"One of our [retail] customers confronted us, saying, `When I want something from [Company X], this is who I call' and he threw a single business card on the desk. [Then the retail customer said] `When I want something from ConAgra, this is who I have to call' -- and [he] proceeded to throw out 15 different cards."'
Added Mr. McMahon: "That's when we knew we had a problem."
Other major food marketers, including Kraft Foods and General Mills, have long grasped the concept of leveraging scale at retail to gain a greater in-store presence for their diverse brand portfolios. But ConAgra had not wielded its power as a large-scale package-goods company, instead letting brands fend for themselves. The reason?
"We were an agribusiness giant, very big in producing base commodities, and we had become a [package] food company and didn't know it," Mr. McMahon said.
In an effort to adapt to its newfound status, ConAgra a little more than a year ago underwent a major restructuring. Dubbed "Operation Overdrive," the program's mantra is to "make it better, buy it better, sell it better." The program was designed to address problems the food goliath faced with its tangle of 10 operating units, roughly 68 retail brands, 45 foodservice brands and a slew of food ingredients and agricultural products.
" `Operation Overdrive' has been a fundamental effort to take stock of what we have here, because in order to be a really good marketer, you have to be the best producer of your products, the best sourcer of your products and the list goes on and on," Mr. McMahon said. "We needed to get our act together to become more efficient in terms of buying it, making it and selling it."
The makeover has included everything from a financial restructuring to a revamping of sourcing strategies and production lines to a sell-off of non-essential units such as a barge company and a wool company. Those changes have cleared the way, Mr. McMahon said, for a focused mission heretofore inconceivable: to become America's favorite food company.
The process by which ConAgra plans to achieve that mission includes, according to Mr. McMahon, the ability to "create, recreate and sharpen the promise of each of our brands and to get that [promise] across in a meaningful way to consumers."
That clarity begins with the company's name. At its annual shareholder meeting Sept. 28, ConAgra President Bruce Rohde announced that the company's moniker will shift from ConAgra to ConAgra Foods to "make clear that we're focused on the food business." He then proceeded to unveil 19 new product innovations as further proof of ConAgra's food focus.
INCREASE MARKETING SPENDING
Then, on Oct. 11, during ConAgra's first meeting with analysts in more than two years, company executives spoke at length -- although not in detail -- about their plans to increase marketing spending. The goal: To finally reflect the fact that 80% of the company's earnings come from retail and foodservice business vs. commodity products.
"Part of the increase [in marketing spending] is to make up for the fact that ConAgra hasn't been spending a lot in the past, mostly because they haven't had a lot of new news to talk about," said Dave Nelson, analyst at Credit Suisse First Boston.
RELATIONS WITH GROCERS
According to Mr. Nelson, ConAgra's marketing efforts have been a mixed bag. While it's done a good job marketing the Marie Callender's line of frozen entrees and its new Healthy Choice Bowl Creations, "they've let [the] Healthy Choice [brand] wither on the vine," he said.
Grocery products, too, have long been all but ignored. ConAgra barely leveraged its center-of-the-store portfolio despite a powerful roster of brands including Orville Redenbacher popcorn, Hunt's tomato products and Peter Pan peanut butter. That roster was strengthened by the June acquisition of International Home Foods and its leading brands such as Chef Boyardee and Bumble Bee tuna.
Mr. McMahon ceded ConAgra's marketing spending is "still working from a very small base." However, last year's budget, which included $75 million in measured media according to Competitive Media Reporting, represented a 35% increase from 1998. But 2001's additional expenditures -- spread among agencies including Grey Worldwide, New York, Euro RSCG Tatham, Chicago, and Nelson Henry, Wayzata, Minn. -- will be "somewhat north of that," he said.
ConAgra's first marketing priority has been the relaunch effort for the ailing Healthy Choice. That effort was set in motion in September with the introduction of roughly 71 new or reformulated Healthy Choice products for the $1 billion better-for-you line, and a pledge to spend $40 million toward marketing the more than 300 products that bear the moniker throughout the store (AA, Sept. 25). The effort from Grey touts the brand as "Feel good food."
