Business administration homework

Jiwu Cui

BA301-006

Homework #3

Oct 31, 2017

Conagra Brands, Inc.

It is common to find the majority of the fridges and freezers of households filled with Conagra Brand products. The Company manufactures and markets both the packaged and frozen foods to a majority of the retail outlets. Among the best-known brands of Conagra's cornucopia of America are Egg Beaters, Banquet, and Marie Callender among others. The company is also known for its production of seasoning and grain ingredients for different sectors in the United States including food service and manufacturing and the industrial markets, which is stongly connected to their vision statement “Conagra Brands has the most energized, highest-impact culture in food. We persistently challenge and disrupt marketplace/business conventions and we are respected for our great brands, great food, great margins and consistent results.” (Conagara Brands, 2017) “In the year 2016, Tree House Foods acquired ConAgra Foods’ private-label. The acquisition price was valued at $2.7billion.” (Our Food Brands, 2017) The separation Lamb Weston Holdings and ConAgra in 2016 saw the latter change its name to Conagra Brands. The Lamb Weston Holding Inc. sold frozen potato and vegetable products. After the separation, the newly formed Conagra Brands retained the Consumer Foods and Foodservice businesses. (Our Food Brands | Conagra Brands, 2017)

There are two segments of process of the Conagra Brands; Consumer and Commercial Foods. According to the previous year’s reports, “the Consumer Food segment contributed to a majority of the company’s sales of 62%. Their products include branded, custom-made, and private-label food products. The composition of the products ranges from meals to snacks and desserts. There are different retailers that the company uses to sale its products with a majority located in North America.” (Our Food Brands, 2017) Some of the brands sold by this segment include Orville Redenbacher's and Van Camp's among others. The second segment is the Commercial Foods which was sold to TreeHouse Foods in 2016. The segment comprised of food products and ingredients applicable to the kitchen and manufacturers of food. The company has its manufacturing facilities mainly in US Midwestern, Sunbelt, and New England areas. It also operates in other countries such as Canada and Singapore among many other countries.

Sales and Marketing

According to the last year financial reports, Wal-Mart attributed to the 16% of the total sales of the Conagra products hence becoming the main customer of the company. The organization uses strategies such as advertising, incentives, promotions, and use of different retail channels in the marketing of their products. The company sells off the less profitable Private Brands businesses to acquire more capital for the development of the profitable segments. Also, the organization sold some of its food ingredients assets to Platinum Equity. Moreover, the organization uses mergers and acquisitions in expanding their market and product line, for example, the joint venture between Conagra and Cargill and CHS. Conagra acquired Blake's All Natural Foods, an organization that majors in the production of organic food, in 2015 with an attempt to expand the product line. In 2014 the organization also acquired TaiMei Potato Industry Limited engaged in the production of frozen potato products. Conagra Company faces competition from many players in the industry including Campbell Soup Company, Kellogg Company, and Schwan's Company among others ("ConAgra Foods, Inc. SWOT Analysis | Free SWOT Analysis", 2017).

ConAgra Foods, Inc. SWOT Analysis

From the Conagra’s SWOT Analysis, we can see the external and internal factors impact on the operation of the company. From the Conagra Brands SWOT Analysis, we can know that “Conagra Brands is one of the leading and well-performing organizations in the food industry due to its internal strengths.” (ConAgra Foods, Inc. SWOT Analysis, 2017) The strengths are important in both market development and penetration. There are also weaknesses that the organization has to improve in different area and opportunities are also help Conagra Brands to increase their profit and revenue.

