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ConAgra, Inc.

 


Address:
ConAgra Center
One Central Park Plaza
Omaha, Nebraska 68102
U.S.A.

Telephone: (402) 595-4000
Fax: (402) 595-4595


Statistics:
Public Company
Incorporated: 1919 as Nebraska Consolidated Mills Company
Employees: 42,993
Sales: $21.5 billion
Stock Exchanges: New York
SICs: 2048 Prepared Feeds, Not Elsewhere Classified; 2879 Agricultural Chemicals, Not Elsewhere Classified; 2041 Flour & Other Grain Mill Products; 6211 Security Brokers & Dealers


Company History:

In 1919 Alva Kinney brought four grain milling companies in south central Nebraska together to take advantage of increasing grain production in the Midwest, and the Nebraska Consolidated Mills Company was born. Seventy years and a name change later, ConAgra, Inc. is a diversified international company whose products range from agricultural supplies such as fertilizers, pesticides, and feeds to prepared gourmet dinners for a new age of consumers.

Officially formed on September 29, 1919, the Nebraska Consolidated Mills Company (NCM) was headquartered in Grand Island, Nebraska. At first Kinney concentrated on milling the bumper postwar wheat crops at his four Nebraska locations. But soon, to accommodate his growing business, Kinney added a mill in Omaha, in 1922, and moved the headquarters of the company there. He continued to run a profitable and relatively quiet company solely in Nebraska until he retired as president in 1936.

Kinney was succeeded by R. S. Dickinson. Initially, Dickinson followed his predecessor's simple but successful policy of milling grain in Nebraska. World War II and the postwar boom kept the demand for grain high and the milling business profitable.

During the early 1940s Dickinson began to use the company's profits to expand. Other successful milling operations, such as General Mills and Pillsbury, were expanding both the number of plants and the number of products they offered, and NCM followed the same trend. In 1942 Dickinson opened a flour mill and animal feed mill in Alabama. He also promoted research into new types of prepared foods that used flour, which led to the development of Duncan Hines cake mixes, introduced in the early 1950s.

The Alabama expansion was profitable, but Dickinson found that it was more difficult to gain a foothold in the prepared-foods market. Cake mixes, though only a small proportion of the total flour market, accounted for as much as $140 million a year in retail sales by 1947. But the market was dominated by General Mills's Betty Crocker brand and by Pillsbury, each with one third of the market share, while Duncan Hines controlled only ten to 12 percent. Unable to increase its share of the highly-competitive cake mix market, NCM eventually decided to get out of prepared foods and use the money it raised to expand in basic commodities: grains and feeds. So, in 1956 the company sold its Duncan Hines brand to Proctor & Gamble.

The new president of Nebraska Consolidated Mills, J. Allan Mactier, used the proceeds from the sale to expand aggressively. In 1958, NCM built the first major grain processing plant in Puerto Rico through its subsidiary, Caribe Company. The $3 million plant processed flour, corn meal, and animal feeds at Catano in San Juan harbor. Production at the plant did not compete with the parent company's already-existing concerns; none of the flours and feeds produced there were exported to the mainland.

Caribe's foothold on the island led to further Puerto Rican expansion in new areas. A second subsidiary, Molinos de Puerto Rico, took over Caribe's animal feed business on the island while also developing Puerto Rico's virtually nonexistent beef industry as a market for its products. In Molino's first five years of operation, consumption of animal feeds in Puerto Rico increased from 136,516 tons, of which 100,314 were imported, to 249,267 tons, of which only 46,723 were imported. The company also profited from an increased demand for meat and milk on the island.

Elsewhere, however, flour millers faced shrinking profits as demand leveled off in both domestic and foreign markets. European grain production had recovered from the disruption of World War II, and prosperity at home in the 1950s and 1960s allowed consumers to buy more expensive food items, leading to lower flour consumption.

Large millers turned to diversification to offset declining profitability. Industry leaders General Mills and Pillsbury developed their consumer foods lines and introduced new types of convenience foods, while the third of the "Big Three" in flour milling, International Milling Company, Inc., diversified primarily into animal feeds. Nebraska Consolidated Mills, perhaps unwilling to compete again in packaged foods after its experience with Duncan Hines, also developed the animal feed end of its business. Throughout the 1960s and into the 1970s, the company developed mills and distribution centers for feed and flour in the Southeast and Northwest.

NCM also turned to another basic commodity: chicken. It developed poultry growing and processing complexes in Georgia, Louisiana, and Alabama during the 1960s. In 1965 the company also began to expand into the European market by going into partnership with Bioter-Biona, S.A., a Spanish producer of animal feed and animal health products and breeder of pigs, chickens, and trout.

By 1971 Nebraska Consolidated Mills had outgrown its early base in Nebraska as well as its name. It chose a new name to reflect its new concerns: ConAgra, meaning "in partnership with the land." ConAgra was listed on the New York Stock Exchange in 1973.

