ConAgra Cutting 1,500 Jobs, Moving Headquarters to Chicago

Major Changes at Food Maker Come Under New CEO, Activist Investment

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ConAgra Foods Inc., coping with a slowing packaged-food industry and a failed acquisition of Ralcorp Holdings Inc., will cut about 1,500 jobs and move its headquarters to Chicago as part of a plan to boost efficiency.

The eliminated jobs represent about 30% of the company's office workforce globally, according to ConAgra, which is currently based in Omaha. The maker of Chef Boyardee, Orville Redenbacher's and Slim Jim expects to save at least $300 million from better efficiency, lower headcount and cutbacks in overhead expenses.

The company will spend about $345 million, mostly in cash, to implement the changes over the next two to three years. And the move to Chicago, coming in the summer of 2016, will make it easier to attract talent, said CEO Sean Connolly.

"We are making difficult, but necessary, decisions to enhance productivity," Mr. Connolly said in a statement.

Like other packaged-food giants, ConAgra has struggled to maintain growth in the face of changing consumer tastes. The company has the added weight of dealing with its troubled acquisition of Ralcorp, a maker of private-label foods for supermarkets. ConAgra struggled to merge those operations with its branded food business and announced plans in June to sell the division. Last month, it wrote down the value of the private-label business by almost $2 billion.

The company also came under pressure from activist investor Jana Partners earlier this year. The hedge fund acquired a 7.2% stake in ConAgra and threatened to nominate board members in a proxy fight. The two sides settled in July, with ConAgra agreeing to add two directors to its board.

The stock got a boost after Jana got involved with the company, helping send it up by 12% this year through the end of September.

"With marketing spending down $120 million or so over the past two years, we believe the company will look to reinvest roughly half of its savings to build its advertising budget back up," Stifel analyst Christopher Growe said in a research note.

Last week, ConAgra said it planned to increase marketing support behind improving brands while pushing on the brakes when it comes to trade spending, a promotional tool ConAgra had been "heavily reliant" on in the past, Mr. Connolly said.

On Thursday, the company said it expects to cut about $100 million in costs by improving its trade spending. It expects the other $200 million in savings to come from the job cuts, trimming layers of management, outsourcing technology and back-office functions and "aggressively embracing" zero-based budgeting -- a budgeting method already touted by a number of food marketers.

The company will move about 700 employees to new offices in Chicago's Merchandise Mart, including senior leadership, and said about 1,200 employees in areas such as administrative functions, research and development and supply chain management will work in Omaha.

~ Bloomberg News with contributions from Ad Age

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