The second priority, Mr. McMahon said, is a recently kicked-off umbrella campaign for the $500 million-plus Hunt's brand. "It's been 15 years since we've been on the air for Hunt's, but it's high time given that we are the tomato experts and there are 24.9 million eating occasions for tomatoes in a given year," Mr. McMahon said. That push, from Euro RSCG Tatham, will include mention of a new line of tomato-based meal-starters from Hunt's called Family Favorites, pre-seasoned cans of tomatoes for easy preparation of popular meals such as lasagna, pasta, tacos and chili.
According to Mr. Nelson, the new Hunt's line is a me-too product playing off of what competitor Del Monte has been doing for years. The same is true, he said for the planned introduction of Bumble Bee tuna in a pouch, which follows closely on the heels of H.J. Heinz Co.'s effort with StarKist.
RETHINKING EXISTING BRANDS
But these introductions are more than just playing catch-up, Mr. McMahon said. They are ConAgra's answer to meeting consumer's needs for simple, easy meals, a way of rethinking existing brands and making them relevant without "meteoric changes," he said.
Another example of the strategy is a new line of Home Style Bakes from Banquet. The product extends the value frozen-entree brand into a new line of shelf stable easy casserole kits that include all the necessary ingredients for meals. Varieties include Creamy Chicken & Biscuits and Chili with Corn Bread. Advertising, from Nelson Henry, touts the ease of the product, which requires only 5 minutes preparation and 25 minutes in the oven, by showing a mom with the time to play hide-and-seek with her kids.
ConAgra has also begun to tout its No. 1 position in popcorn with the Orville Redenbacher brand via a return to TV after a two-year hiatus. The ads, from Euro RSCG Tatham, beseech consumers to treat themselves to popcorn, using animated scenes and the tagline, "Get Orvillized."
But ConAgra also wants to emphasize the company behind the brands. It recently launched a corporate umbrella campaign that will use print ads created in-house to tie the new ConAgra Foods name to individual brands such as Reddi-Wip. The tagline: "Hungry? You've come to the right place. ConAgra Foods."
That effort will be bolstered by the continuing invigoration of its ad budget to "deliver on the promise" for a variety of other brands, including recent acquisitions Slim Jim and Chef Boyardee and longtime existing brands Butterball and Armour meats.
It is in meats where ConAgra faces possibly its biggest challenge, said Credit Suisse First Boston's Mr. Nelson. "ConAgra has promised to take commodity volume tonnage and add value to it, but they've been ineffective to date in achieving that," he said.
At its shareholder meeting, though, ConAgra unveiled a number of new products in beef and pork to do just that. Following the successful lead of Hormel Foods' own Always Tender Pork, Con
-Agra is introducing a line of Armour Guaranteed Tender Pork and Beef items. In addition, Armour will be extended with a Premium Beef Sirloin Roast that comes pre-marinated and ready to cook and with a new tub barbecue product that will carry Clorox Co.'s KC Masterpiece brand name.
Campbell Mithun, Minneapolis, is Armour's agency.
The ability to build brands now, through both new product innovation and marketing, is likely a result of a new level of communication at the company between formerly separate operating units and brand teams, Mr. McMahon said.
"What has happened in the last couple of years that never happened before is that people are talking to each other whereas they previously worked in silos, off by themselves," Mr. McMahon said.
A new Breakfast Club group, for example, has been formed to determine what opportunities for the breakfast occasion might arise from ConAgra's various bacon and sausage brands. While the group operates out of the company's Refrigerated Foods unit, it also reaches out to other parts of the company for input. In addition, major cross-category brands such as Healthy Choice, Armour and Butterball now have "brand champions" to spearhead their efforts across multiple operating units.
PRESENTING ONE FACE
The aim is to help ConAgra transform what has been a problem situation at retail into an asset in the new era of "bigger retailers with centralized buying that want one face per company," Mr. Nelson said.
Mr. McMahon admitted that, for a company as sprawling as ConAgra, having one person looking out for a retailer's specific needs is likely impossible. But he said, "Retailers have strategies in their business and they have to have business partners that understand those strategies. We had to reorganize so we could answer their needs and solve their problems." By virtue of talking to each other and organizing around customers, Mr. McMahon said, ConAgra is "on our way" to doing just that. "It's a fun mission we're on."