Business Strategies / Capital Spending / Industry News / Industry Outlook

ConAgra Moving to Chicago, Cuts 1,500 Jobs

By Lauren R. Hartman, Product Development Editor

Oct 01, 2015

ConAgra Foods, manufacturer of processed food staples such as Chef Boyardee, Peter Pan, Hunts, Slim Jim snacks and Manwich, announced Sept. 30 that it is cutting 1,500 jobs and moving its corporate headquarters and 700 jobs to downtown Chicago. The decision is part of ConAgra's restructuring plan under new CEO Sean Connolly, who has said he aims to find greater administrative efficiencies, revitalize some of the company's household brands and sell off the company's flagging private-label business.

The struggling food company will eliminate 30 percent of its office-based workforce but will retain plant positions, the company reports. Like other large food conglomerates, ConAgra has worked diligently to adapt as consumers trend away from traditional processed, packaged foods toward healthier alternatives. Connolly described the decisions as "difficult but necessary." The move to Chicago and the company's new Merchandise Mart location from Omaha, Neb., will start in 2016.

In its first fiscal quarter ending Aug. 30, ConAgra reported a loss of $1.2 billion, or $2.88 a share, compared with a profit a year ago of $482.3 million, or $1.14 a share. Included in the quarter was a write-down tied to plans to sell its private-label business later this fall. First-quarter sales totaled $2.8 billion, up only 1 percent from a year ago.

For decades, the company was based in Omaha, Neb., but has maintained a Chicago-area presence, most recently with a Naperville office that employs about 400 people. The senior leadership team and certain functions of the consumer foods business — positions that are now in Naperville, where the lease is expiring − will go to Chicago, and Omaha.

The plans are to maintain some 1,200 employees in Omaha, the company reports, including some research and development and supply-chain-management operations.

ConAgra estimates it will incur total charges of about $345 million in connection with the restructuring over the next two to three years. ConAgra also says it expects to realize more than half of the savings by the end of its 2017 fiscal year, with the balance achieved in 2018. Altogether, the plan will represent about $300 million in savings over the next three years, ConAgra says.

"Today's announcements are important milestones as we continue to execute against our strategic plan to build a focused, higher-margin, more contemporary and higher-performing company," Connolly said in a statement. "We are making difficult, but necessary, decisions to enhance productivity, drive standardization and enhance flexibility to deliver improved profitability. And through our organization redesign, we will better harness the power of our front line by deploying our talent against our largest opportunities for future growth and value creation."

Connolly came on board in April in efforts to turn the company around. ConAgra's board hoped he could repeat the kind of performance he had at Hillshire Brands, which was bought by Tyson Foods last year after Connolly helped it broaden into more lucrative segments like gluten-free foods and high-protein snacks.

ConAgra's $5-billion acquisition of the Ralcorp private-label business in 2013 under previous management has been a drag on the company's operations. Under pressure from activist investors, Connolly vowed in July to sell Ralcorp.

Locating its headquarters and largest business segment in Chicago "places us in the heart of one of the world’s business capitals and consumer packaged-goods centers, enhancing our ability to attract and retain top talent," Connolly says. "The decision to move headquarters was solely based on the strategic needs of our business, and was not a city-versus-city exercise. We feel fortunate to have a meaningful relationship with two outstanding business centers."

ConAgra also said Sept. 30 it would begin "aggressively embracing zero-based budgeting," a process in which managers justify spending plans from scratch each year, rather than rely on previous allotments.

The method has triggered sweeping cost cuts at companies utilizing it, from eliminating hundreds of management jobs and corporate jets to requiring employees to seek permission to make color photocopies. Other food and beverage companies have embraced the strategy, in part to avoid becoming targets of activist investors or stronger rivals.