food products, hand-held dough-based products, specialty meats, and other products primarily for foodservice markets.

The refrigerated foods segment produces and markets fresh and branded processed meats, beef and pork products, chicken and turkey products, and meat alternative products for retail, foodservice, institutional, and specialty markets. The processed meat products include hot dogs, bacon, ham, sausages, cold cuts, turkey products, and kosher products. Fresh meat products include beef, pork, and lamb. The poultry businesses include chicken and turkey products. Meat alternative products include soy-based items like meatless hot dogs and patties.

COMPANY FINANCES

In 2000, ConAgra Foods Inc.'s agricultural products segment reported fiscal year sales of $5.2 billion. The packaged foods segment had sales of $7.7 billion. The refrigerated foods segment had sales of $12.5 billion.

For fiscal 2001, overall sales grew 7 percent to reach $27.2 billion, while operating profit reached $1.9 billion. ConAgra reported that it had a tough first half of the year, but it bounced back in the second. During the fourth quarter, sales for the company's food businesses (packaged and refrigerated) grew 5 percent to $5.5 billion. Total food business operating profit declined to $372.0 million, versus $415.0 million in fiscal 2000. For all of 2001, food business sales grew 7 percent to $21.9 billion, and food business operating profit stayed the same at $1.6 billion.

Fourth quarter sales for the packaged food segment showed a 17 percent increase ($2.3 billion), while operating profit was $276.0 million compared to $294.0 million in the fourth quarter of 2000. For the full fiscal year, the segment's sales grew 14 percent to $8.7 billion and operating profit grew 5 percent to $1.1 billion.

For the same quarter, refrigerated foods sales went down by 2 percent to $3.3 billion, and operating profit decreased to $97.0 million (down from $121 million in the fourth quarter 2000). For the full year, sales rose 3 percent to $13.2 billion, and operating profit declined to $438.0 million from $491.0 million in 2000.

Fourth quarter sales for the agricultural products segment increased 4 percent to $899 million. Operating profit was $33 million, compared to $47 million in the fourth quarter of fiscal 2000. For the full fiscal year, agricultural products sales rose 5 percent to $5.3 billion and operating profit totaled $281 million, down slightly from the 2000 operating profit of $283 million.

In 2002, for the 39 weeks ended February 24, 2002, revenues rose 3 percent to $21.22 billion. Net income rose 6 percent to $592.8 million.

FAST FACTS: About ConAgra Foods, Inc.

Ownership: ConAgra Foods, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: CAG

Officers: Bruce Rohde, Chmn., Pres., CEO, 52, 2001 Salary $982,000; James O'Donnell, CFO, VP, Sec., 53, 2001 salary $466,000; Owen Johnson, EVP, Human Resources and Administration, 55, 2001 salary $415,000; Dwight Goslee, EVP, Operations Control and Development, 51, 2001 salary $133,000; Kenneth Gerhardt, SVP, CIO, 51, 2001 salary $373,000

Employees: 90,000

Principal Subsidiary Companies: ConAgra Foods Inc. is subdivided into three major business segments, including agricultural products, packaged foods, and refrigerated foods. These segments are further subdivided into various companies. The companies include more than 500 subsidiaries, many with well-known names such as Butterball Turkey, Bumble Bee Seafoods, Hunt Foods, and Swift & Company.

Chief Competitors: ConAgra Foods operates in the consumer/non-cyclical sector of the food processing industry. Its main competitors include Cargill, Kraft Foods, and Nestle USA.

ANALYSTS' OPINIONS

Some analysts have a bit of trouble reading ConAgra Foods, Inc. for several reasons. For one thing, the company has employed a complex trading strategy. In recent years, using cash earnings rather than reported earnings, ConAgra traded 34 percent below the price-cash flow ratios of the food industry group. Also, ConAgra is viewed by some as a complex company that has a "commodity-like image" because two-thirds of its sales are derived from activities such as meatpacking, poultry production, and agriproducts. For ConAgra Foods, low margins typical in those businesses result in an overall margin well below those of other food industry leaders. And because the company has three significant business segments, sometimes it's hard to determine exactly where the profits are really coming from.

