CAG ConAgra Brands Inc

By Annie Gasparro 

ConAgra Foods Inc. will cut about 1,500 office jobs and move its headquarters to Chicago as part of a plan to boost profit margins and revive an old-line packaged-foods business reeling from shifting consumer tastes.

The Omaha, Neb., company plans to trim $300 million from its annual budget through the layoffs, improved efficiency and expense reductions. ConAgra said the job cuts represent 30% of its global office staff.

The maker of Chef Boyardee canned pastas and Healthy Choice frozen dinners identified the cost savings through zero-based budgeting, a tool increasingly adopted by big U.S. food makers that requires departments to justify expenses anew every year.

The actions "will make us one of the leanest organizations in the food industry when we're done," ConAgra Chief Executive Sean Connolly said in an interview. The company "took every expense and put it out in the parking lot"--and only allowed "it back in based on whether we could attach a return to it," he said.

The move to Chicago--to be aided by Illinois tax incentives--will help ConAgra better attract talent as it restructures, the CEO said. ConAgra's stock rose 1% on Thursday.

Mr. Connolly took the helm at ConAgra in April amid unrelenting weak sales and a botched acquisition of private-label business Ralcorp Holdings Inc. The former CEO of Hillshire Brands Co. also began facing pressure to improve results from activist investor Jana Partners LLC, which revealed in June that it had built a more-than 7% stake in the food maker.

ConAgra is among an array of big U.S. food companies grappling with slowing growth as many consumers eschew traditional packaged foods for less-processed and fresher fare.

The maker of Hunt's ketchup and Reddi-wip dessert topping also is challenged by aggressive moves at bigger rivals, including newly merged Kraft Heinz Co., to increase margins.

"We have to take actions within our control to improve margins and eliminate waste," Mr. Connolly said.

ConAgra estimates the restructuring will cost $345 million over the next two to three years. It expects to realize more than half of the savings by the end of its 2017 fiscal year, with the balance achieved in 2018.

The move to Chicago, planned for next summer, will bring 700 jobs to the city. ConAgra will maintain some 1,200 office employees in Omaha, where it has maintained its headquarters since 1922.

ConAgra's relocation is part of a continuing push by Chicago Mayor Rahm Emanuel to recruit companies to the Windy City from out of state and elsewhere in Illinois. Motorola Solutions Inc. announced last month it would move its global headquarters to downtown from the Chicago suburbs, while Archer Daniels Midland Co. moved its headquarters to the city from Decatur, Ill. last year. Kraft Heinz announced plans to move to downtown Chicago from the suburbs shortly after merging in July.

As part of the ConAgra move, Illinois Gov. Bruce Rauner signed off on tax credits for the company based on 150 new jobs coming to the state. His administration didn't put a dollar value on the incentive package, saying it will depend on factors such as employee salaries and future tax rates. Tax breaks for individual companies have received increased pushback by Illinois lawmakers in recent years as the state faces deep fiscal challenges, but the new credits won't require legislative approval.

ConAgra has an office in the Chicago suburb of Naperville with about 400 people. Many of those jobs will move to downtown Chicago, along with its senior leadership team and its frozen-foods business in Omaha.

Mr. Connolly is no stranger to such moves. He led Hillshire when it moved its suburban Chicago headquarters to the city's downtown in 2012. Tyson Foods Inc. acquired Hillshire last year.

"We need that energized culture for our consumer-brands segment," Mr. Connolly said. "I know that drill."

He said more cost cuts could come at ConAgra once it completes a similar analysis of its manufacturing operations and supply chain.

Other food makers, including Kellogg Co. and General Mills Inc., have announced factory closures in the past year as Brazilian private-equity firm 3G Capital Partners LP leads a push for sweeping cost cuts in the industry through its control of Kraft Heinz.

ConAgra continues to look for a buyer for its struggling private-brands business. The company so far has announced write-downs totaling more than $4 billion for the business, which it bought for $5 billion less than three years ago. Mr. Connolly said last week that the company had received a lot of interest from potential buyers.

Mark Peters contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

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(END) Dow Jones Newswires

October 01, 2015 16:41 ET (20:41 GMT)

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