Business Research Homework

Executive Summary......................................................................................... 3

Situation Analysis............................................................................................ 3 Problem Analysis & Definition ........................................................................5 Solutions, Evaluation & Recommendation...................................................... 11

Implementation ............................................................................................... 15

Success Metrics ............................................................................................... 15

Bibliography .................................................................................................... 16

Appendix I ....................................................................................................... 20

Appendix II ...................................................................................................... 22

Appendix III ..................................................................................................... 24

Executive Summary

Conagra Brands is a food processing company based in the US that combines 48 food brands. Conagra makes and sells food under various brands, and the fields they are focusing on are supermarkets, restaurants, and the food service industry. ConAgra Brand is known for its high-quality products that are versatile and fulfill the needs of hundreds of consumers nowadays. The packed and frozen product of the company is the favorite customer products where their fridge and refrigerators are always filled with the products of the company. ConAgra has also extended their product line by merging with a different company so that they can introduce multiple products in the market. Their commercial and customer food segments have brought revolution in their sale that increases their sales as compared to previous years. “Conagra Foodservice offers products to restaurants, retailers, commercial customers and other foodservice suppliers.” (Conagra Brands)Although, it is analyzed that the company has extended their business operations by merging and acquiring other companies, still there are many weaknesses which they seriously have to cater and ethically resolve so that they can earn more from the existing market. (Conagra Brands.com)

Situation Analysis

Internal Performance

Conagra Brands have a long-term strategic plan. This company has been pursuing strategic acquisitions to strengthen its business and portfolio. “Conagra has acquired a number of brands such as Alexia, Lamb Weston, Marie Callender’s and Claim Jumper in the past.” (ConAgra Foods, Inc. - Financial and Strategic Analysis Review) “Acquisition of

complementary businesses and strategically fit brands has thereby strengthened ConAgra's food business and brand portfolio.” (ConAgra Foods, Inc. - Financial and Strategic Analysis Review)

They have vision statements which are “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.” (About Conagra Brands) Conagra has strong financials and top position in the food industry field. “This transaction creates one of the largest packaged food companies in North America, with sales of approximately $8 billion annually and more than 36,000 employees. It will also position ConAgra Foods as the largest private label packaged food business in North America, with combined private label sales of approximately $4.5 billion.” (Benzinga.com) This presented Conagra has strong financial power to support their acquisitions. According to the Conagra’s 2016 Citizenship Report, their stakeholders are advocacy groups, consumers, customers, employees, government, investors, and suppliers. “Maintaining an open dialogue is critical to creating mutual understanding and providing a basis for strategic decision-making.” Conagra is connected with them on social and environmental issues.

Industry Perspective

The Hershey’s has potential to be a major step forward in meeting the rising demand for quality chocolate produced by Conagra Brands Company. The Hershey’s has the ability to reduce the particle level of the chocolate from one hundred microns to twenty-five microns in just three hours, instead of the forty to sixty hours that this process takes with the conche alone. The chocolate would still need to have some time in the conche for proper aeration, but this would only be ten hours. The addition of the Hershey’s would cut the grinding and aeration process from forty to sixty hours, down to a combined fifteen hours between the Hershey’s and conche. The addition of this has the ability to increase capacity by at least 75 percent. If you were Jim Harris, you would go through with the implementation of that, as this is a simple way to increase capacity, while still managing to produce the finest quality chocolate. The quality of the chocolate after preparation with the ball mill was already cleared by Conagra Brand Company, after figuring out that the first batch they tested contained another company’s inferiors’ beans. (Davis, 2012) After gaining new capacity through the implementation, a reevaluation of the production line is needed to identify where the next big area of improvement or investments could be made for further efficiency in the chocolate production industry.

Environmental Factors

At this point, we must look at the Future-State Capacity Expansion for the 62% Cocoa Recipe. This figure reveals the 150% increase in production that is desired, and what is needed to accomplish that goal. The 150% increase in production is based on the current conche production of 2040kg each day. (Davis,2012) In order for production to keep up with the increase in demand of 150%, the daily production of the nib from the conch would need to be 2040kg per day. As revealed in the product discussion, the current nib production rate from the conch is well below this capacity requirement. The conch is only able to produce 816 kg per day. The analysis was to determine whether the capacity with the addition of the ball mill could increase over the entire production line by increasing nib production in the conch to the desired 2040kg per day. Moving beyond the addition of the ball mill, many other pieces of the production line need to be implemented to increase output, if the increase in demand is going to be met. The roaster needs to increase production from 1185kg of nibs per day to 2072kg per day. (Calkins, 2012) The winnowers output needs to increase from 1971kg of nibs per day to 2218kg per day.