However, Shields and Company of New York feels that ConAgra Foods, Inc. is a strong, well-managed food company that is "under-recognized" by the market. In 2000, it rated ConAgra a "strong buy." It based this rating on its increased confidence in ConAgra's ability to maintain its long-established record of double-digit earnings growth. "With annual sales of $27 billion, ConAgra is the nation's second largest food company, deriving 36 percent of sales and 63 percent of profits from Packaged Foods, 45 percent and 22 percent from Refrigerated Foods, and 19 percent and 15 percent from Agricultural Products," Shields reported in October 2000. "The company has an unusually strong position in the growing foodservice market, which accounts for 37 percent of revenues, and where it is the industry's number one supplier."

HISTORY

It all started back 1919. The company that would become ConAgra Foods Inc. began when four flourmills in Grand Island, Nebraska, consolidated and incorporated as Nebraska Consolidated Mills. Three years later, the new company moved to Omaha, the city where ConAgra Foods, Inc. is now based.

For the next 50 years, Nebraska Consolidated Mills operated primarily as a commodity producer and food industry supplier. But that would start to change in the second half of the twentieth century, when it would move into other areas and enterprises. The company's evolving nature was reflected in its name change to ConAgra in 1971.

ConAgra really started becoming the company it is known as today in the 1980s and 1990s when it made a long series of acquisitions in a period when conglomerates were breaking apart. The process began in 1980, when ConAgra bought Banquet Foods from RCA. By 2000 the company would amass 33 brands that would turn an impressive $100 million in sales.

In 1998 ConAgra named Bruce Rohde as its chief executive officer. The appointment would prove crucial, as Rohde strengthened ConAgra's overall performance and enhanced the company's potential. Rohde implemented cost reduction steps, and he placed more emphasis on product development and marketing. He also focused on acquisitions and divestitures. The results of his actions had a significantly positive impact. By the end of the decade, ConAgra's profit margins would be at record highs. As the company moved into the twenty-first century, it appeared that these margins would continue rising.

In 1999 ConAgra integrated its five beef subsidiaries and began operating them under one name, Congra Beef Co. In August 2000, ConAgra made one of its most significant acquisitions when it bought International Home Foods for $2.9 billion. It was the company's largest acquisition in its history, and it would increase the sales of its packaged foods segment by 30 percent. The company scored another major acquisition that same year when it purchased Bumble Bee, a tuna company.

CHRONOLOGY: Key Dates for ConAgra Foods, Inc.

1919:

Nebraska Consolidated Mills, which will become ConAgra Foods, Inc., is founded in Grand Island, Nebraska

1922:

Nebraska Consolidated Mills moved to Omaha, Nebraska, the future headquarters of ConAgra Foods, Inc.

1971:

Nebraska Consolidated Mills changes its name to ConAgra

1980:

ConAgra begins a long series of acquisitions when it purchases Banquet Foods from RCA

1998:

Bruce Rohde is appointed CEO of ConAgra

1999:

ConAgra begins "Operation Overdrive," a major organizational restructuring program

1999:

ConAgra integrates its five beef subsidiaries and begins operating them under one name, ConAgra Beef Co.

2000:

ConAgra buys International Home Foods for $2.9 billion; ConAgra changes its name to ConAgra Foods, Inc. to reflect its changing business focus

2001:

ConAgra Foods, Inc. acquires the David & Sons sunflower seeds and snack business from Nestle USA, Inc.

In September 2000, ConAgra renamed itself ConAgra Foods, Inc., to underscore its new emphasis on its increasing role as a foodservice manufacturer. As part of this image makeover, Rohde placed advertisements in the Wall Street Journal, the national financial newspaper. With the ads, he wanted the country to see that ConAgra Foods was a major food company, and not just an agricultural ingredients supplier. Rohde wanted nothing less than for ConAgra Foods, Inc. to become America's favorite food company.

In December 2001, the company acquired the David & Sons sunflower seeds and snack business from Nestle USA, Inc., a subsidiary of Swiss-based Nestle S.A., one of its major competitors.

STRATEGY

Management has implemented a strategic plan designed to result, over a long term, in single-digit sales growth, expanding profit margins, double-digit growth in operating profits, and an increasing return on investment. The plan has five key strategies including channelization, controlling capital, "cleaning house," margin and mix, and targeted acquisitions.

