030911 ConAgra Foods Determined to Build Brands

Omaha, NE - A more focused ConAgra Foods will be presented to shareholders as chief executive Bruce Rohde continues shedding low-margin fresh meat and chicken businesses in favor of branded products.

Since last September, the nation's second-largest food company has sold its fresh beef and pork divisions and its canned seafood and cheese units. It plans to close on the sale of its fresh chicken businesses in the second quarter.

At the same time, sales have dropped from $25 billion in 2002 to $19 billion in the last fiscal year. Net income dropped to $775 million from $783 million, while per share earnings dropped 1 cent, to $1.46 from $1.47.

"We planned for that as part of our transition program," Rohde said in the company's annual report, which was issued before the company's annual meeting Thursday.

The Omaha-based company is the nation's largest food service supplier and the second largest food company behind Altria Group Inc.'s Kraft Foods, which had $29.7 billion in revenue in 2002.

Rohde took over at ConAgra in 1997. He has restructured the company, closing plants, laying off workers and tightening its distribution network. Rohde also has abandoned the company's practice of holding businesses across the food industry in favor of packaged and frozen foods, which bring higher profits.

With brands like Banquet, Orville Redenbacher's, Healthy Choice, Kid Cuisine, Hunt's, Reddi-wip and Blue Bonnet, ConAgra is determined to expand its reach into the grocery store, Rohde said.

"This involves many important areas of our business, ranging from product design to quality, packaging, presentation, advertising and promotion practices," Rohde said.

ConAgra's plan looks good on paper, but questions remain about the power of its brand names and the creativity of its food development and marketing teams, analyst John McMillin of Prudential Equity Group said.

"When your best brands are Chef Boyardee and Slim Jim, it's not exactly Kraft," McMillin said. "You still ask yourself, 'What do they have that Wal-Mart has to have?'"

ConAgra has not been known for its nimbleness, though its creativity has improved, McMillin said.

"Here is a company big in frozen foods, meat and flour and they missed the entire frozen pizza revolution," McMillin said. "The question is: can they be better going forward?"

Rohde acknowledges ConAgra has work to do.

Focusing on branded and value-added opportunities is a first step to improving ConAgra's manufacturing, marketing, sales and distribution, Rohde said in the annual report.

Teams are being set up to study product development and marketing to capitalize on consumer trends and more quickly produce new offerings, Rohde said.

In addition, people inside and outside ConAgra are helping the company look at what it makes and how it sells it, Rohde said.

"We are aggressively re-examining how consumers think, feel and act toward our products," Rohde said.

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