(Reuters) - ConAgra Foods Inc said it would cut about 1,500 jobs and move its headquarters to Chicago from Omaha as part of a plan to save at least $300 million in three years.
The maker of Chef Boyardee pasta and Healthy Choice dinners is under pressure to cut costs and accelerate growth as consumers shift from packaged food to options they consider fresher, healthier alternatives. In July, the company added two directors to its board as part of an agreement with Jana Partners LLC after the activist hedge fund took a stake in the company.
The job cuts mark the latest changes implemented by ConAgra Chief Executive Sean Connolly, who joined in April. The company also announced in June that it would divest its struggling private-label business.
“While we believe that we can create a lot of value with ConAgra Foods, that’s only going to happen if we make bold change, and we’re going to continue to push for change,” Connolly said in an interview. He added that the move to Chicago allowed the company to consolidate its consumer foods business in one location.
The job cuts, which exclude the private label business, represent about 30 percent of ConAgra’s office-based workforce. Overall, ConAgra had about 32,900 employees as of May.
About 1,200 employees will be left in Omaha following the cuts, down from roughly 2,400, excluding ConAgra’s private brands workers, Connolly said.
Nebraska Governor Pete Ricketts said in a statement that he regretted ConAgra’s decision, and that the government would be ready to assist Nebraskans seeking reemployment due to the restructuring.
Beginning summer of 2016, about 700 employees, including the company’s senior leadership, will be located at the new Chicago headquarters.
The workforce reductions, in addition to the company’s adoption of zero-based budgeting, which requires managers to justify each year’s costs from scratch, will account for $200 million in savings. The other $100 million will come from more efficient spending on promoting products within stores, ConAgra said.
“While we view these efforts as prudent, we don’t believe ConAgra is poised to post operating margins on par with the midteens generated by industry peers, given its lagging brand set,” said Morningstar analyst Erin Lash, noting that increased investments in marketing and innovation would partly offset savings.
ConAgra estimated restructuring-related cash charges of about $345 million over the next two to three years.
Shares of ConAgra were little changed at $40.54 on Wednesday.
Reporting by Anjali Athavaley in New York; Editing by Alden Bentley