ConAgra forms Wellness Group to augment nutritional portfolio

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Recent failures in functional foods haven't scared off ConAgra, the company that built the Healthy Choice franchise.

Signaling a new platform for growth, ConAgra Grocery Products Co. has formed a new Wellness Group, based in Fullerton, Calif. The new unit, described by a spokeswoman as "in the embryonic stage," will be charged with developing new brands, acquiring brands and extending existing brands centered on shelf-stable products with a nutritional bent.

Nelson-Henry, Minneapolis, was named to handle advertising for products emerging from the unit.

Within the group, marketing of such existing brands and extensions with vitamin and mineral fortifications are identified as the "close-in" options; but development of wholly new brands also will be key, said an executive familiar with Con-Agra's plans.

HEALTH CONCERNS GROW

The first marketing efforts stemming from the now seven-person division -- offering mainstream food options to meet aging baby boomers' growing health concerns -- will likely come in the second or third quarter of 2000.

While no ad budgets have been disclosed, the executive close to the company said the group "is a priority area [for the company] and has gained a lot of attention from top management and they will spend to support it."

It's unclear whether existing ConAgra brands with a health skew, which include its multicategory Healthy Choice brand and low-fat vegetarian and natural foods line Advantage/10, will be bundled under the Wellness Group. Currently, Advantage/10, endorsed by cardiologist Dean Ornish, is housed under the Golden Valley Foods unit.

ConAgra's Hunt's shelf-stable tomato products also are a likely candidate for a wellness positioning due to the role that lycopene, found in tomatoes, plays in lowering the risk of cancer and heart disease. Other possibilities include Egg Beaters and margarine brands acquired from Nabisco.

RIVALS RETRENCH

ConAgra's renewed push into functional foods comes as rivals retrench. Campbell Soup Co.'s doom-ed dalliance with Intelligent Quisine ended in mid-1998, and Kellogg Co. last month pulled its struggling Ensemble line.

"As a general concept, I think very highly of [ConAgra developing a functional foods unit]," said Credit Suisse-First Boston analyst Dave Nelson. "When you look at the demographic profile of the U.S., boomers are getting older and they don't want to slow down. So while at one end of the spectrum companies are seeing success with indulgent products, they're also seeing success with more healthful products."

SETBACKS MASK POTENTIAL

Mr. Nelson said setbacks in the functional foods arena -- including, most recently, McNeil Consumer Products' yanking consumer advertising for Benecol amid slow sales -- aren't a true measure of the potential of health-related foods. Rather, he said, "they reflect the poorly conceived nature of those specific products."

The formation of the new division originally centered on the introduction of the company's digestive-health dietary supplement Culturelle. But in an about-face, that brand recently was placed back at ConAgra's corporate headquarters.

The shift is just one example of the recent turmoil at ConAgra, which last spring announced a plan called Operation Overdrive to gain synergies in buying, manufacturing, selling and distributing.

The new approach has allowed the big marketer to diminish its nearly 90 operating companies to 10, most recently by integrating its five U.S. beef units into ConAgra Beef Co.

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