Channelization involves focusing on the specific needs of each class of customers, including general consumers, supermarkets, club stores, and convenience stores in the retail sector, and restaurant chains and broad-line distributors in foodservice. Controlling capital involves establishing tight controls over capital expenditures to provide more funds for acquisitions and other purposes. The "cleaning house" strategy is part of ConAgra Foods Inc.'s intent to strengthen the company and increase its profitability by divesting unproductive assets and businesses that no longer fit in with its long-term plans. The margin and mix strategy involves the company's "Operation Overdrive," a major restructuring program that began in 1999 and has resulted in significant cost reductions and expanded margins. Through its targeted acquisitions strategy, ConAgra Foods intends to continue its active acquisition programs, which has resulted in tremendous gains for the company, including diversity of product, increased sales, and rising cash flow.

INFLUENCES

When ConAgra wanted to become known as a major food company, it found it has some obvious catching up to do with food industry competitors. The company was able to achieve this rather rapidly, thanks to a massive organizational restructuring that includes divestiture of businesses like barges, wool, and pet supplies last year, as well as reorganizing its remaining business into three lines: retail foods, foodservice supply, and agricultural products.

The appointment of Bruce Rohde as CEO had no small impact on the company's successful navigation of its new direction. Possessing a track record of initiating change, Rohde helped ConAgra Foods become the largest U.S. foodservice manufacturer and the second largest retail food supplier. One of the things Rohde did was step up ConAgra Foods' acquisition efforts. Under his watch, the company scored some pivotal business acquisitions, including International Home Foods. It amassed important brand names like Chef Boyardee, Bumble Bee, Pam, and Gulden's, and it reinforced some of its brands through line extensions that included new products such as gravy, stuffing, broth (for the Butterball brand name), and a casserole mix (for the Banquet brand name).

CURRENT TRENDS

Moving into 2001, ConAgra continued making acquisitions, the most high-profile element of its strategic plan. It also started forming strategic alliances. However, the company doesn't absorb other companies and branded names indiscriminately, nor does it choose partners randomly.

For instance, in 2001, ConAgra joined forces with Wolfgank Puck to manufacture, market, and distribute gourmet foods such as frozen entrees, pizzas, and side dishes under the Wolfgang Puck name. According to reports, ConAgra entered into the agreement to capitalize on a growing trend: American consumers are cooking less, eating out more, and relying more and more on gourmet meals that are easy to prepare. Faced with a shrinking market for vegetables, meats, and other farm products that need to be prepared, ConAgra aggressively went after high-margin gourmet products, which Rohde sees as a gold mine, and for good reason. In 2001, consumers were spending about $1 billion a day on food eaten away from home (according to the National Restaurant Association), and prepared foods remain one of the few growth segments in the industry.

PRODUCTS

ConAgra has perhaps the largest number of leading brand names in the food industry. Thirty of its brands have sales in excess of $100 million a year, including Healthy Choice, with sales of more than $1 billion. Its three major business segments include packaged foods, refrigerated foods, and agricultural products.

Its packaged foods segment includes many well-known brand names. Its major shelf-stable brands include Hunt's, Healthy Choice, Chef Boyardee, Wesson, Orville Redenbacher's, Peter Pan, Van Camp's, Gulden's, Swiss Miss, Bumble Bee, and La Choy. Major frozen food brands include Banquet, Marie Callender's, Kid Cuisine, and Wolfgang Puck. Major dairy brands include Parkay, Blue Bonnet, Fleischmann's, Egg Beaters, and County Line. Foodservice major brands include Lamb Weston, Fernando's, Casa de Oro, Holly Ridge, Rosarita, and Zoll. Major brands from its refrigerated foods segment include Armour, Butterball, Cook's, Country Pride, Healthy Choice, Brown 'N Serve, National Deli, and Swift Premium.

ConAgra's agricultural products segment distributes crop protection chemicals, fertilizers, seeds, and information systems at wholesale and retail levels. Major agricultural brands include Clean Crop, ACA, Savage, Shotgun, Saber, Signature, and Loveland Industries.