Strengths	Weaknesses
1. Easier penetration to new markets 2. Customer satisfaction and loyalty 3. Strong and reliable suppliers 4. Brand recognition 5. Quality products and services	1. Poor financial planning and management 2. Poor marketing strategies 3. Lack of product specialization 4. Increased days of inventory 5. Inability to deal with the problem of increased new entrants into the market 6. Inability to integrate firm with different work culture
Opportunities	Threats
Increasing popularity of organic foods in the US Rising obesity increases demand for health foods	1. High competition for the local distribution may have caused the decrease in the revenue and may have resulted in the company disposing some of the investment of assets. 2. Irregular access to innovative products 3. Changes in the legal and political environments increases possibilities of lawsuits 4. Inadequately skilled workforce who may have moved to the competitors who may be offering a better incentive. 5. Increase change in consumer buying behaviors

Threats ConAgra Foods Facing - External Strategic Factors

1. High competition for the local distribution may have caused the decrease in the revenue and may have resulted in the company disposing some of the investment of assets.

2. Irregular access to innovative products

3. Changes in the legal and political environments increases possibilities of lawsuits

4. Inadequately skilled workforce who may have moved to the competitors who may be offering a better incentive.

5. Increase change in consumer buying behaviors

Limitations of SWOT Analysis for ConAgra Foods

There are limitations of using the SWOT analysis as a strategic management tool.

1. Certain factors are both opportunities and threats at the same time, (ConAgra Foods, Inc. SWOT Analysis, 2017) for example, change in legal and political environment.

2. It does not indicate strategies to adopt in achieving competitive advantage.

3. SWOT analysis may also limit the management to over-emphasize on certain factors and neglecting others hence failing to reveal devising strategies.

4. It does not show the implementation plan from the Conagra Foods strategic competitiveness ("ConAgra Foods, Inc. SWOT Analysis | Free SWOT Analysis", 2017).

Financial Performance

The financial performance in the form of a bar graph in terms of the revenue, cost of goods sold, general, selling, and administrative expenses, and net income for the three years 2017, 2016 and 2015 (Appendix III).

According to the 2017 financial reports, “there was a reduction of 32.78% sales compared to the year 2016. Further, there was an increase in the revenues by 26.46% as compared to 2015. The decrease is attributed to a decrease in consumer food revenues. There is also a decrease in the cost of goods sold in the year 2017 from 2016 as shown by 35.87% in 2017 and 31.17% as shown by 2016. The same resulted in the decrease in gross profit in 2017 by 24.22% and there was a decrease in gross profit in 2016 by 6.58%.” (ConAgra Lowers Profit Outlook, 2017) Also, the fall is attributed to the poor pricing strategies adopted by the marketing team and the management, and it’s results in the sales declined and their stock profit goes down.

The increase in general, selling, and administrative expenses led to the increase in the total loss reported in 2016. Nevertheless, there was a decrease in general, selling, and administrative expenses in 2017 at a higher rate that the revenues, the company reported a net profit for the year. There was an increase in the net income by 194.43% form the loss that was reported in 2016 (Appendix I). The balance sheet shows that “the total cash reduced by 69.87% in 2017 and had increased by 355.76% in 2016. It means that the company has resolved to retained more cash. At the same time the net property plant and equipment decreased by 38.57% in 2017 from 2016 and had decreased by 16.53% in 2016 from 2015. It means the company has disposed of some of the assets that it owned. The company has also decreased intangible assets.” (ConAgra Lowers Profit Outlook, 2017). The company’s long-term debt decreased in 2017 by 43.69%. It may be the reason for the decrease in cash as some of the cash may have been used to pay off the long-term debt. At the same time the short-term debt may have been paid off by the cash from the sale of the assets. The retained earnings increased in 2017 by 31.96% which may due to the increase in the net income (Appendix II). The reason for the low revenues could be attributed to the soaring costs for raw materials like grain, meat and fuel. In an effort to pass some of those costs on to consumers, ConAgra has raised prices on many of its goods, which has hurt sales volume. Thus, the company reported a decrease in the revenues ("ConAgra Lowers Profit Outlook", 2017).

