ConAgra Foods Inc (NYSE:CAG) has announced restructuring plans to improve profitability, advance its growth agenda, and unlock shareholder value. The company expects to realize at least $300 million of efficiency benefits within the next three years through a combination of reductions in SG&A and enhancements to trade spend processes and tools.
Cost savings of about $200 million are expected to be derived from a combination of lower headcount and non-headcount costs. This will be achieved by aggressively embracing zero-based budgeting, simplifying organizational structure by increasing spans of control and reducing layers, and outsourcing technology and back office functions to improve scalability. The company also expects to realize approximately $100 million of efficiency benefits from enhancements to trade spend processes and tools.
This restructuring is expected to result in the elimination of around 1,500 positions or roughly 30% of the company’s global office-based workforce, and excludes any impact from the planned divestiture of private label operations. Plant positions will not be eliminated in connection with this restructuring. ConAgra Foods estimates it will incur total non-recurring charges of about $345 million over the next two to three years in connection with the restructuring.
The company also announced the relocation of its headquarters to Chicago IL. Beginning in summer 2016, approximately 700 employees will be moved to new offices in the city’s Merchandise Mart, including the company’s senior leadership team and certain functions of the Consumer Foods business, which are currently in Omaha NE and Naperville IL. The company will continue to maintain a significant presence in Omaha, including about 1,200 employees within key administrative functions, as well as research and development and supply chain management.
Sean Connolly, president and chief executive officer of ConAgra Foods, said, “We are making difficult, but necessary, decisions to enhance productivity, drive standardization, and enhance flexibility to deliver improved profitability. 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.”
“I am thrilled to welcome ConAgra Foods’ worldwide corporate headquarters to Illinois,” Gov Bruce Rauner said. “ConAgra has relied on the hardworking men and women of Illinois for almost 30 years, with over hundreds of employees calling our state their home. We look forward to the opportunities created by ConAgra’s decision to invest in Illinois, and welcome them to their new home.”
ConAgra Foods is one of North America’s largest packaged food companies with branded and private label food found in 99% of America’s households, as well as a strong commercial foods business serving restaurants and foodservice operations globally. It also supplies frozen potato and sweet potato products as well as other vegetable, spice, and bakery products to commercial and foodservice customers.
For more information, see www.conagrafoods.com.