The company also is a leading supplier of both hamburger patties and frozen French fries to McDonald's, Burger King, Wendy's, and other fast food chains. Other customers include Pizza Hut, Taco Bell, Arby's, Popeyes, Jack in the Box, Applebee's, and Aramark. In addition, it is the top supplier to just about all of the major foodservice distributors including SYSCO, U.S. Food-service, PYA/Monarch, Alliance, and Performance Food Group.

CORPORATE CITIZENSHIP

ConAgra Foods, Inc. commits itself to improving the quality of life in communities across America. It does this through leadership partnerships and financial contributions. Specifically, its activities are focused on two major national initiatives: Feeding Children Better, a multi-million-dollar, multi-year commitment to helping end child hunger in the United States; and a national program aimed at educating consumers about home food safety.

The company has also implemented an environmental program that includes four key initiatives: water and energy conservation, prevention of air pollution, waste reduction and recycling, and land management protection and enhancement. In 2000 the company's program saved 448.3 million gallons of water, reduced landfill waste by nearly 14.0 million pounds, cut electrical use by 35.7 million kilowatts, and cut natural gas use by 86.8 million square cubic feet.

GLOBAL PRESENCE

ConAgra Foods has principal operations in about 25 countries and more than 200 operating groups and plants around the globe. It has foreign offices located in Hong Kong, Korea, Mexico, Taiwan, and Tokyo.

EMPLOYMENT

ConAgra Foods employs more than 90,000 people worldwide, and it provides a strong employee support system that includes a flexible benefits package and a family-friendly working environment. Employees are offered a menu of benefits that best suit their individual or family needs. Plans include 401(k) with company match; PPO, HMO, or POS health coverage; and dental and vision coverage.

GOING TO BAT FOR CONAGRA

In August 2000 baseball superstar Sammy Sosa joined the ConAgra Foods team. The outfielder was turned into a pitcher; that is, his role was designated to be a "pitchman" for ConAgra's popular Hunt's Snack Pack and Orville Redenbacher's Gourmet Popping Corn brands. He was also slated to go to bat for ConAgra's Feeding Children Better program.

In striving to create an environment that encourages creativity and innovation, the company has installed an online internal job posting process, promotional and rotational career opportunities, and recognition and reward programs. It also offers encourages advancement through educational reimbursement programs, memberships in professional and industry associations, conference and seminar attendance, and through programs offered at its Learning Center in Omaha, Nebraska.

SOURCES OF INFORMATION

Bibliography

business 2.0.com. "conagra foods, inc." 1 april 2002. available at http://www.business2.com.

cbs marketwatch. "profile: conagra foods, inc." 2002. available at http://cbs.marketwatch.com.

cohen, debra. "conagra mulls the fate of laggard units—analysts," 26 december 2001. available at http://www.google.com/fdc/ads.

cummins, robert j. "investment highlights: conagra foods, inc." shields & company, 17 october 2000. available at http://www.shieldsandco.com.

hoover's online. "conagra foods, inc.," 1 april 2002. available at http://www.hoovers.com.

independent sector. "conagra foods and america's second harvest." mission and market, 2002. available at http://www.independentsector.org/mission_market/conagra.htm.

yahoo! finance. "conagra foods, inc." yahoo market guide, 28 march 2002. available at http://biz.yahoo.com/p/c/cag.html.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. conagra foods, inc.'s primary sics are:

2011 meat packing plants

2013 sausages and other prepared meat products

2015 poultry slaughtering and processing

2022 natural, processed, and imitation cheese

2038 frozen specialties, not elsewhere classified

2041 flour and other grain mill products

2048 prepared feeds and feed ingredients for animals andfowls, except dogs and cats

2875 fertilizers, mixing only

2879 pesticides and agricultural chemicals, not elsewhereclassified

6211 security brokers, dealers, and flotation companies

also investigate companies by their north american industry classification system codes, also known as naics codes. conagra foods, inc.'s primary naics codes are:

311119 other animal food manufacturing

311211 flour milling

311412 frozen specialty food manufacturing

311513 cheese manufacturing

311611 animal (except poultry) slaughtering

311612 meat processed from carcasses

311615 poultry processing

325314 fertilizer (mixing only) manufacturing

325320 pesticide and other agricultural chemical manufacturing

523120 securities brokerage