Comparison to the industry

Moreover, this company’s financial data is higher than the other industries because of their higher stock prices. According to the CAG Conagra Brands’ stock news, “The firms stock price is currently trading at $ 33.69 as of 27 October 2014 time 4:11 PM in the NYSE. The day change was an increase in 0.93%. The company’s beta was 0.29 which is quite low. It means the firm is less risky to invest in. The shares price to earnings was 24.2 as compared to the industry at 25.3. The trading price means that the company is overvalued. The price to sales was 1.9 to the industry of 1.7. The debt to equity ratio was 0.7 while the industry was 0.8 which means the company is less leveraged.” (CAG Stock Quote Price News, 2017). The company’s interest coverage was 4.7. The same time, Morning star has rated the company at 3- star above most of the peers in the industry. The company is performing well than the industry peers ("CAG Conagra Brands, Inc. XNYS: CAG Stock Quote Price News", 2017).

Appendix I

CONAGRA BRANDS INC (CAG) Cash-Flow Flag INCOME STATEMENT		Horizontal analysis
Fiscal year ends in May. USD in thousands except per share data.	2017-05	2016-05	2015-05	2014-05	2013-05
Revenue	7,826,900	11,642,900	15,832,400	-32.78%	-26.46%
Cost of revenue	5,484,800	8,552,100	12,523,900	-35.87%	-31.71%
Gross profit	2,342,100	3,090,800	3,308,500	-24.22%	-6.58%
Operating expenses
Sales, General and administrative	1,417,100	2,209,400	3,472,100	-35.86%	-36.37%
Total operating expenses	1,417,100	2,209,400	3,472,100	-35.86%	-36.37%
Operating income	925,000	881,400	(163,600)	4.95%	638.75%
Interest Expense	199,200	299,100	333,100	-33.40%	-10.21%
Other income (expense)	3,700	1,300	1,200	184.62%	8.33%
Income before taxes	729,500	583,600	(495,500)	25.00%	217.78%
Provision for income taxes	254,700	225,400	234,000	13.00%	-3.68%
Other income	71,200	137,800	122,100	-48.33%	12.86%
Net income from continuing operations	546,000	496,000	(607,400)	10.08%	181.66%
Net income from discontinuing ops	102,000	(1,161,900)	366,600	108.78%	-416.94%
Other	(8,700)	(11,100)	(11,800)	-21.62%	-5.93%
Net income	639,300	(677,000)	(252,600)	194.43%	168.01%
Preferred dividend		4,800	1,700	-100.00%	182.35%
Net income available to common shareholders	639,300	(681,800)	(254,300)	193.77%	168.11%
Earnings per share
Basic	1.48	-1.57	-0.6
Diluted	1.46	-1.57	-0.6
Weighted average shares outstanding
Basic	431900	434400	426100	421300	410800
Diluted	436000	438500	426100	427500	417600
EBITDA	1196700	1256600	429900	1560800	1872600

