ConAgra bets on store brands with Ralcorp deal

| November 27, 2012
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NEW YORK (AP) — ConAgra Foods is set to become the country’s biggest maker of private-label foods.  That’s with its $5 billion purchase of Ralcorp expanding its stake in the fast-growing market for cereals, crackers and other packaged foods sold under store brands.

The deal caps a year of acquisitions for ConAgra, which makes Banquet, Chef Boyardee and Marie Callender’s. The company, based in Omaha, Neb., also snapped up brands including National Pretzel, Bertolli frozen meals and Del Monte Canada in the past year.

The Ralcorp purchase comes at a time when private label brands — also known as store brands or house brands — are gaining popularity with price-conscious shoppers. Supermarkets and drug stores have also been working to improve the image of their store brands as a way to control the rising costs for name brands.

In a conference call with analysts, ConAgra CEO Gary Rodkin noted that private label products are growing at twice the rate of name brands and now account for 18 percent of the overall packaged food market. Rodkin says retailers want to cultivate customer loyalty by offering innovative or unique store brand products. He cites CostCo and Trader Joe’s as companies that are significantly growing their store brands.

The deal, which was unanimously approved by both companies’ boards, is expected to close by March 31. It still needs Ralcorp shareholder approval.

ConAgra said that the buyout should have a modest benefit on its fiscal 2013 financial results. The company still anticipates fiscal 2013 earnings in a range of $2.03 to $2.06 per share, excluding any benefit from the Ralcorp deal.

Category: Farm, Farm News