Reuters  Oct 22  Comment 
TreeHouse Foods Inc is in advanced talks to acquire Ralcorp, the private label business of ConAgra Foods Inc , in a deal that could be valued between $2.5 billion and $2.7 billion,...
TheStreet.com  Aug 24  Comment 
NEW YORK (TheStreet) -- TreeHouse Foods  is said to be in talks with ConAgra to acquire its private label division, Ralcorp, for about $3 billion, The New York Post reports. TreeHouse Foods CEO Sam Reed met with investors to confirm there...
Reuters  Jul 8  Comment 
ConAgra Foods Inc has hired Centerview Partners to explore a sale of its private label unit Ralcorp, just two years after it acquired the troubled business with advice from the same...
Financial Times  Jun 30  Comment 
Disposal of Ralcorp Holdings after less than three years comes as no surprise
Financial Times  Jun 30  Comment 
Group reverses course after ill-fated $5bn acquisition of Ralcorp
Wall Street Journal  Jun 18  Comment 
Jana Partners disclosed a 7.2% stake in ConAgra and is seeking to change its board, trying to turn around what it said was a disastrous deal: the $5 billion purchase of private-label foods company Ralcorp.
Wall Street Journal  Jun 25  Comment 
Ahead of the Tape: Amid sectorwide malaise, ConAgra's big bet on Ralcorp isn't delivering the payoff investors had hoped for.
DailyFinance  Mar 21  Comment 
SUGAR LAND, TX -- (Marketwired) -- 03/21/14 -- Researched by Industrial Info Resources (Sugar Land, Texas) -- Leading North American food company ConAgra Foods Incorporated (NYSE:CAG) (Omaha, Nebraska) reported solid gains in the third...
TheStreet.com  Feb 11  Comment 
SAN DIEGO (TheStreet) -- I have no idea what the short interest was in Ralcorp when it was bought last year by ConAgra , but I'm beginning to think it might have been higher than average. When ConAgra bought Ralcorp a year ago, it was a big deal....


Ralcorp Holdings Inc. (NYSE: RAH) manufactures and distributes branded and private label food products in the mass merchandise, grocery, and foodservice channels. Ralcorp offers cereal products, crackers, cookies, frozen foods, breads, snacks, candy, and sauces. In the fiscal year ending September 30, 2010, Ralcorp recorded $4,049 million of net sales and $3,892 million for the fiscal year ending September 30, 2009. Net income was $209 million in FY2010 and $290 million in FY2009. [1] Although no single competitor competes with Ralcorp in all of its product categories, Kraft Foods, General Mills, and Kellogg Company are seen as its main competitors.

Ralcorp's main business strategy is growth through acquisition. Since 1997, Ralcorp has acquired 25 companies that manufacture private-brand, regional-brand or value-brand food products. In 2008, Ralcorp also acquired the third-largest ready-to-eat cereal manufacturer in the United States, Post Foods. [2]

In 2010, Ralcorp made several key acquisitions. On May 31, 2010, the Company acquired Canadian-based North American Baking Ltd., a leading manufacturer of private-brand specialty crackers in North America. Also in May 2010, Ralcorp acquired J.T. Bakeries Inc., a leading manufacturer of private-brand and co-branded gourmet crackers in North America. On June 25, 2010, the Company acquired Sepp’s Gourmet Foods Ltd., a leading manufacturer of foodservice and private-brand frozen griddle products. On July 27, 2010, Ralcorp acquired American Italian Pasta Company (AIPC), a leading manufacturer of store and regional brand dry pasta. [3]

Company Overview

Ralcorp is a producer of store brand foods and food service products. The Company sells products under individual labels to grocery, mass merchandise, and drug store retailers. Frozen bakery products are sold to in-store bakeries, restaurants and other food service customers.

Business and Financial Metrics

Fiscal 2010 Results (ended September 30, 2010) [4]

Ralcorp recorded $4,049 million of net sales in the fiscal year ending September 30, 2010 and $3,892 million for the fiscal year ending September 30, 2009 which is a 4.09% increase. Net income was $209 million in FY2010 and $290 million in FY2009 which is a 5.89% decrease. Top line revenue growth was due to increased sales from acquisitions, but net earnings decreased due to negative impacts on margins.

