OMAHA — ConAgra Foods, Inc. expects “bumps and bruises” as it works to integrate its recently acquired Ralcorp business, said Gary Rodkin, chief executive officer of ConAgra Foods, during an April 3 call with financial analysts to discuss third-quarter earnings.
“We’re integrating at a pace and sequence that will optimize the long-term growth of this major acquisition, so we are obviously being deliberate and thorough up front to make sure the integration drives success,” Mr. Rodkin said. “We, of course, will find some opportunities to course correct and other places to build upon Ralcorp’s successes. There will clearly be some bumps and bruises as we put these two companies together.”
While the acquisition positions ConAgra Foods for faster growth while participating in what it identifies as the “very exciting space” of private brands, the company said it has experienced a steep learning curve since the earlier-than-planned transaction completion on Jan. 29. Ralcorp’s business model, driven by acquisitions and cost savings, and its approach to pricing and commodities were not consistent with ConAgra’s strategies for long-term, organic growth.
“I think the history of Ralcorp was that they focused an awful lot on acquisitions, and they were rolling up various pieces of private label,” said Paul Maass, president of ConAgra’s commercial foods division. “And I think one of the byproducts of that is that’s an organization that historically is not really focused on organic growth the way we have. So, it’s not that they don’t have good capabilities. It’s not that they’re not really good at costs. They have good customer relationships and all those things, but their D.N.A. was not about organic growth. So, I think as we’ve kind of started our integration and learning about the business … one of the challenges we have is we really need to orient the business and the leaders of the business towards organic sustainable growth.”
ConAgra’s course correction focuses on tactical pricing adjustments, supply chain efficiencies and organizational development.
“I think another area would be … how we will manage commodities and some of the capabilities we bring to really connect our commodity decisions with our marketing and pricing decisions and how we go to market,” Mr. Maass said. “I think those are some of the muscles that we’ve built over the last couple years that we’ll be able to leverage. And then I think related to that, the third big area is I think this whole area of pricing architecture and how do we leverage different kinds of analytics with a focus on organic growth as we apply pricing capabilities. So, I think there are a number of issues there in terms of how we’re going to run the business differently.”