Open AccessConAgra foods 2015 and the limits of debt: rewriting a recipe that just didn’t work
Author(s) -
Susan V. White,
Carlos Omar TrejoPech,
Magdy Noguera
Publication year - 2019
Publication title -
the international food and agribusiness management review
Language(s) - English
Resource type - Journals
eISSN - 1559-2448
pISSN - 1096-7508
DOI - 10.22434/ifamr2018.0087
Subject(s) - bankruptcy , leveraged buyout , recipe , debt , business , earnings , marketing , profitability index , divestment , private label , listing (finance) , value (mathematics) , brand management , economics , advertising , finance , private equity , chemistry , food science , machine learning , computer science
ConAgra Foods purchased Ralcorp, a generic brands packaged foods manufacturer, in January 2013. This purchase made ConAgra the largest private-brand packaged foods company in North America. The purchase was part of the firm’s acquisition strategy, its ‘recipe for growth’ launched in 2012. Instead of moving ConAgra forward, the purchase almost brought ConAgra into bankruptcy. ConAgra had difficulties integrating Ralcorp and the trend for private label (vs. brand name) products declined shortly after Ralcorp’s acquisition. This turn of events was made far worse because ConAgra had borrowed a large amount of debt to make the acquisition. Now, almost three years later in fall 2015 ConAgra had a new CEO, had faced reduced profitability and lower earnings per share and financial distress, and was under the pressure of an influential activist hedge fund advocating for the sale of the private brands segment. This case provides data to assess ConAgra’s situation financially and strategically, and to value the potential divestiture of the private brand business segment.