FY2009 FY2010 Change
Net Sales (M) $3,892 $4,049 +4.09%
Net Income (M) $290 $209 -5.89%

The negative margin impact was due to adjustments such as the absence of divested investment gains in FY2010 (included in FY2009 results), the impairment of goodwill and brand trademarks from acquisitions, merger and integration costs, and legal settlement costs related to plant closures. If these items are excluded, the adjusted diluted earnings per share increased 9% to $4.68 since Ralcorp benefited from acquisitions, higher base-business sales, lower raw material costs, fewer number of outstanding shares in FY2010.

Business Segments

Branded Cereal Products (24% of net revenue)[5]

The Branded Cereal Products segment includes the Post cereal business, which is manufactured and distributed under its own brand. Cereal brands include Honey Bunches of Oats, Pebbles, Shredded Wheat, Post Raisin Bran, and Honeycomb. In 2008, Ralcorp also acquired Post Foods, the third-largest ready-to-eat cereal producer in the United States. An internal sales staff and an independent sales agency manages sales in the grocery, mass merchandise, drugstore, and foodservice channels in the U.S., and a broker distribution systems manages the distribution internationally.

Other Cereal Products (20% of net revenue)[6]

The Other Cereal Products segment includes private-brand and value-brand cereals, as well as nutritional bars and natural and organic specialty cookies, crackers, and cereals. Ready-to-eat cereals are currently produced at three manufacturing facilities and uses flaking, extrusion and shredding technologies to produce 45 different types of ready-to-eat cereal. Hot cereals include old-fashioned oatmeal, instant oatmeal, and 3 Minute Brand hot cereals which are all produced at one facility.

Snacks, Sauces & Spreads (36% of net revenue)[7]

The Snacks, Sauces & Spreads segment includes the following products: crackers, cookie, snack nuts, candy, chips, sauces, and spreads.

Ralcorp produces cookies under the Rippin’ Good brand and crackers under the Ry Krisp and Champagne brands. In fiscal 2010, approximately 29% of the Snacks, Sauces & Spreads segment’s net sales was from crackers and cookies. The cracker and cookie business are produced to order, and production increases in the fall and winter as consumption increases. [8]

The snack nuts, candy and chips business produces a variety of jarred, canned and bagged snack nuts, chocolate candy, and corn-based snacks. Brands include Nutcracker, Flavor House, Hoody’s, and Medallion. In fiscal 2010, approximately 34% of the Snack, Sauces & Spreads segment’s net sales was snack nuts, candy, and chips. The snack nut and candy products are mostly produced to order and shipped directly to customers. Inventories are stored in warehouses during times of peak demand.

The sauces and spreads business includes dressings, syrups, peanut butter, jellies, salad dressings, sauces, and non-alcoholic drink mixes. In fiscal 2010, this business provided approximately 37% of the Snacks, Sauces & Spreads net sales. Approximately 86% of its net sales was to retail customers and the remaining 14% was to foodservice, contract and other customers.

Frozen Bakery Products (17% of net revenue)[9]

The frozen bakery products segment includes pancakes, waffles, French toast, and dry mixes for bakery foods. This business uses both make to order and make to inventory production scheduling processes. Customers of this segment are foodservice customers such as large restaurant chains and distributors of foodservice products, retail grocery chains, and mass merchandisers. In fiscal 2010, approximately 36% of the business’s net sales was griddle products, 25% was breads, rolls and biscuits, 30% was dessert products and 9% represented frozen dough and dry mixes. Approximately 35% of its net sales was in the foodservice channel, 42% was to in-store bakeries and 23% was retail.

Pasta (3% of net revenue)

The Pasta segment produces approximately 300 different shapes and sizes of pasta products in bulk packages for institutional customers and individually-wrapped packages for retail consumers. The types of pasta produced include spaghetti, fettuccine, lasagna, and rigatoni. Brands include Pennsylvania Dutch, Heartland, Golden Grain, and Mueller’s. The two primary customer markets are the retail market and the institutional markets. The retail market includes grocery, mass merchandise, and drugstore channels that sell branded and private-brand pasta to consumers. The institutional market includes foodservice customers that supply restaurants, hotels, schools and hospitals and other food processors that use pasta as a food ingredient. In fiscal 2010, approximately 80% of sales in this segment was in the retail channel and 20% was institutional.

Key Trends and Forces

Ralcorp relies on growth through acquisition and base-business.