The change that was mentioned in the paper that could help increase capacity was the option of transferring the liquid chocolate to the co-packers in special tanks. This could potentially increase capacity as it would avoid the need for duplicate tempering, allow more control of molding, and would create more capacity on the current molding machine. The issue of risk was brought up regarding this option within the paper, as this is a difficult task to require from the Packaging Department. (Riggs, 2000) This risk could be controlled if there was a Conagra employee at the third-party packing plant that controlled quality.

The brand image of Conagra Brands Company is also at risk with trying to increase productivity through more outsourcing and labor automation. Conagra Brands holds the reputation of a handcrafted, artisan, and quality chocolate. Seeking to standardize testing or any other quality measures presents the possibility of diminishing the value of operator tasting and the artisanal image. Conagra Company could prevent this from becoming a reality by doing both auto-sampling and random taste sampling to retain this value proposition. (Riggs,2000)

Another risk, that was touched on briefly before is the quality risk associated with sourcing more of the company’s capacity to the third-party packers. This is a threat to the chocolate quality, as a major component in getting the product ready for consumption and retail would not be happening by Conagra Company employees. This risk is easily removed if Conagra Company will train a quality manager to be present at each of the packaging facilities. (Calkins, 2012)

Problem Analysis & Description

Problems

By casual analysis, there are many problems that they have to seriously think about and take decisions so that they can promote the products of the company. “Rodkin admitted ConAgra had tried to broaden the consumer base for three brands - Chef Boyardee, Healthy Choice and Orville Redenbacher's - without success. “We have spent too many resources on these brands trying to penetrate new consumer segments by overcoming their perception barriers, and frankly, it hasn't worked," he told analysts.” (Best)The below is a list of problems that the company is facing:

1. They have no proper marketing plan where they can market their products to potential customers and increase their sale. Absences of marketing strategies create a hurdle to the success of the company.

2. The poor management of the company fails to maintain the wide range of products. This poor management leads to poor financial performance.

3. Although they have acquired different companies and the merger with others to increase their products they are still not specialized in products that give them a competitive edge over others.

4. Increased days of inventory leads to product loss and damage as they deal in perishable good and due to the limited sustainability of products, most of the products are the waste in the warehouse.

5. “Although they have ample resources, still they are not taking benefit from them and increase the production of organic food.” (crunchbase.com)

SYMPTOMS, SIGNS AND INDICATORS PROBLEMS of CONAGRA BRANDS

Over the last month, Conagra's shares generated a return of 0.60%, under performing the growth of 3.31% recorded by the food industry - Miscellaneous industry Zacks. The title of Zacks Rank # 4 (Sell) a record of lower than expected revenue for the third quarter of fiscal 2017 on March 23. The stock also posted an average decline in value over the last year to an average of -0.494%. This is an indicator of the continued reduction in revenues over the last 3 years, such as “a 32.78% decrease in revenues in 2016 and a 26.46% decrease over the previous year. year 2016 from 2015.” (Forbes, 2017) As reported one position of Conagra "has struggled to integrate [Ralcorp] into its own food manufacturing business under the names of other companies." Goodwill amortization of 1.3 billion dollars last year, "reports Lindsay Whipp for the Financial Times.

"While we have seen encouraging signs over the past year, such as the strong improvement in consumer brand margins and profits, and the strong performance of Lamb Weston, these black spots have been overshadowed by inconstancy, volatility and disappointments, operational performance, not least marks, said Mr. Connolly in a passage that manages to avoid the two words. It is time to act to create a different future. Among the problems facing ConAgra, Ralcorp contracts with retailers before the acquisition, "says the St. Louis Post-Dispatch." They prevented the company from achieving its goals, with sales falling almost 6% in two years ".

