By Paul Ziobro
ConAgra Foods Inc. (CAG) Chief Executive Gary Rodkin says the
key ingredients, including strong balance sheets and low borrowing
costs, are in place for consolidation in the packaged food
industry, but time will tell if it come into fruition.
"The signals are clearly there," Mr. Rodkin said during an
interview with Dow Jones Newswires. But, he added, "we'll see,"
whether anything comes of it.
Mr. Rodkin made the comments after being asked about last week's
$23 billion buyout of H.J. Heinz Co. (HNZ) by Warren Buffett's
Berkshire Hathaway Inc. (BRKA, BRKB) and Brazilian private-equity
firm 3G Capital. "I was as surprised as anybody," Mr. Rodkin
said.
The deal sparked speculation about whether it would mark the
start of a wave of consolidation in the packaged-food industry,
where companies are grappling with how to increase sales in
developed markets like the U.S.
ConAgra, for its part, is currently taking a breather from
acquisitions after recently completing the $4.95 billion
acquisition of private-label food maker Ralcorp. ConAgra is
currently working to pay down debt incurred during the deal.
The maker of Peter Pan peanut butter, Slim Jim meat snacks and
other food products on Tuesday raised its outlook for fiscal 2013,
in part to reflect the benefit of the Ralcorp deal that closed last
month. It also said that Ralcorp should add about 25 cents to
fiscal 2014 earnings per share, but didn't disclose an outlook
yet.
In recent trading, ConAgra shares were down slightly at
$33.47.
ConAgra bought Ralcorp because of its dominating presence in the
private-label food space, which ConAgra expects to continue to gain
a larger share of consumer wallets over the years. Private-label
food sales currently make up 18% of U.S. food sales, the company
says.
Mr. Rodkin said as a combined company, ConAgra would be able to
help Ralcorp lower costs to buy ingredients and packaging material.
It will also be able to work with some customers. For instance, Mr.
Rodkin said that one unnamed fast-food chain buys ConAgra's Lamb
Weston french fries and Ralcorp breakfast products, so they can now
approach that chain as one supplier.
Write to Paul Ziobro at paul.ziobro@dowjones.com
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