ConAgra spins off "second tier" brands
Last month, food processor ConAgra announced that it would spin off its seafood and cheese lines. This happened as the company announced that it would cut its dividend, we learn in an appropriately titled Wall Street Journal article ("ConAgra Cuts Dividend, Plans To Shed Seafood, Cheese Lines", 3/17/06).
The CEO of the company, according to the article:
said he wants to pare ConAgra's sprawling portfolio of second-tier brands and spend more money marketing the company's most-promising lines, including Healthy Choice meals, Chef Boyardee canned pasta and Pam cooking spray. "You can't afford to waste resources….The way to do that is have a more-focused portfolio."
As we've said before, companies are always picking up and discarding products in search of the winning hand. For ConAgra, with scores of brands in its portfolio, the idea is to concentrate on expanding sales on the established brands, rather than spending time and money on sustaining weaker ones.
Other ConAgra brands on the block were its Cook's ham line (sold off to pork products leader Smithfield) and Butterball turkey (looking for a buyer). Trident Seafoods, a specialist is frozen and canned seafood, will buy the Louis Kemp line and Singleton Fisheries will buy some other seafood lines.
The article points out this trend in food companies like Kraft, Sara Lee, and Heinz, which have been "selling brands that don't hold top market shares and shift their focus to their best labels. Grocery stores are stocking fewer brands and Wal-Mart Stores Inc. increasingly is focusing on manufacturers that are leaders in their categories."
Just like being #3 or #4 in an industry segment is seen as a losing strategy, so too is being #3 or lower in a specific category is something you either buy or sell your way out of.
