Milling & Baking News - August 23, 2011 - 14

Business 

Ralcorp executives offer upbeat outlook for Post new products
ST. LOUIS — With the separation of Post Foods from Ralcorp Holdings, Inc. looming, company executives earlier this month said they have identified over $200 million in additional revenue opportunities in ready-to-eat cereal and adjacent categories. “We have developed a detailed and multi-year new product plan prioritized by size and risk,” David Skarie, co-president and co-chief executive officer of Ralcorp, said during an Aug. 9 conference call with analysts. “We believe this disciplined and multiyear approach to new product development is a first for Post. Two-thousand eleven was just the beginning and we are excited about our future new product pipeline.” Mr. Skarie said Ralcorp spent much of the first three quarters of 2011 focusing on improving Post’s new product pipeline. Those efforts included the launch of Fruity Pebbles Treats and Honey Bunches of Oats Raisin Medley, which gained a 4.4% and 2.6% market share of their respective categories. Fruity Pebbles Treats, which mirror Fruity Pebbles cereal but in bar form, are the brand’s first foray outside of ready-to-eat cereal, and Mr. Skarie said Post has taken advantage of the Pebbles brand strength to resonate with consumers. Meanwhile, he called Honey Bunches of Oats Raisin Medley “a unique product,” featuring three different kinds of raisins. The new variety has strengthened Honey Bunches of Oats’ standing as the No. 3 brand in the R.T.-E. cereal category, he said. Another innovation that served Post well during the first nine months of fiscal 2011 was the reintroduction of Great Grains. With an assist from celebrity chef spokesperson Curtis Stone, Great Grains’ “less process for better nutrition” message resonated well with consumers searching for healthier alternatives, Mr. Skarie said. As a result, Great Grains volumes were up 22% over the first nine months of fiscal 2010, and the brand

has gained 0.2 share points since the reintroduction, he noted. “We are supporting these initiatives with enhanced advertising and promotion spending, which rose 47% during the quarter,” he said. “We feel that shifting our marketing investment from trade to advertising and consumer spending is the right direction for our business and for the ready-to-eat cereal category. We are excited about our early successes with this approach.” Also during the call, Scott Monette, corporate vice-president and treasurer, elaborated on the $32.1 million

impairment of trademarks at Post on the company’s Shredded Wheat and Grape-Nuts brands. “When we acquired Post in 2008, we established revenue estimates for each of the major brands and set trademark values accordingly,” Mr. Monette said. “These brands have not been as responsive to our marketing efforts as we originally planned, so the trademark values have been reduced. Unfortunately, accounting rules do not allow us to reflect the additional value in the Honey Bunches of Oats, Pebbles or Great Grains brands.” Calling Shredded Wheat and Grape-Nuts “two of the most distinct brands in the Post portfolio,” Mr. Skarie added that the company intends to change its advertising approach to reflect the health positioning enjoyed by both brands. That change includes focusing on digital and social media platforms. “Using digital and social media will allow us to target our advertising and promotion more precisely, and leverage our investment more effectively,” Mr. Skarie said. “We remain optimistic about the future for both Shredded Wheat and Grape-Nuts, and look forward to implementing our new advertising approach.” In issuing its financials for the third quarter the same day, Ralcorp said net income in the period ended June 30 totaled $28.3 million, equal to 51c per share on the common stock, down 47% from $53 million, or 97c per share, in the same period a year ago. Excluding special items, though, the company earned $1.15 per share, up from $1.11 per share in the same period of fiscal 2010. Net sales in the third quarter rose 22% to $1,171.9 million from $962.4 million. MBN company’s proposal. The $94 cash offering was an increase over the $86 cash offering ConAgra made to Ralcorp this past May. ConAgra Foods said Ralcorp’s spinoff plan does not provide competitive value to Ralcorp’s shareholders relative to ConAgra Foods’ proposal. “In contrast to the uncertainty related to the proposed spin-off, ConAgra Foods’ all-cash $94 per share proposal provides Ralcorp shareholders with certainty and upfront value,” the company said. MBN
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Ralcorp rejects ConAgra’s second takeover proposal
ST. LOUIS — The board of directors for Ralcorp Holdings, Inc. unanimously rejected a second proposal by ConAgra Foods, Inc., Omaha, to combine the two companies at $94 per share in cash. The Ralcorp board of directors said the proposal is not in the best interests of Ralcorp and its shareholders. “After careful review, our board of directors has determined that the separation of Post Foods from Ralcorp will better allow each company
14 / August 23, 2011 Milling & Baking News

to focus on strategies specific to their particular businesses, thereby unlocking additional significant value for our shareholders,” said William P. Stiritz, chairman of the board for Ralcorp, in a letter to ConAgra Foods. “We are firmly committed to this plan and therefore, we have unanimously determined that we have nothing further to discuss.” Gary Rodkin, chief executive officer of ConAgra, said he was disappointed by the summary rejection of his

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Milling & Baking News - August 23, 2011

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