ConAgra to Cut 1,500 Jobs, Move Headquarters to Chicago -- 2nd Update
October 01 2015 - 4:56PM
Dow Jones News
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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