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In a weak economy, more shoppers are turning to private label brands to save money.
ST. LOUIS POST-DISPATCH
When ConAgra ponied up about $5 billion for St. Louis-based Ralcorp last week, the Omaha-based conglomerate did something that food companies have been doing for a while: It got a lot bigger.
ConAgra Foods Inc., which produces some 60 brand name products--everything from Slim Jim sausage snacks to Manwich mixes to Wesson cooking oil--will now become one of the largest food companies in the world, with about $18 billion in sales, up from $12.3 billion in the fiscal year ended on May 11.
Globally speaking, that would put ConAgra among the top 20 food companies in the world, up from its current spot of 31 and well ahead of food juggernauts General Mills and Kellogg.
But ConAgra's new neighbors on the list of global food-and-beverage big shots probably won't be there for long.
In a turbulent food marketplace that has struggled in recent years, companies are trying to out-big each other --or, at least, redefine what they are, by splitting, spinning off and window-shopping for each other's discards.
In buying Ralcorp Holdings Inc., ConAgra gobbled up a dominant player in the private-label food business--one of the few areas of the American market that has seen sparks of life in the past decade.
"Private label--in consumption, not in sales--has forever been about 20 percent. That goes back to the 1980s," explained Harry Balzer of NPD Group, an industry analysis group that tracks how Americans eat. "Then in 2000 it goes up--to 30 percent--and it's up for one reason: The country's not getting wealthier. Fifty percent of the country has a median household income under $50,000, and that hasn't moved for 10 years. If you're looking for a way to economize, you look for a private label."
Balzer explained that the market for processed foods exploded in the 1950s, enabling women to go work rather than spend time cooking. But since 2000 the percentage of women working has come off its peak of 60 percent, although attitudes about cooking, he believes, haven't changed appreciably.
"The food world has been in flux for the last 10 or 12 years, mainly because of female employment," Balzer added. "Prior to the last 12 years, we've had more women working, greater household income and less time to prepare meals, so we needed convenience. Since then, household incomes are down, but we still don't want to cook."