The new name, however, did not necessarily mean continuing success. The early 1970s, in fact, brought the company to a low point. Many of its acquisitions during the expansion of the 1960s and early 1970s were only marginally profitable at best. In 1974 the company posted net losses and suspended dividends. Heavy losses in commodity speculations brought ConAgra to the brink of bankruptcy in 1975.

ConAgra's first high-profile chief executive, former Pillsbury executive Charles Harper, was named president in 1975 with a mandate to turn the ailing company around. Essential to Harper's turn-around plan were strict financial goals combined with a series of acquisitions that served to broaden's ConAgra's sales base. To reduce debt, Harper first sold nonessential operations. He then began to buy agricultural businesses at the low end of their profit cycles and turn them around. Harper originally intended to stick with ConAgra's emphasis on basic commodities rather than compete with the packaged-food giants. When he purchased Banquet Foods Corporation in 1980, he claimed that the acquisition was not an entry into prepared foods but a way to increase ConAgra's chicken capacity. ConAgra's chicken production did increase by a third, bringing the company from eighth to fifth place among chicken producers. Harper expanded into fish as well as poultry in the 1970s with investments in catfish aquaculture.

Another of Harper's acquisitions put ConAgra back in the forefront of the flour market. In 1982 ConAgra bought the Peavey Company, a Minneapolis-based flour miller and grain trader, giving it 16.3 percent of the nation's wheat-milling capacity and a system of grain exporting terminals. Political barriers to U.S. grain exports had depressed Peavey's profits, and the acquisition was not the early success story that Banquet was for ConAgra. By 1986, however, Peavey was posting a $16.4 million profit on sales of $1.2 billion, a promising upward trend.

Harper also kept to a commodity-oriented approach by diversifying into agricultural chemicals. ConAgra expanded into fertilizers, and in 1978 acquired United Agri Products, a distributor of herbicides and pesticides. Higher grain prices, Harper reasoned, would mean increased demand for such chemicals.

But, in an attempt to counter the cyclical profit pattern of basic agricultural commodities, Harper also entered areas that didn't mesh well with the company's traditional orientation: pet accessories, a Mexican restaurant chain, and a fabrics and crafts chain, among others.

In a dramatic change of direction during the 1980s, ConAgra decided on prepared foods as a better way to balance cyclical profits in the food industry. The company's stringent financial goals were being met: return on equity averaged 20 percent; annual growth in trend-line earnings were over 14 percent and long-term debt was held to below 35 percent of total capitalization. With the company on firmer financial ground, ConAgra began a series of acquisitions which would ultimately make it the nation's second largest food company.

ConAgra's moved into the prepared seafood market in 1981 with the purchase of Singleton Seafood, the largest shrimp processor in the country, and Sea-Alaska Products. In 1987 ConAgra bought Trident Seafoods and O'Donnell-Usen Fisheries, the producer of Taste O' Sea frozen seafood products, thus positioning the company to compete against the leading frozen seafood brands, Mrs. Paul's Kitchens, Gorton's, and Van de Kamp's.

In 1982, during a low in the poultry cycle, ConAgra moved to take first place in the chicken industry by forming Country Poultry, Inc. By the next year, Country Poultry was delivering more than a billion pounds of brand-name broilers to markets, making it the biggest poultry producer in the country. In 1986, the company formed ConAgra Turkey Company and in 1987 it acquired another poultry company, Longmont Foods, further strengthening its position in the field. But ConAgra's poultry concerns no longer focused on the basic bird Harper purchased Banquet for: Country Poultry introduced a number of higher-profit convenience poultry products, such as marinated chicken breasts, chicken hot dogs, and processed chicken for fast food restaurants.

ConAgra moved into another area of processed foods in 1983 when the company purchased Armour Food Company, a processor of red meats such as hot dogs, sausage, bacon, ham, and lunch meats. The acquisition also included Armour's line of frozen gourmet entrees, Dinner Classics, which complemented Banquet's line of frozen foods. As with many of his other acquisitions, Harper bought Armour in a down cycle for book value ($182 million). By waiting to complete the deal until Armour closed several plants, Harper painlessly eliminated about 40 percent of Armour's major union's members. Some Armour plants still have unions, but without a master contract labor costs were slashed. Harper then reorganized the company, emphasizing new marketing strategies (reintroducing the familiar Armour jingle to take advantage of consumer recognition) and refocusing product lines. The Dinner Classics line was hurt by price competition and the introduction of new brands of premium frozen dinners. Armour as a whole was still unprofitable through the early 1990s, but the Classics line has increased profits since the purchase.

In 1986, Harper increased ConAgra's presence in frozen foods by purchasing the Morton, Patio, and Chun King brands. And in 1987, the company expanded in red meats with its purchase of E.A. Miller, Inc., a western producer of beef products, and Monfort of Colorado, Inc. Almost a decade earlier, ConAgra had tried to purchase MBPXL Corp., the number-two beef packer in the country, only to be blocked at the last minute by the privately owned Cargill Inc. The Monfort deal, for $365 million in stock, made ConAgra the third-largest U.S. beef producer. Health-conscious consumers began eating less beef in the late 1980s and ConAgra responded by working to develop new, leaner beef products as it developed new poultry products. Another 1987 acquisition, 50 percent of Swift Independent Packing Company, a processor of beef, pork, and lamb, made ConAgra a leading meat processor as well. Harper rounded out his changes at ConAgra by developing the company's international trading position and by forming its own financial services subsidiary.