Ralcorp states that its main strategy of growth is through acquisition and growth in its base-business. Increases in net sales in fiscal 2010 compared to fiscal 2009 was the result of acquisitions and base-business growth. In 2010, Ralcorp acquired four companies--North American Baking Ltd., J.T. Bakeries Inc., Sepp’s Gourmet Foods Ltd., and American Italian Pasta Company (AIPC). Although Ralcorp saw top line revenue growth in fiscal 2010 compared to fiscal 2009, net earnings in fiscal 2010 of $208.8 million ($3.74 per diluted share) were down $81.6 million, This is due to factors such as the impairment of goodwill and brand trademarks, merger and integration costs, and legal settlement costs related to plant closures. Excluding these items, adjusted diluted earnings per share increased 9% to $4.68 due to higher base-business volumes, lower raw material costs, fewer number of outstanding shares in fiscal 2010. [10]

Ralcorp faces a mature market and strong competition.

Each of the five business segments that Ralcorp competes in is a mature market with many competitors. Pricing and volume are down in 10 of the 12 categories in which Ralcorp competes. [11] Competitors engage in promotional discounting, and consumers are price sensitive due to the recent recession. Despite the demand for low prices, Ralcorp management plans to raise prices in every category except Post cereal. At the same time, competitors such as General Mills and Kelloggs are implementing list price increases of their products as well. Kraft began increasing its cookies and crackers product prices in 3Q 2010. [12] Ralcrop must respond strategically to its competitors' adjustments in product prices.

Ralcorp faces increasing commodity prices.

Ralcorp faces declining margins due to increasing commodity prices. Management indicated that input costs would be $200 million higher in FY2011 compared to FY2010 due to recent commodity inflation. [13]Since commodities represent ~70% of RAH’s cost of goods sold, the $200 million increase in commodity costs would result in a 10% YoY increase in cost of good sold. Ralcorp plans to respond to these increasing commodity prices by increasing the list prices of its products.


Some of Ralcorp's main competitors include Kraft Foods (KFT), General Mills (GIS), and Kellogg Company (K).

  • Kraft Foods (KFT) is a producer of confectionaries, foods, and beverages, with well-known brands such as Cadbury, Oscar Mayer, Nabisco, Oreo, and Philadelphia Cream Cheese. Kraft has begun implementing price increases in several product categories, including cookies and crackers in which it closely competes with Ralcorp. Resultingly, during Q3 2010, Kraft's business revenue increased 230 basis points and the price increase was the primary driver of organic sales growth. [14]
  • General Mills (GIS) is a producer of cereal, yogurt, ice cream, canned soup, and frozen dough products. Ralcorp competes with General Mills mostly in the cereal and frozen dough business segments. General Mills recently announced a price increase on a portion of its portfolio starting on November 15, 2010, while Ralcorp has maintained stable prices. [15] General Mills has also noted that aggressive promotional activity has not helped grow their cereal revenue. [16]
  • Kellogg Company (K) is a producer of cereals and snacks with brands such as Kellogg's Corn Flakes, Frosted Flakes, Corn Pops, and Rice Krispies. In the past two years, Kellogg has developed whole grain products and reduced sugar in its cereal products, responding to pressure from government regulators. Kellogg expects to continue in developing innovative products that satisfies government regulations while catering to consumer demands. [17] In terms of price and cost saving strategy, Kellogg expects increases in price of 2% on a portion of its portfolio and reductions in promotion spending of 3% for 2011.[18]

While the products that Ralcorp offers are similar to these competitors, Ralcorp's brands focuses on private-label and value-label products. As a result, Ralcorp sustained a competitive advantage during the economic recession due to more competitive prices.

Company Revenues (M) Net Income (M) EPS
Ralcorp Holdings (RAH) $4,049$209$3.79
J.M. Smucker Company (SJM) $4,605$494$4.15
General Mills (GIS) $14,797$1,531$2.32
Kellogg Company (K) $12,575$1,212$3.17
Kraft Foods (KFT) $40,386$3,021$2.04

Data from company FY 2010 10-K.


  1. FY2010 10-K
  2. FY2010 10-K
  3. FY2010 10-K
  4. FY2010 10-K
  5. FY2010 10-K
  6. FY2010 10-K
  7. FY2010 10-K
  8. FY2010 10-K
  9. FY2010 10-K
  10. FY2010 10-K
  11. Credit Suisse Research Report 12/6/2010
  12. William Blair & Company Research Report November 22, 2010
  13. Suntrust Robinson Humphrey Research Report November 10, 2010.
  14. William Blair Research December 2010
  15. William Blair Research December 2010
  16. BB&T Capital Markets Research November 2010
  17. William Blair Research December 2010
  18. William Blair Research December 2010
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