Ciaran McEvoy of the Investor's Journal wrote: "An analyst at KeyBanc Capital Markets said Treehouse, a private label food manufacturer and Post, which had been separated from Ralcorp in 2012, could buy the ConAgra unit. 1.6% to 44.11 (Forbes, Thom) To date, the share price has fallen to $ 33.69, which is 23.62% ("CAG Historical Stock Prices, Yahoo Finance Exchange"). The company has also led to the sale of assets, as indicated by “the decrease in fixed assets of 38.57% in 2017 compared to 2016 and had decreased further in 2016 to 24.88% in 2015.” ("CAG Conagra Brands Inc. XNYS: Quote of the CAC Stock Quote News"). The decrease showed that the company is raking some of its investments, they produce too much but they did not receive much revenues.

Sales performance was affected by the company's ongoing portfolio management activities and the unfavorable impact of currency exchange rates. We believe that Conagra's results could be affected by its current revenue management activities in the coming quarters. In addition, other countervailing winds such as a stronger US dollar, strong industrial rivalry or price inflation of inputs should weigh on short-term results ("Conagra Lowers Outlook Profit").

Possible causes of identified problems

ConAgra Foods has lowered its profit forecast for the current quarter as higher prices for packaged foods reduce demand. Like all food companies, ConAgra, the manufacturer of frozen banquet food, Chef Boyardee pasta and Hebrew National Hot Dog, suffered from the rising costs of raw materials such as cereals, meat and fuel. In order to pass some of those costs on to consumers, ConAgra has increased the prices of many products, which have a detrimental effect on sales volume.

Growing health problems are affecting all sectors of the industry as levels of obesity continue to rise at alarming rates. Several branches of the US government including the Food and Drug Administration (FDA) as well as a number of consumer groups focus on food producers on nutrition and ethical responsibilities and the issues inherent in food production and marketing. The treatment of farm animals is rapidly gaining consumer awareness and has forced a realignment of research methods. The industry is in a hurry everywhere. Prices for milk, eggs, corn, wheat, oils and almost all other food products continue to rise. Electricity and fuel prices are also rising, making treatment and distribution more expensive. With high international unemployment, moderate inflation and slow economic growth, it is not possible to pass on the total price increase to consumers, fearing a substantial reduction in global demand. The value of the brand increases in importance for producers as demand decreases. Factors contributing to price increases include high feed prices caused by ethanol demand, the retention of a smaller stock of calves, and a possible increase in export demand due to the depreciation of the feedstock dollar. Multinational companies with diversified customer bases are better positioned to overcome this high / low demand trend.

Nevertheless, the firm is making efforts to return to better performance that may lead to profitability. Once ConAgra pays debt, they will have more cash flow to fund cash repayments to shareholders. ConAgra distributed less than half of its free cash flow as a dividend last year. One reason they have not been more aggressive in increasing their dividends recently is probably because they need all the extra money they can get to repay the debt related to your acquisition (Ciura, Bob, 2017).

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 $2.7 billion.” (Our Food Brands, 2017) The separation of 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. Also, 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.

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). According to the Appendix I, the Gross profit is increasing which means they used wrong materials to process their products and they waste too much materials.

Solutions, Evaluation & Recommendation

ConAgra Brand is known for its high-quality products that are versatile and fulfill the needs of hundreds of consumers nowadays. The packed and frozen product of the company is the favorite customer products where their fridge and refrigerators are always filled with the products of the company. ConAgra has also extended their product line by acquiring merging with a different company so that they can introduce multiple products in the market. Their commercial and customer food segments have brought revolution in their sale that increases their sale as compared to previous years. “Conagra Foodservice offers products to restaurants, retailers, commercial customers and other foodservice suppliers.” (Conagra Brands)Although, it is analyzed that company has extended their business operations by merging and acquiring other companies, but still there are many weaknesses which they seriously have to cater and ethically resolve them so that they can earn more from the existing market. (Conagra Brands.com) Additionally, Conagra should adjust their use of materials to produce products, because in that way they won’t waste too much investments on production, it can help them produce more and sell more.

The feasible and ethical solution to problems:

1. Implementation of the proper marketing plan: as the size of the company is large. Therefore, they need an assistance of marketing department that will be run by the market specialist so that they can make and implement comprehensive marketing strategies for promotion of productions of the company.

