Healthy Choice needs help, stat

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Despite a bleak prognosis, ConAgra is optimistic it can mend its ailing Healthy Choice brand with a dose of marketing and innovation. And there's a new "doctor" in the house to do just that.

R. Dean Hollis, president-chief operating officer of ConAgra Frozen Foods, was named in May by CEO Bruce Rohde as the first "brand champion" to oversee the portfolio of better-for-you products across six operating companies. His vision, despite double-digit sales declines for Healthy Choice in most of the categories where it competes, is to double the $1 billion brand through product improvements, extensions to new platforms and increased advertising spending.

"My role is to communicate the vision of where the brand is going, to develop best practices across the operating companies and to devote the resources necessary to meet the brand growth goal as well as to engender a passion behind the brand," Mr. Hollis said.


His attention is much needed. While ConAgra was a pioneer of convenient healthy foods back in 1988 when it introduced its initial line of 10 frozen dinners, the portfolio of more than 300 products from deli meats and cheeses to popcorn and pasta has suffered from a severe lack of innovation over the ensuing decade.

"Healthy Choice, like [Nabisco's] Snackwells, had good results initially, but they failed to follow up with innovation and better-tasting products that would keep consumers' interest," said Lehman Bros. analyst Andrew Lazar.

Even Mr. Hollis agreed that while consumers never wanted to compromise taste, the importance of taste has increased significantly to the point where they are "not willing at all to compromise taste or nutrition," he said.

But, he acknowledged, it is a challenge for ConAgra's product development and culinary department to develop great-tasting products while at the same time adhering to the high health standards of the brand, which include being low in fat, sodium, cholesterol and calories.

ConAgra first began to reformulate the Healthy Choice brands back in early 1998 to combat declines for its Beatrice Cheese unit's fat-free cheeses. Recognizing consumers' growing disinclination to trade taste for a few less grams of fat, ConAgra improved the line with the addition of several fat grams per serving and remedied problems including lack of taste and the cheese's inability to melt. The relaunch was supported with a $15 million campaign from what is now Campbell Mithun, Minneapolis.


But despite the efforts, Healthy Choice cheeses are still faltering. In the natural shredded cheese segment where ConAgra has the largest presence, sales dropped 18.8% to $30 million in supermarkets for the 52 weeks ended Aug. 13, according to Information Resources Inc., and other segments indicated an even poorer showing.

Now, despite the lackluster results in the cheese arena, ConAgra is setting its sites on rebuilding its other biggest segments with similar product reformulations. For ice cream, where the Healthy Choice Premium Low Fat brand dipped 11.5% to $87 million, ConAgra touts a new texture "so rich and creamy, you won't believe it's low fat."

New varieties nod to the popular high-fat ice cream brands such as Haagen-Daz and Ben & Jerry's with flavors such as dulce de leche and tin roof sundae, and with good reason, according to Matthew Patsky, managing director for investment bank Adams, Harkness & Hill.

Mr. Patsky, who focuses his efforts on healthier food and beverage companies and nutrition, cited statistics showing the decline in consumption of red meat, tobacco and spirits for the period from 1980 to 1996 as well as the surge in consumption of healthier foods such as poultry, fish, whole grains and fruit. But, he said, "Although we're seeing now an almost 25-year trend in food and beverage toward people recognizing the link between their behavior and their health and being more careful, we've also seen a move toward higher-quality indulgences. They may be eating less chocolate, but they're eating better quality chocolate when they do. If they eat ice cream, they want it to be the very best."


ConAgra also has reformulated its biggest line of products, frozen dinners and entrees, to try to stem a 10% decline in the $338 million business. The newly improved line features 37 new products with improved taste, contemporary ingredients and bold ethnic flavors. A new three-tier system, which separates the line into one-dish meals called Solos, combination meat-and-side-dishes called Duos and restaurant-inspired meals called Medleys, is intended to help consumers more easily differentiate the offerings.

ConAgra also improved the taste of its soup business, down 10.3% to $91 million, and its cold cuts franchise, which, though sales dropped 19.7% to $76 million for the base brand, has already seen positive results from the introduction of a more premium Savory Selections line.

Now that ConAgra has begun to make product improvements, the next step is to "aggressively tell consumers" about those changes, Mr. Hollis said. ConAgra plans to return to the high-spending days of 1996 -- when the company put $42 million behind the Healthy Choice brand -- by doubling last year's $20 million in media spending.


The bulk of the spending will go toward an extensive new TV campaign for Healthy Choice that kicked off earlier this month. The effort from Grey Worldwide, New York, themed "Feel good food," is an attempt to "re-emphasize the primary vision" of the brand, Mr. Hollis said. That concept was developed originally by former Con Agra CEO Charles "Mike" Harper after he suffered a heart attack in 1985, just before his 58th birthday.

"The tagline in the original commercials, `Great food that's good for you,' was meant to convey the idea that as opposed to being just diet and healthful, Healthy Choice was also something that tastes great," he said. The new campaign aims to do the same. Creative features an assortment of wholesome Americans talking about how great they feel after eating Healthy Choice foods in order to show that "when you eat [Healthy Choice] you get the feeling that you're doing something right for yourself," Mr. Hollis said.

In January, ConAgra will extend the theme with a frequent-flier-miles giveaway promotion dubbed "Feel good to go" (see story at left).

Despite its increased efforts, ConAgra still is a long way from Mr. Hollis' goal of making Healthy Choice a $2 billion brand. The shining star of the Healthy Choice portfolio is the Bowl Creations frozen line -- launched in August 1998 -- which grew 26.1% to $82 million. And Mr. Hollis promises that the next phase of the revitalization plan is moving similarly into what he calls "truly innovative platforms."


But while consumer trends point to the interest in healthier eating, Adams, Harness & Hill's Mr. Patsky said consumers truly interested in having a healthier meal are probably going to avoid brands such as Healthy Choice because of its undesirable additives.

"There's been a shift away from the paranoia about fat and toward natural and organic foods so, while for someone who wants to start eating healthier, Healthy Choice might be a starting point, it's certainly not an end point and that's their problem," Mr. Patsky said.

In addition, he added, while improving the taste of the products might make consumers give the brand another try, "the rule of thumb is that once you turn off the consumer, they're gone."

Mr. Hollis won't give up that easily, however. In his previous positions, first as president of ConAgra's Gilardi Foods Co., and then as president in charge of ConAgra's frozen prepared foods business in alternate channels, Mr. Hollis was able to meet his goal of doubling the business each time.

"The key to success is focusing on what the consumer wants and, understanding that need, focusing on differentiation and relevance," Mr. Hollis said. "If we do that, we'll accomplish what we set out to do."

Lehman Bros.' Mr. Lazar is optimistic also. "There's a tremendous amount of latent growth potential in Healthy Choice, in part because the brand absolutely stands for `better for you' in consumers' minds."

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