ConAgra buys into private label's success
Food giant ConAgra sees Ralcorp purchase as a way to enter the growing store brand market.
ConAgra, the packaged food goliath, got even bigger today. The company that claims you can already find its brand name products in 97 percent of American households wants to get in on the private label market, too. It announced the acquisition of private label manufacturer Ralcorp for $5 billion. Ralcorp is a leading private label manufacturer of cereals, pastas, and frozen waffles that stores can then brand as their own.
If the name ConAgra doesn't immediately evoke a slew of brand-name foods, here is just a handful of examples from the dozens of brands it owns: Slim Jim, Reddi-wip, Chef Boyardee, Hebrew National, Hunt's, Orville Redenbacher's. But, in a conference call today about the Ralcorp acquisition, ConAgra CEO Gary Rodkin said, "private label has outperformed branded almost every year since 1998," adding that,"We believe there's a long runway ahead."
Food analyst and "supermarket guru" Phil Lempert agrees, saying consumers in this economy want brand-name quality at affordable prices and that's what you usually get with private label store brands like Safeway's O, Whole Food's 365 and Ralphs' Private Selection. And Lempert says those private labels cost less, not because they skimp on quality, but because they don't market or use fancy packaging. So it makes sense for ConAgra to buy into that market.
"Now they're going to have it from both sides," says Lempert. "From the branded side and from the store brand and especially if you look at different generations, baby boomers are more brand oriented and millennials are less brand-oriented."
Lempert says ConAgra's acquisition of private label manufacturer Ralcorp means all consumers -- baby boomers and millennials -- can look forward to store brands tasting even more like their brand name favorites. Hmm...what would Safeway call its version of a Slim Jim?