CONAGRA FOODS

Several hundred ConAgra Foods employees will lose their jobs in March when the Omaha food manufacturer outsources a portion of its sales force to a Florida-based firm.

The sales employees, most of whom work outside of Omaha, learned of the layoffs last week, according to people familiar with the matter who spoke to The World-Herald on the condition they not be identified. The layoffs are part of the ConAgra job cuts announced in October.

ConAgra President of Sales Derek De La Mater discussed the changes in a video message sent to sales employees Friday. The World-Herald gained access to the audio portion of the video.

"While major changes like this is never easy, the leadership team and I felt it was imperative that we make aggressive changes to our approach, to support the company's efforts to reduce SG&A (selling, general and administrative) spending, improve business results and deliver sustainable, profitable growth," De La Mater said on the video.

ConAgra confirmed the coming layoffs but wouldn't say the exact number of positions that will be eliminated. A spokesman said he thought 30 to 40 salespeople that would lose their jobs are based in the Omaha area.

The employees who will lose their sales jobs work across the U.S. in ConAgra offices and from their homes. They can earn more than $100,000 a year in salary plus benefits, including a performance-based bonus and the use of a company car and phone, according to employees.

ConAgra said affected employees could have the opportunity to work for the outsourcing firm, the ConAgra spokesman confirmed.

ConAgra employees who talked to The World-Herald said pay and benefits might not be the same as they earned at the Fortune 500 firm.

The sales outsourcing is part of a larger restructuring of ConAgra's sales and customer development departments into a new internal organization called Customer Leadership, De La Mater said in the video.

He said the goal is that ConAgra become "a true strategic partner" to supermarkets and other food sellers, working together on strategies to increase sales for the benefit of both manufacturer and retailer.

Two sales employees who said they are losing their jobs spoke about the changes with The World-Herald on condition of anonymity, saying they did not want to harm their careers or risk their severance packages.

They said ConAgra sales employees will continue to call directly on the headquarters of more than two dozen major national food retailers, including Walmart, Kroger and Costco.

Smaller, regional supermarket chains and wholesalers, such as Hy-Vee and No Frills operator Spartan Nash, will now be served by Florida-based Acosta, an outside sales broker that specializes in grocery, convenience and drug stores. ConAgra already had used Acosta for some sales functions.

In the packaged food business, ConAgra and other manufacturers compete for limited grocery shelf space. ConAgra isn't automatically granted freezer space for pot pies at Walmart, for example.

Sales representatives, whether in-house or through an outside broker, work with retailers to create annual plans for which brands and products will find warehouse and shelf space. They also buy promotional space — like the "caps" at the ends of aisles — pitch new products and plan for coupons and deals at certain times of the year.

Then, lower-level salespeople make routine calls on retail stores for tasks like introducing new items and ensuring shelves are stocked correctly.

In ConAgra's new model, Acosta will handle all those roles for all but the company's top customers, the employees said.

That's increasingly common in the food industry, said Paul Weitzel, managing partner at grocery industry consultant Willard Bishop.

"The food industry right now is like a lot of industries — it's going through a tough time and there's not a lot of growth," he said.

ConAgra's competitors have been moving toward more dependence on brokers for several years, including Campbell Soup. In 2011, Barclays Capital analyst Andrew Lazar said in a report that it was likely more would follow.

Companies don't employ a broker only to save money, said Rick Abraham, president of the Foodservice Sales & Marketing Association, some of whose members are big food brokers that serve retail customers. He said one broker might represent several manufacturers and can have a more frequent presence with a retailer.

The ConAgra employees said benefits to keeping the positions in-house include the consistency of a retailer working with the same sales manager for many years, and the sales manager's direct connection to ConAgra and its brands.

Weitzel said many manufacturers, which today are under intense investor pressure to cut costs, are weighing the advantages and disadvantages of the models and, like ConAgra, are taking a "hybrid" approach, with some accounts served by a broker and some kept in-house. They also are being more choosy about where they invest their sales budgets, and they are investing more heavily with those customers that are larger accounts or seeing faster growth.

The ConAgra employees said they had not been told how many people will lose their jobs but estimated it in the hundreds based on the number of accounts that will be outsourced. They said their jobs will be eliminated as of March 25.

In the video, De La Mater told ConAgra workers they could apply for jobs with Acosta.

"Acosta will hire a dedicated sales force to handle our portfolio," De La Mater said. "Although we are not directly involved with their employment choices, impacted ConAgra employees are eligible to apply for those positions and be considered for those roles."

The employees told The World-Herald that for them, the layoffs cap a tumultuous four months, ever since a companywide sales meeting in Las Vegas was soured by the Oct. 1 announcement of mass layoffs and the headquarters move.

Both of the employees who spoke with The World-Herald said they attended the meeting, which they said took place at the Wynn Las Vegas resort. They said ConAgra paid for travel, food and lodging costs for three nights at the Wynn for hundreds of employees.

It was the first time in at least a decade ConAgra had planned a national sales meeting, and it was planned before new Chief Executive Sean Connolly joined the company in April. Employees anticipated Connolly would attend.

"When everyone got there we soon realized that he was not coming," one employee said. "We then found out the reason he did not come was he had flown to Omaha."

Amid a schedule of speakers and breakout sessions, employees watched via a video feed as Connolly, in Omaha, announced the mass layoffs.

"The timing couldn't have been worse," another employee said.

What was supposed to be a motivational event had the opposite effect for some.

"We walked out of there like, what the heck?" the employee said. "It was a total waste of money. They should have called the whole thing off."

Since the sales meeting, the employees had waited to find out how layoffs would hit sales teams, even as they heard about layoffs in other areas of the company.

ConAgra defended holding the meeting, saying it had been planned well in advance and that there was much to gain from getting employees together to discuss sales strategy and meet leaders in the sales division.

"You've still got to run your business while you're making these changes," ConAgra spokesman Chris Kircher said.

Contact the writer: 402-444-1336, barbara.soderlin@owh.com

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