Appendix II

CONAGRA BRANDS INC (CAG) BALANCE SHEET		Horizontal analysis
Fiscal year ends in May. USD in thousands except per share data.	2017-05	2016-05	2015-05	2017-05	2016-05
Assets
Current assets
Cash
Cash and cash equivalents	251,400	834,500	183,100	-69.87%	355.76%
Total cash	251,400	834,500	183,100	-69.87%	355.76%
Receivables	563,400	836,600	972,900	-32.66%	-14.01%
Inventories	934,200	1,582,100	2,201,200	-40.95%	-28.13%
Prepaid expenses	228,700	206,500	310,500	10.75%	-33.49%
Other current assets	35,500	117,000		-69.66%	100.00%
Total current assets	2,013,200	3,576,700	3,667,700	-43.71%	-2.48%
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	4,301,800	6,209,200	7,438,500	-30.72%	-16.53%
Accumulated Depreciation	(2,636,900)	3,498,900)	(3,830,400)	-24.64%	-8.65%
Net property, plant and equipment	1,664,900	2,710,300	3,608,100	-38.57%	-24.88%
Goodwill	4,298,300	4,533,800	6,300,300	-5.19%	-28.04%
Intangible assets	1,232,900	1,276,800	3,030,000	-3.44%	-57.86%
Other long-term assets	887,000	1,293,000	936,100	-31.40%	38.13%
Total non-current assets	8,083,100	9,813,900	13,874,500	-17.64%	-29.27%
Total assets	10,096,300	13,390,600	17,542,200	-24.60%	-23.67%
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt	227,200	610,200	1,015,900	-62.77%	-39.94%
Accounts payable	773,100	945,400	1,358,300	-18.23%	-30.40%
Accrued liabilities	720,200	922,100	936,000	-21.90%	-1.49%
Other current liabilities		54,700		-100.00%
Total current liabilities	1,720,500	2,532,400	3,310,200	-32.06%	-23.50%
Non-current liabilities
Long-term debt	2,769,200	4,917,800	6,888,900	-43.69%	-28.61%
Pensions and other benefits	709,800			100.00%
Minority interest	87,000	81,200	84,000	7.14%	-3.33%
Other long-term liabilities	819,000	2,145,600	2,733,100	-61.83%	-21.50%
Total non-current liabilities	4,385,000	7,144,600	9,706,000	-38.62%	-26.39%
Total liabilities	6,105,500	9,677,000	13,016,200	-36.91%	-25.65%
Stockholders' equity
Common stock	2,839,700	2,839,700	2,839,700	0.00%	0.00%
Additional paid-in capital	1,171,900	1,136,300	1,049,400	3.13%	8.28%
Retained earnings	4,247,000	3,218,300	4,331,100	31.96%	-25.69%
Treasury stock	(4,054,900)	(3,136,200)	(3,364,700)	29.29%	-6.79%
Accumulated other comprehensive income	(212,900)	(344,500)	(329,500)	-38.20%	4.55%
Total stockholders' equity	3,990,800	3,713,600	4,526,000	7.46%	-17.95%
Total liabilities and stockholders' equity	10,096,300	13,390,600	17,542,200	-24.60%	-23.67%

Appendix III

Bibliography

ConAgra Lowers Profit Outlook. (2017). Nytimes.com. Retrieved 28 October 2017, from

http://www.nytimes.com/2012/03/23/business/conagra-lowers-profit-outlook.html

CAG Conagra Brands, Inc. XNYS: CAG Stock Quote Price News. (2017). Morningstar.com.

Retrieved 28 October 2017, from

http://www.morningstar.com/stocks/xnys/cag/quote.html

Our Food Brands | Conagra Brands. (2017). Conagrabrands.com. Retrieved 28 October 2017,

from http://www.conagrabrands.com/brands

ConAgra Foods, Inc. SWOT Analysis | Free SWOT Analysis. (2017). Freeswotanalysis.com.

Retrieved 28 October 2017, from

http://www.freeswotanalysis.com/food-agricuture/465-conagra-foodsinc-swot-analysis.html

ConAgra Foods, Inc. - Financial and Strategic Analysis Review. GlobalData, Dec. 2016,

bi.galegroup.com/global/showpdf?pdfdocid=306226_GDCPG28506FSA.

“About Conagra Brands.” Company Overview | Conagra Brands, Conagra Brands, Inc.,

www.conagrabrands.com/our-company/overview.

Revenue, COGS, Gross profir, Expenses and net income

Revenue 2017-05 2016-05 2015-05 7.8269E6 1.16429E7 1.58324E7 Cost of revenue 2017-05 2016-05 2015-05 5.4848E6 8.5521E6 1.25239E7 Gross profit 2017-05 2016-05 2015-05 2.3421E6 3.0908E6 3.3085E6 Sales, General and administrative 2017-05 2016-05 2015-05 1.4171E6 2.2094E6 3.4721E6 Net income 2017-05 2016-05 2015-05 639300.0 -677000.0 -252600.0

Years

Amount