About three years ago, ConAgra Foods Inc (NYSE:CAG) bought the private-label foods company Ralcorp for $5 billion. Now ConAgra Foods has 23% of its sales from private-label unit and rest from brands as Chef Boyarde canned pasta, Healthy Choice frozen meals, and Peter Pan peanut butter. But this integration of ConAgra and Ralcorp has not been fruitful. One year after the acquisition of Ralcorp, the net profit margin started falling. Through the end of March 201, ConAgra had a loss of more than $2 billion associated to Ralcorp.
Jana Partners LLC, who owns more than 7% stakes and is seeking 3 three board seats at ConAgra, has now set its eyes on the new CEO, Seon Connolly. Mr. Connolly took over Gary Rodkin, as CEO on April 6. For competing with the maker of Slim Jim snacks and Wesson cooking oil he would be forming new strategies to revive decreasing shareholder value of ConAgra. Mr. Connolly can surely unlock the value from Ralcorp and can come out with new ways for ConAgra Foods marketing and innovation segment.
Mr. Connolly headed Hillshire Brands from 2012 to 2014. Under him, Hillshire was acquired by Tyson Foods, Inc. (NYSE:TSN) and by this deal Hillshire shareholder received about 70% premium to the share price. It was Mr. Connolly who handled the comeback of neglected brands at Hillshire.
Mr. Connolly can also opt for a sale out of Ralcorp or can revive the private label unit of ConAgra by increasing spending on the market in and innovation. He also has to take an interest in branded food categories from Wolf canned chili to Snack Pack pudding.
Apart from this, Mr. Connolly faces new challenges from the changing preferences of Americans from frozen dinners to refrigerated, ready to heat, and meals at grocery stores.
Mr. Connolly, who has been in this business for about 23 years, is confident enough to address all these issues and achieve the targeted profit margins for ConAgra Foods Inc (NYSE:CAG).