NEW YORK — Gary Rodkin, chief executive officer of ConAgra Foods, Inc., said he’d like to see the Omaha-based company become a “top-tier” operating company in five years. Doing so, he said, will require the company to leverage core adjacencies, grow internationally and expand in private label.
The frozen business is an excellent example of a category with opportunities for future growth through core adjacencies, said Mr. Rodkin, who spoke May 24 at the Citi Global Consumer Conference in New York.
“We have a very strong position in frozen meals with brands like Marie Callender’s, Banquet and Healthy Choice,” Mr. Rodkin said. “So we have big scale, strong capabilities there. But the real growth vectors in the frozen business are in the breakfast daypart and in the dessert daypart — those are what we would call adjacencies.”
Mr. Rodkin said ConAgra “kind of tiptoed” its way into the dessert adjacency with internal innovation in the Banquet brand, developing Banquet dessert pies. The company relied on the knowledge it had learned from the Banquet pot pie business.
“It’s just a little different putting fruit in there instead of chicken,” Mr. Rodkin said. “That was very successful.”
Next, ConAgra in 2010 acquired the license for Marie Callender’s frozen dessert pies held by American Pie, L.L.C.
“We had (the Marie Callender’s equity) in all the rest of the grocery business, but we didn’t have the dessert pie business,” he said. “We bought that business because we had a real clear tailwind coming out of the frozen dessert business. We could combine that with our Marie Callender’s brand for all the obvious reasons: we could innovate more, we could produce with better productivity and that business has been outstanding for us for the last 15 months since we have owned it.”
Mr. Rodkin promised that going forward ConAgra will produce even more in the frozen dessert category.
Another core adjacency that will be tapped will be on the frozen breakfast business, he said, pointing to the recently acquired Odom’s Tennessee Pride business, which he likened to the Sara Lee Jimmy Dean brand.
Eye on doubling international presence
While ConAgra is “not looking to plant flags everywhere,” Mr. Rodkin noted in his remarks that the company is hoping to double the size of its international business, which currently accounts for about 11% of the company’s business. ConAgra has a strong position in India (through Agro Tech Foods Ltd.), Mexico (led by the company’s Act II popcorn brand), and, most recently, in Canada, where the company acquired Del Monte Canada.
But the biggest global footprint is likely to come from the company’s Lamb Weston business.
“Lamb Weston is the largest potato business in North America and the second-biggest globally,” Mr. Rodkin said. “And the real growth — the real driving growth — is in the developing markets. We have a very strong position in Asia, obviously in Japan we’re very well developed, but also in China and other places in India. And the bottom line here is that having gone around the world I’ve yet to find anyone who doesn’t like a french fry. It’s all about availability.”
Identifying value in private label
Five years from now, Mr. Rodkin said he’d like to see ConAgra move from being a “decent” operating company to a “top-tier” one, and to become “the fastest-growing private label business.” He stressed that the company primarily will remain a branded business, but by moving the portfolio toward private label it will be positioned in some businesses that the company has more confidence in in terms of growth opportunities from a category standpoint.
Asked to elaborate on some of the benefits of growing in private label, Mr. Rodkin referenced the company’s November 2011 acquisition of the National Pretzel Co., Lancaster, Pa.
“When we bought the National Pretzel Co. — which is by far the biggest player on the private label side of the pretzel category — it wasn’t so that we could have a cheaper version of Rold Gold pretzels, that’s a piece of the business,” he explained. “The real reason we bought it is because of their technology that they developed, which some of you may have had, peanut butter filled pretzels, which you can find at a number of retailers like a Trader Joe’s or a Costco.
“And that brand — that piece of the business — is on fire because it’s true value and it’s got good margins. And when we looked at that and said, ‘Wow, not only could we expand that business with our scale sales force and our customer connections, but our R.&D. capabilities can do all kinds of things with that.’
“So, if you take that and apply that same discipline across all the acquisitions that we’re making in private label, that’s what really gets us excited about it, not the fact that we’ll be the lowest price on the shelf.”