Another processed-food giant is slashing jobs and moving its headquarters to Chicago to get leaner and more nimble in the face of changing consumer tastes toward healthier foods.
ConAgra Foods, maker of familiar brands Reddi-wip, Slim Jim and Chef Boyardee, announced Thursday it would cut about 1,500 jobs and locate 700 jobs in a new corporate headquarters in the historic Merchandise Mart.
In doing so, the company follows in the footsteps of Kraft Heinz which, facing similar pressure to deliver greater profits, announced in August the layoffs of 2,500 workers, including 700 locally, and plans to relocate its Chicago-area offices to downtown Chicago.
For decades, ConAgra has been based in Omaha while maintaining a Chicago-area presence, most recently with a Naperville office that employs about 400 people. But hampered in recent years by a flagging private-label business and challenges selling processed foods to a more educated consumer, new CEO Sean Connolly seized upon an opportunity — sweetened by state incentives — to cut costs and reposition the company for the future.
Connolly, who called the cuts “difficult but necessary,” said in an interview Thursday that relocating the headquarters to Chicago was a strategic move to house the executive team and consolidated consumer foods departments under one roof instead of in separate states.
“I want to be with the business,” said Connolly, who lives in Winnetka. “And I expect my executives to be with the business too.”
For example, jobs supporting the frozen food brand Banquet are in Omaha while Chef Boyardee is supported by employees in Naperville. Going forward, the grocery, frozen and snack departments will be together at the Merchandise Mart.
The 1,500 job cuts represent about 30 percent of the company’s global office-based workforce. The restructuring is expected to result in about $300 million in savings over the next three years, ConAgra said.
The cuts will “unfold in an orderly fashion” over the next 12 months, Connolly said.
Of those 700 jobs in the new Chicago headquarters, 550 will be relocated from Naperville and Omaha, a company spokesman said.
ConAgra expects to eliminate about 60 jobs in Naperville and another 220 to 250 jobs there will move downtown, the spokesman said. It’s unclear what will happen to the remainder; a spokesman said more planning was needed to iron out the details.
About 1,000 or so jobs will be cut from the Omaha offices, with another 300 positions relocated to the new Chicago office.
In a news conference Thursday, Omaha Mayor Jean Stothert said the cuts were “even worse” than expected, despite attempts by ConAgra executives to assure her they wouldn’t be so severe. About 1,200 jobs will remain in Nebraska.
A delighted Chicago Mayor Rahm Emanuel said he met with Connolly to discuss the relocation Aug. 10.
Thursday, Emanuel touted Chicago’s educated workforce, its transportation links, its business community and overall vibrancy as the keys to wooing an increasing number of corporate headquarters to the city.
Asked why, if Chicago was so attractive a proposition, ConAgra also had to be wooed by the governor with tax incentives, Emanuel said “that is a question for the state” but noted that Nebraska was also aggressively courting ConAgra to remain in Omaha. “Our incentives are the skill and knowledge of our workforce,” he said of Chicago.
Gov. Bruce Rauner earlier this year agreed to offer ConAgra tax credits through the Economic Development for a Growing Economy program, or EDGE, in return for a promise to bring at least 150 jobs to Illinois and to keep them here for at least 15 years, according to Illinois Commerce and Economic Opportunity spokeswoman Lyndsey Walters.
The governor has since ordered a halt to such incentives until the state’s budget impasse is resolved.
While ConAgra and the state have declined to detail the ultimate value of the tax credits, an estimate using Bureau of Labor Statistics salary data for management positions in the Chicago area of $111,980 suggests that ConAgra could be handed a reduction of at least $630,000 a year on its corporate tax bill if it employs the minimum of 150 new workers in Illinois.
Using the same salary estimates, the tax break could double to $1.26 million a year if ConAgra brings 300 workers into the state.
“That’s certainly appreciated,” Connolly said of the incentives. “You can’t fail to have appreciation in that, particularly with the state of things in Illinois.”
“We look forward to the opportunities created by ConAgra’s decision to invest in Illinois, and welcome them to their new home,” Rauner said in a statement.
In Naperville, there was disappointment with ConAgra’s decision, along with recognition that it might be a boon to Chicago and to Illinois overall.
“This certainly is not good news for Naperville,” said state Rep. Grant Wehrli, R-Naperville. “Shifting hundreds of jobs from one community to another creates winners and losers within our own state.”
Wehrli called on Rauner to work with the Naperville community to replace the hundreds of local jobs that will be lost. “I know the governor worked hard to bring these jobs to Chicago,” Wehrli said. “Now he needs to work equally hard to help us bring jobs back to Naperville.”
Naperville Mayor Steve Chirico said he was not pleased with ConAgra’s decision to leave the western suburb, but he is happy with the “big win for the state of Illinois.”
At the landmark Merchandise Mart along the Chicago River, ConAgra will lease about 168,000 square feet on the building’s 13th floor, adding its name to a directory of corporate tenants in the Art Deco building that includes Motorola Mobility, Yelp, Regus, Publicis and the 1871 startup incubator. The building’s owners, Vornado Realty Trust, have repurposed the mart as office space since the traditional trade show business moved online and to Las Vegas.
Like other large food conglomerates, ConAgra has struggled to adapt as consumers trend away from traditional processed, packaged foods toward healthier options.
In its first fiscal quarter that ended May 31, ConAgra reported a loss of $1.2 billion, or $2.88 a share, compared with a year-ago profit of $482.3 million, or $1.14 a share. Included in the quarter was a write-down tied to plans to sell its private-label business later this fall.
First-quarter sales totaled $2.8 billion, up only 1 percent from a year ago.
Jana Partners, the hedge fund that took a stake in Walgreens last year and pushed for change, acquired a 7.2 percent stake and seats on ConAgra’s board in July.
Connolly, 50, was hired in April to turn the company around and, under pressure from activist investors, has vowed to divest the private label business. ConAgra’s board hoped he could repeat the trick he performed at Hillshire Brands, which was bought by Tyson Foods last year after Connolly helped it expand into more fashionable areas including gluten-free foods and high-protein snacks.
The acquisition of private-label business Ralcorp in 2013 under previous management has been a drag on ConAgra’s operations, and Treehouse Foods is considered a likely suitor for it.
A Treehouse spokesman on Thursday declined to “comment on speculation.”
Gary Karp, executive vice president at market research firm Technomic, lauded Connolly’s leadership and vision with the restructuring plan, saying it would attract top talent to the new Chicago location. “I give them high marks for courage and high marks for strategic approach,” Karp said.
In the years to come, consumers will continue to demand healthier food with greater labeling transparency and better-quality ingredients, Karp said. “All of these trends are going to continue, and we do believe that ConAgra is going to make it a key plank in their strategy,” Karp said.
ConAgra had 32,900 employees as of May 31.
Its largest customer is Wal-Mart Stores, which accounted for 18 percent of annual sales.
Jane Donahue, a Naperville Sun freelancer, contributed.
Twitter @GregTrotterTrib
Twitter @kimjnews
