America’s about to see a new packaged food giant, but thanks to the way products are branded you’ll never know. ConAgra, a very important but somewhat obscure holding company for packaged food brands, announced today an agreement to buy Ralcorp—an even more obscure but still quite important packaged food company—for the fine price of $5 billion.
The significance of Ralcorp is, by design, obscured from people who aren’t in the industry. That’s because Ralcorp’s main business these days (other businesses like Post cereals and Purina pet products originated as Ralcorp entities but have since been sold or spun off) is the manufacture of “private label” brands. That’s the stuff you buy at the supermarket that’s either generically branded with the store’s brand or else has some special in-house brand. The private label business has been doing well, either because cash-strapped consumers are getting thriftier or because savvier consumers are less willing to pay for pointless branding. ConAgra’s been after them for a while, and now they’ve got ‘em.
And what does ConAgra make? All kinds of stuff, ranging from gross Hunt’s ketchup (try Heinz!) and Egg Beaters (try eggs!) to solid products such as Hebrew National hot dogs (interestingly, there’s some legal and theological dispute as to whether these are truly kosher), Wesson cooking oils, and that weird Chef Boyardee stuff I used to love to eat as a kid over at my friend Jeff’s house but haven’t had in years. These are mostly considered “second-tier” packaged food brands, and in a climate of growing polarization they’ve decided it’s better to move down by acquiring Ralcorp than to try to move up into the glorious world of premium packaged food.
The practical implications of this for your life are probably nil, but M&A activity is generally a good sign of financial health.