In The News
September 6, 2007


Associated Press
ConAgra says recent product worries shouldn't hurt profit outlook

OMAHA, Nebraska: ConAgra Foods Inc. sought to reassure investors Thursday that consumer concerns about the company's microwave popcorn recipe and a salmonella outbreak that took its Peter Pan peanut butter off the market should not hurt the company's profit outlook.

The Omaha-based company does not anticipate consumer backlash because of recent headlines about its brands, and ConAgra still expects earnings per share of $1.48 for fiscal 2008, officials said at an investor conference.

Earlier this week, ConAgra announced plans to remove a buttery flavoring chemical from its microwave popcorn that has been linked to a lung ailment in popcorn plant workers.

And last month the company returned Peter Pan peanut butter to stores after a six-month absence because the peanut butter was linked to a salmonella outbreak that sickened more than 625 people.

ConAgra's executive vice president of research Al Bolles said he does not think popcorn will be a problem for the company because it is planning to remove the flavoring chemical diacetyl from its recipe sometime over the next year.

The chemical diacetyl occurs naturally in foods such as butter, cheese and fruits, and the U.S. government has approved its use as a flavor ingredient.

But it has been linked to cases of bronchiolitis obliterans, a rare life-threatening disease often called popcorn lung. The primary concern with diacetyl is for workers inhaling the chemical in manufacturing settings and not from eating microwave popcorn, according to the Flavor and Extract Manufacturers Association.

New concerns emerged this week because a doctor at Denver's National Jewish Medical and Research Center warned that consumers, not just workers, could be in danger from the buttery flavoring diacetyl.

"I'll just say that we are very comfortable with the food safety from a consumer standpoint of our product," Bolles said. "It's not going to be an issue for us because we are going to take diacetyl out of all of our popcorn, and we have been aggressively working on that. But there is no reason to be concerned."

The company does not release sales figures for individual products. But ConAgra's microwave popcorn brands, which include Orville Redenbacher and Act II, accounted for nearly 53 percent of the U.S. market for microwave popcorn over the past 12 months, according to the research firm Information Resources Inc. The firm's research doesn't include Wal-Mart stores and membership stores such as Costco.

In some ways, ConAgra's Peter Pan peanut butter faces a bigger challenge because it was missing from store shelves for so long.

ConAgra recalled all its peanut butter in February after government investigators linked a salmonella outbreak to peanut butter ConAgra produced at a Georgia plant.

ConAgra resumed shipping Peter Pan last month. The company faces several lawsuits filed by people who say they became ill after eating Peter Pan.

Dean Hollis, who leads ConAgra's consumer product's division, said he was optimistic about Peter Pan's prospects.

"It's very rewarding to see Peter Pan back on the shelf, so we're excited about that," Hollis said. "All of our consumer research shows the consumer was very excited to have us back. The customers have been phenomenal. And our distribution is actually ahead of where it was before."

ConAgra is planning to release its first-quarter earnings report later this month, so some details of the first peanut butter sales may be available then.

The company said in June that the peanut butter recall cost ConAgra $66 million (?48.28 million) before taxes during its last fiscal year and hurt peanut butter sales, which generated about $92 million (?67.31 million) in revenue in 2007 versus $147 million in 2006.

Analysts surveyed by Thomson Financial predict a profit of $1.49 per share, on average. Conagra's profit outlook excludes one-time items, as do most analyst estimates.

ConAgra also said Thursday that sales for fiscal 2008 to 2010 are expected to grow 2 percent to 3 percent annually and earnings per share for 2009 and 2010 should increase 8 percent to 10 percent per year, excluding one-time items.