As published in Toledo Business Journal - August 1, 2016
ConAgra turnaround drives $70M+ investment
Archbold plant creating 107 new jobs
Competition in the food processing industry remains intense. Many companies in this business are under increasing pressure to find ways to operate more efficiently and more effectively.
Hoovers, a Dun and Bradstreet company and market intelligence service, describes the impact of the competitive structure in the food processing industry: “The profitability of individual companies depends on efficient operations, because products are commodities subject to intense price competition. Companies compete largely based on cost and their ability to distribute the finished product.”
ConAgra Foods (ConAgra), a large food processing company with operations in northwest Ohio, is undergoing a major transformation. In 2015, the company had revenues of $15.8 billion. Net income after tax was a loss of $730 million. In 2014, the company had similar revenues of $15.8 billion; however, net income after tax was only $141 million – less than 1% of sales.
Brands
ConAgra owns brands that include Marie Callender’s, Reddi-wip, and Chef Boyardee. The company also owns Orville Redenbacher’s, Hunt’s, and Healthy Choice frozen entrees.
ConAgra also produces and markets products under additional brands that include Slim Jim, Hebrew National, Peter Pan, PAM, Banquet, Snack Pack, Egg Beaters, and La Choy.
Turnaround
In April, 2015, faced with significant issues, ConAgra’s board of directors put a new CEO in place. Sean Connolly, formerly CEO of Hillshire Brands, immediately began to make major changes. 1,500 jobs were eliminated; plans were announced to move the corporate headquarters from Omaha to Chicago; a divestiture of the company’s private-label business was announced with the planned sale to Treehouse Foods; plans were made to spin off its Lamb Weston frozen potato business; and the company announced that it would be split into two independent publicly traded companies.
In late May of this year, Barron’s reported that the company sold its Spicetec Flavors & Seasonings for about $340 million to Givaudan. It also shared analysts’ expectations: “Analysts expect ConAgra’s revenue to fall to $11.7 billion in fiscal 2016 following the sale of its private-label food business to Treehouse Foods for $2.7 billion. This compared with $15.83 billion the prior fiscal year.”
Facilities consolidation
As part of the company’s efforts to improve its operations and reduce costs, ConAgra examined major opportunities with its production facilities. One of the decisions made was to consolidate operations in order to obtain significant cost reduction and improve operating performance.
The company made the decision to close its Trenton, Missouri plant and to move production to its Archbold, Ohio facility. This past spring, ConAgra advised employees at the Trenton plant that it would be closing this facility in 2018, resulting in the loss of 395 employees.
A radio station in Trenton, Missouri, KTTN, shared information behind this decision: “The production is to move to a ConAgra plant at Archbold, Ohio. The primary driver for the decision is the operational infrastructure of the Archbold plant. It is significantly more modern, and there is sufficient capacity at the plant to take on additional work, therefore, the transition will allow ConAgra to operate more efficiently.”
The company is bringing canned chili and sausage making capability to the Archbold plant which currently makes canned foods for brands including La Choy and Healthy Choice, according to Kristine Mulford, ConAgra corporate communications.
There will not be any physical expansion of the plant as there is sufficient capacity to take on the additional work.
“It’s a saved project where we will actually be moving some new lines into that facility,” she said. “One will start mid-year, 2017, the next will come in early 2018, and we will be adding approximately 120 new manufacturing jobs.”
“We have definitely been looking at that facility,” said Mulford. “They have had high performance there for years. We just know that they certainly can provide the same type of energy and commitment to these new lines we are bringing in once we start moving those over next year.”
Incentives
In late March, the Ohio Tax Credit Authority approved a 1.21%, six-year tax credit to ConAgra Foods Packaged Foods, LLC. This is for the creation of $5,421,600 in new annual payroll as a result of the company’s expansion project in the Village of Archbold which is located in Fulton County. As part of the tax credit agreement, the Authority requires the company to maintain operations at the project location for at least nine years.
According to the Ohio Tax Credit Authority, “The proposed project in the City of Archbold involves increasing food production capacity. The company’s fixed asset investment would be towards expanding and renovating an existing building, on-site infrastructure improvements, and new machinery / equipment.”
Industry sources indicate that the company will invest over $70 million in this project. This will take place over several years as new equipment is delivered and installed and capacity is expanded to support the business.
The company expects to create 107 full-time equivalent employees.
In a statement issued by the Fulton County Economic Development Corporation (FCEDC) and reported in the Fulton County Expositor: “ConAgra Foods is one of the largest employers in the County and an important industry in the Village of Archbold. The FCEDC is pleased that the company chose the Archbold plant for this expansion project, which will add more than 100 jobs in the plant. This expansion is possible because the Archbold facility hosts a productive workforce that is recognized in the company for their hard work and quality. We congratulate all involved in this project and the employees at the ConAgra plant in Archbold.”
“It is my opinion that the role of economic development organizations is to work with the community to share the importance of creating an environment that is favorable to growth,” said Matt Gilroy, FCEDC economic director. “When businesses decide to locate in a certain geography numerous factors are involved in their decision-making process. Our goal at the FCEDC is to understand these factors that weigh into the process and strive to make our environment the best fit for the businesses that we believe are the best fit for our communities.”
“This was an extremely competitive process which turned into a great win for northwest Ohio as the Archbold facility will be attracting additional production from other plant locations,” said Gary Thompson, executive vice president of the Regional Growth Partnership (RGP). “Strong collaboration between ConAgra, the RGP, JobsOhio, and Fulton County Economic Development was necessary to help move this project forward.”
