Since Gary Rodkin took over as CEO a little more than a year ago, he's been forthright about the challenge ConAgra faces in turning itself from a hodgepodge of second-tier brands into a leading package-goods player. His candor, confidence -- and plan to add $75 million in marketing for fewer "high-priority" brands -- has driven up the company's esteem on Wall Street, not to mention its stock price.
But early returns are mixed, and even analysts bullish on the stock see loopholes in the plan.
Lehman Bros. analyst Andrew Lazar said that in ConAgra's first quarter (the first since the program was implemented), its high-focus brands grew 4% and nonpriority brands dropped 6%. However, Mr. Rodkin told analysts that although volume for low-priority brands fell, profits for that group were actually up because of operating-cost improvements.
Credit Suisse analyst Dave Nelson praised the renewed profitability but said, "It's an efficiency story right now. Within the next year or two, [Mr. Rodkin will] have to transition it to a growth story to be successful."
Growth may require more marketing investment than the sizeable layout Mr. Rodkin has earmarked, Mr. Lazar said. And the company may have designated too many brands as "priority" -- 16 brands that make up more than of 70% of retail sales.
So far, ConAgra has been cheered by results from an effort for Hebrew National this summer, a campaign from OneSeven, New York. According to ConAgra spokeswoman Regina DeMars, the effort drove sales up 8% on a national basis and 36% in the Detroit market where it pushed hard with a campaign at Comerica Park.
But the $6.7 million ConAgra spent on Hebrew National for the first nine months of the year, according to TNS Media Intelligence data, is only a pittance compared with the $425 million in marketing Mr. Rodkin has committed over the next three quarters for its priority brands. Where exactly it will go is yet to be determined, and some are skeptical ConAgra will put its money where its mouth is.
"I'm not sure they've realigned their internal marketing organization to meet their external ambitions," said one executive close to ConAgra.
And in some instances, spending more hasn't helped. Sales of Healthy Choice in the refrigerated-deli segment fell 14.5% to $99 million for the 52 weeks ended Nov. 5 in food, drug and mass outlets excluding Wal-Mart, according to Information Resources Inc. -- though that time period includes only three months of renewed spending on the brand with a new campaign from Nitro.