Next Step for ConAgra: Streamlining Its Supply Chain
CEO Sean Connolly says packaged-food maker will look for ways to increase efficiency effort
ConAgra CEO Sean Connolly said David Biegger, the company’s chief supply chain officer, will lead an effort to increase efficiency in the manufacturing, transportation and other functions for its retail brands. Above, a ConAgra plant in Council Bluffs, Iowa. PHOTO: MATT MILLER FOR THE WALL STREET JOURNAL
In his first six months as chief executive of ConAgra Foods Inc., Sean Connolly has moved to jettison its unprofitable private-label business and drastically revamp its headquarters operation. Now he’s turning his sights on the supply chain.
In an interview Friday, Mr. Connolly said David Biegger, a formerCampbell Soup Co. executive who will join ConAgra on Monday, will lead a “deep dive” to search for ways to increase efficiency in the manufacturing, procurement, transportation, warehousing and other functions for its retail brands.
“We need to be relentless from a productivity standpoint,” Mr. Connolly said. “We are looking at any and all ways to make [supply-chain] expenses more efficient.”
Sean Connolly PHOTO: DANIEL ACKER/BLOOMBERG NEWS
EARLIER COVERAGE
Many packaged-food companies have announced plant closures and manufacturing-worker layoffs to cut costs—a step ConAgra also has taken in years past. Asked about that, Mr. Connolly said: “We have closed plants in the past. We always look for ways to find efficiencies in the manufacturing network, and sometimes that means consolidations.” But he added that “we have no imminent plans to do anything like that.”
ConAgra on Thursday said it would cut about 1,500 office jobs and move its headquarters to Chicago as part of its efforts to improve profitability.
Mr. Connolly said ConAgra already was attentive to supply-chain efficiency, but that Mr. Biegger’s appointment to the newly created position of chief supply chain officer, in which he’ll report directly to the CEO, will enhance that effort.
Mr. Biegger held several positions at Campbell managing its supply chain over the past decade. While he was there, Campbell closed five plants as part of a broader cost-saving plan. Before Campbell, Mr. Biegger spent 25 years at Procter & Gamble Co.
At ConAgra, Mr. Biegger will focus on the unit that produces branded foods sold in grocery stores, including Slim Jim meat snacks, Peter Pan peanut butter and Healthy Choice frozen dinners. That division has about 30 manufacturing facilities.
Mr. Connolly said ConAgra is looking at many ways to reduce costs, including eliminating excess ingredients that go to waste and cutting back on the variations of supplies it buys so it can get better bulk pricing.
Mr. Connolly said ConAgra will continue to cut lower-margin or low-selling items while boosting sales of brands with the most potential, such as Hunt’s tomato sauce PHOTO:DANIEL ACKER/BLOOMBERG NEWS
Mr. Connolly, who took over in April, also announced plans in June to shed ConAgra’s unit that makes food for supermarket brands.
In its fiscal 2015, which ended in May, the consumer-foods unit posted 20% growth in operating income despite flat sales. ConAgra’s overall operating profit margin excluding the private label business was 14%, which was above some rivals but below others, including Campbell, where it was 16%.
ConAgra’s shareholders have cheered Mr. Connolly’s restructuring plans. Its stock has risen about 15% since the announcement of his appointment in February.
“One of our top priorities as a company is margin expansion, but there are a number of ways we get at that,” Mr. Connolly said. “We’re not just a one-trick pony.”
Mr. Connolly said ConAgra will continue to cut lower-margin or low-selling items, which helps lower manufacturing costs, while boosting sales of brands with the most potential, like Hunt’s tomato sauce.