By the late 1980s, ConAgra had grown into a well diversified food company, better able to absorb the ups and downs of the industry. 1987 was a banner year for ConAgra's poultry division, which posted $130 million in operating profits due to a tremendous (and ultimately unsustainable) upswing in the poultry market. The poultry division's operating profits plummeted the following year to $20 million, but by then ConAgra's other divisions were strong enough to make up the difference. The company posted net earnings of $155 million, about 5 percent higher than the previous year.

In 1988 Harper boasted that ConAgra was probably the only food products company to "participate across the entire food chain." However, in the grocery store, the majority of its packaged food products were found in the frozen foods section, where it held the top market share in the country. In 1990, sensing that even greater diversification was necessary to ensure steady earnings growth, Harper led the purchase of Beatrice Co., which produced top brands such as Hunt's Tomato Paste and Butterball Turkey and had annual sales over $4 billion. The Beatrice purchase gave ConAgra a broader portfolio of products and provided a strong sales and distribution system in the "dry goods" segment. ConAgra paid $2.35 billion for the company and assumed a debt of about $1 billion in the process.

In the early 1990s ConAgra expanded at a rate of about 35 acquisitions and joint ventures a year. The company's international presence grew as it formed joint ventures in Japan, Thailand, France, Canada, Chile, and Australia. Key acquisitions included Australia Meat Holdings and the malt, wool, and 50 percent of the beef business of Elders Ltd., another Australian concern. On the home front, ConAgra made its first foray into the kosher foods business with the purchase of National Foods and also entered the private label consumer products market with the acquisition of Arrow Industries, a clothing manufacturer.

In 1991 the company enlarged its frozen foods market share further with the introduction of Healthy Choice, a low fat, low sodium, and low cholesterol line of frozen dinner entrees. Within two years, the brand had expanded to offer everything from healthy hot dogs to ice cream. By 1993 Healthy Choice posted sales of over $1 billion and was lauded as the "most successful new food brand introduction in two decades" by Advertising Age.

The company also reorganized some of its divisions in the early 1990s, creating ConAgra Grocery Products Companies to unite its Hunt-Wesson companies with its frozen food businesses and ConAgra Meat Products Companies to bring together its branded package meat business and its fresh red meat businesses. 1992 sales surpassed $20 billion for the first time, as the company posted its 12th consecutive year of record earnings.

In 1992 Harper resigned his post at ConAgra to become chairman and chief executive officer at RJR Nabisco Holdings Corp. Phil Fletcher, ConAgra's longtime president and chief operating officer, assumed Harper's post. In his first two years at the helm, Fletcher cut operating costs by enforcing stricter cost-control measures and fostering greater communication and cooperation between the company's six dozen individual units. Continuing Harper's acquisition strategy, ConAgra began expanding globally, with new ventures in China, Australia, Denmark, and Mexico. 1994 earnings reached $437 million on sales of $23.5 billion.

1994 marked ConAgra's 75th anniversary, and, as part of the company's celebration, $200,000 was donated to a museum in Grand Island, Nebraska, for the erection of a replica of the original Glade Mill, one of the four mills merged to create the company in 1919. In its 75 year history, ConAgra had transformed itself from a low-profile flour miller into an international food company with sales well over $20 billion. It gained its stature through a remarkable mix of conservative fiscal management and aggressive expansion through acquisitions and joint ventures. With its 60-plus operating units--selling everything from livestock feed to microwaveable dinners--ConAgra seemed well positioned to absorb the cyclical trends of the food industry. Building on the strengths of his predecessor, Fletcher was transforming ConAgra into a leaner, more efficient company, and given his track record, the company's future seemed in good hands.

Principal Subsidiaries: ConAgra Agri-Products Companies; ConAgra Diversified Products Companies; ConAgra Grocery Products Companies; ConAgra Meat Products Companies; ConAgra Red Meat Companies; ConAgra Poultry Company; ConAgra Trading and Processing Companies; ConAgra Broiler Co.; ConAgra Frozen Foods Co.; Beatrice Co.; Camerican International Inc.; Monfort Inc.; Country General Stores Co.; E.A. Miller Inc.; Decker Foods Co.; United Agri Products Cos.; General Spice Inc.; Agrichem Co.; Arrow Industries Inc.; Camerican International Inc.





Further Reading:


Burns, Greg, "How a New Boss Got ConAgra Cooking Again," Business Week, July 25, 1994, p. 72.
"ConAgra's Quantum Leap in Buying Beatrice Co.," Mergers & Acquisitions, September/October 1990, p. 54.
Henkoff, Ronald, "A Giant That Keeps Innovating," Fortune, December 16, 1991, p. 101.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.




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