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INTERVIEW - Conagra Looks to Organics for Sales Growth
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USA: February 17, 2006


CHICAGO - Packaged food company ConAgra Foods Inc, looking for ways to jump-start sales, is moving into the fast-growing organic market with canned tomatoes, microwave popcorn and, eventually, other products.


In recent months, the company has started selling organic versions of its Hunt's tomatoes and Orville Redenbacher's popcorn, with more products expected, a company official said.

ConAgra expects its sales of organic products to grow by at least double digits annually on a percentage basis, Glenn Patcha senior vice president for brand marketing at ConAgra, said in an interview on Wednesday.

"We see the whole organic industry continuing to grow at double digits and we definitely want to participate in that," Patch said, adding that the company wants its growth rate to at least match the organic industry as a whole.

In contrast, ConAgra's overall sales were down 3 percent in the six months ended Nov. 27, the most recent sales data for the company.

ConAgra shares closed unchanged at $20.60 Thursday on the New York Stock Exchange. The stock is down 29 percent over the past year, compared with a 7 percent decline for the Dow Jones Food Producers index.

According to the US Department of Agriculture, "organic food is produced without using most conventional pesticides; fertilizers made with synthetic ingredients or sewage sludge; bioengineering; or ionizing radiation." The agency has other guidelines in place for defining organic foods.

Packaged foods companies have been slow to offer organic versions of their regular brands, relying instead on acquisitions of organic foods companies to enter the market.

But organic products typically command prices 20 percent to 30 percent higher than regular products, Patcha said.

That could provide a boon to ConAgra, though the company also has larger issues, including choosing which brands in its portfolio to focus on and raising marketing spending to push sales, said Gregg Warren, an analyst at Morningstar Inc. He and other analysts have said the company is likely to cut its dividend to leave more cash for marketing.

"This is one way to get some pricing, to go the organic route, but overall, there's a lot of work that needs to be done there," Warren said.

Patcha said as demand for organic products becomes more mainstream, consumers are looking for brands they already know to offer them.

"This is not a low-carb fad," Patcha said. "This is an underlying trend that fits in with how consumers want to eat and how it fits in with the environment."

According to the USDA, "organic food is produced by farmers who emphasize the use of renewable resources and the conservation of soil and water."

ConAgra is likely to expand organics into other brands in its portfolio, though some, like popcorn, make more sense than others - like processed meat sticks.

"You probably won't see an organic Slim Jim," Patcha said.


Story by Brad Dorfman


REUTERS NEWS SERVICE

Reuters



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