2. Upgrade their management and organization structure: as we know that company has recently acquired Blake's All natural food and the TaiMei Potato Industry limited as well as a joint venture with Cargill and CHS. Therefore, they must redefine their organization structure, and the addition of new managers will have strengthened managerial practices and oversees dealing with these new companies. That will ultimately improve the financial performance. “ConAgra had difficulties in all three of its segments (consumer foods, commercial foods, and private brands), while its acquisition of Ralcorp has also disappointed, and the regulatory review process overshadowed the creation of its Ardent Mills joint venture with Cargill and CHS.” (Samaha)

3. Although they have acquired and merge with other companies’ sill, the negligence of managers shows bad results. They must implement product specialization strategies to penetrate their organic products in the market.

4. Increase the number of retailers: to decrease the number of inventory days that must develop different discount packages for retailers so that they can decrease the number of inventory days and save the product from damages.

5. The inefficiency of managers and lack of marketing and management strategies makes them inefficient as they are not taking the benefit of available resources. Under the supervision of experts, training sessions are organized for employees where they can learn how to penetrate their products in the market (Conagra Brands).

Weighted Decision Matrix

From the above-mentioned decision matrix, it is analyzed that if the employees of the company are given sufficient training under the supervision of experts of how to manage things, implement marketing strategies than their performance can be enhanced. It is necessary because employees are the important asset of the company (White). If employees are efficient than excellence in business operations can be achieved. Secondly, implementation of new and innovative marketing strategies is important apart from traditional marketing techniques that will bring efficiency and innovation in company current operations.

The Retail business going forward will be led by Dean Hollis, previously executive vice president of Retail. The sales organization, which previously reported into the head of Retail, will be led by Doug Knudsen and will report directly to CEO Gary Rodkin, as will a chief marketing officer (CMO) to be announced later. With the selection of a best-in-class brand builder as CMO, Rodkin looks to energize ConAgra Foods' marketing for high-priority brands, and drive both growth and innovation. (Foods)

The organizational structure is vague, it has to be improved by clearly define the hierarchy so that every manager came to their responsibility. Furthermore, implemented these decisions the performance of the company can be enhanced ( Dow Jones & Company, Inc.). Therefore, Conagra should consider hiring new managers who has new ideas to improve their poor marketing and financial performance, they also can establish some training programs for the managers.

The decision that is made in the decision matrix is further elaborated so that its impact on cost, performance, profitability, and number of customers can be evaluated. From the tradeoff table, it is analyzed that implementation of decisions impacts the business in a positive way with the slight increase in cost that will benefit the company in the long run (Harris).

Recommendation:

There are four solutions to revive the Conagra Brands’ declined marketing.

· Solution A: It is recommended that new strategies for business must be made that is accordance with the current market needs and demands.

· Solution B: It is important to strengthen the skills and abilities of employees so that they can easily meet the business challenges. Therefore, adequate training must be provided to employees.

· Solution C: Marketing strategies should be made that will promote organic food so that company can take maximum benefit out of it.

· Solution D: The whole organization structure must be upgraded so that they meet with current challenged of the market.

The Cost-benefit Analysis model:

Cost:

Benefits

From the cost-benefit analysis, it is evaluated that if company invests in their training sessions and hire new CEO that will enjoy the good profit in 2018. By investing a nominal amount of employee's company can generate the good sale and enjoy the double profit from the previous year.

Implementation Plan

The implementation to solutions aims to resolve the decrease in sales revenue that the Conagra Brands has been experiencing in the recent years. The implementation of the solutions will have positive effect on the sales of Conagra Brands, and it will be implemented thoroughly in order to showing long-term benefits.

8 Review the success metrics 2 years

Success Metrics

The success of this solution will be measured in terms of the future sales revenue and Marketing strategy of Conagra Brands. According to the Weighted Decision Matrix, it is suggested that they should fire the current CEO and hire a new one because of their poor management. They should establish some training-programs for their managers and make any needed changes, therefore their new CEO should have positive and creative ideas on improving their marketing strategy. Furthermore, they should consider their compensation and salary for their employees to create a fair working environment in Conagra. Their marketing strategy determines their sales revenue, and they should avoid the increased gross profit because it shows they used wrong material and waste too much investment. However, the implementation plan can give Conagra opportunity to become an overall leader in the industry once again.

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