You know ConAgra Foods as that bunch of buildings by the Old Market. As a sponsor of events around the city. Maybe even as your neighbor’s employer or the maker of Swiss Miss hot cocoa. You’ve also been hearing about it in the news, and you’re wondering what all the fuss is about. Here’s a primer:
Q: What’s this I’m hearing about ConAgra?
A: The company’s having a tough time. Yes, you see its products all over the grocery store, but that doesn’t mean the company is making tons of money. In fact, it lost more than $1 billion — at least on paper — in its most recent quarter. Peter Pan peanut butter, Healthy Choice TV dinners, Pam cooking spray and Wesson oil — they’re all ConAgra’s, but those household names aren’t enough to shield the company from some investors who are clamoring for ConAgra to rake in the profits.
Q: How did ConAgra get into this position?
A: One word: Ralcorp. ConAgra bought the St. Louis-based company in 2013 for about $6.7 billion. Ralcorp makes generic brand food — boxes of crackers and cereal, for instance — for grocery stores that label the food under their own names. That’s called the “private-label” business. After the purchase, ConAgra was the biggest private-label food manufacturer in the U.S. But it was hard for ConAgra to focus on selling its own brands at the same time as selling generic boxes of crackers. Lots of Wall Street types thought it was a mistake to think one company could do both. Turns out it was. The private-label business lost $375 million in 2014 and nearly $1.5 billion in 2015 when it comes to operating profits on the books. (For ConAgra, 2015 ended on May 31 because it uses a fiscal year calendar.)
Q: So generic food is the only problem?
A: No, some investors also say ConAgra doesn’t have big enough profit margins. Other food makers, like cereal giant General Mills, make much more money for every dollar they spend.
Q: What’s ConAgra going to do to right the ship?
A: Former Chief Executive Gary Rodkin left the company this spring. He had engineered the Ralcorp deal. New CEO Sean Connolly served for two years as the top guy at Hillshire Brands, the maker of Ball Park Franks. Food-industry bigwigs were impressed with Connolly’s time at Hillshire, crediting him with refreshing some tired brands, like Jimmy Dean sausage. In an earlier job at Campbell’s Soup, Connolly got kudos for reinvigorating sales of canned soup and V8 juice. ConAgra’s board hoped he’d bring the same mojo to Omaha. One of his first items of business: Sell Ralcorp. It’s now on the block.
Q: That’s good, right?
A: It depends on who’s asking. It could be good for investors if the company’s stock price shoots higher. And it could be good for employees if the company starts making decent money. (It’s hard to ask for a raise if your company just lost a billion dollars.) But it could also be bad for Omaha and ConAgra’s employees here. Because ConAgra is under pressure to increase profits, Connolly is doing a top-to-bottom review of every brand and every department. Some units might get the ax. Some units might be sold.
Q: So it’s bad for Omaha?
A: Possibly, but nothing’s certain. ConAgra won’t talk about its plans, but here’s what we know: With the private-label division up for sale, there are two main divisions of the company left — consumer foods and commercial foods. Consumer foods are the brands we all know, like Orville Redenbacher’s popcorn and Hunts tomato sauce. The commercial foods division sells to restaurants and the like. (McDonald’s buys some of its french fries from this unit.) Right now, part of the consumer division is based in Omaha. Part of it is based outside of Chicago, in Naperville. The commercial division mostly is based in Washington state. Let’s say ConAgra wanted to sell the commercial division. That leaves the consumer division, a bulk of which is already in Illinois. The company could decide to consolidate offices and move Omaha workers to the Chicago area.
Q: Couldn’t ConAgra just as likely move those workers to Omaha?
A: Well, yes, but here’s what has raised some peoples’ eyebrows. Crain’s Chicago Business, a magazine, reported in July that ConAgra was negotiating a lease for 200,000 square feet of space in Chicago’s hip Merchandise Mart. That’s much more space than is needed for the 400 people who now work in Naperville, based on what real estate experts say is typical office space per worker.
Q: Even if those workers left for Chicago, wouldn’t the rest of the headquarters be left in Omaha?
A: That’s the rub: If those consumer foods workers leave, what’s the need for Omaha? Many of the remaining employees would be so-called “back-office” employees — human resources, information technology and customer service. And those are perhaps the easiest jobs to outsource, something Connolly already has said he’ll do, though he hasn’t been specific about which ones. Connolly and lots of top executives he’s brought to ConAgra also live in Chicago — another point in Chicago’s favor. Perhaps Chicago could be the company’s new headquarters. Sometimes, CEOs move company headquarters to where they live.
Q: What about that big campus downtown?
A: That’s a big question. If ConAgra moves its headquarters, but leaves other divisions here, then it’s probably not a huge deal — other companies or organizations could rent out any empty space. But if ConAgra pulls up stakes entirely, then a big part of the downtown riverfront is up for grabs. (More than 20 historic buildings, dubbed Jobbers Canyon, were demolished to make way for the ConAgra campus. City planning types still fantasize about what Omaha would look like if the Old Market had extended all the way to the river.)
Q: How badly could this hurt the Omaha economy?
A: ConAgra employs about 3,000 people in the Omaha and Lincoln areas. Of those, about 800 work in a frozen-food factory in Council Bluffs. About 90 work in a Fiddle Faddle popcorn factory in Lincoln. Those jobs most likely aren’t targeted. The remaining nearly 2,000 jobs could at least be in question. Omaha’s economy is diverse and relatively strong — and Nebraska has the lowest unemployment rate in the nation. The question is how easy it would be for all those people to find good jobs quickly.
Q: Will I lose my job? Will my neighbor?
A: It’s important to note that although ConAgra’s chief executive has said everything is on the table — including Omaha jobs and its headquarters — the company hasn’t announced any decisions. It could very well decide to keep everything as is. Asked by The World-Herald on Tuesday what he would tell people in the Omaha area, Connolly said: “We’re ... clear-eyed that for us to perform better in a consistent manner, we need to embrace change. Sometimes that change is easy, sometimes that change is difficult.”
Q: Why should I care about any of this?
A: ConAgra is one of Omaha’s major employers. It’s a company headquarters, which is more than just an office outpost; it provides good-paying jobs for leaders of a company that employs 31,500 around the world. It’s a “corporate citizen” that contributes to community events and organizations. It’s been in Omaha since 1922. And it’s a big deal for city boosters who consider ConAgra to be a major feather in Omaha’s cap. It’s a company (No. 173) on the Fortune 500 — the list of the country’s biggest. Omaha right now has four others on the list: Berkshire Hathaway, Union Pacific, Mutual of Omaha and Kiewit Corp. Subtracting from that number would be a serious hit when it comes to the city’s standing in the wider corporate world.
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