ConAgra seeks edge with healthier pizza quesadilla
ConAgra Foods Inc. is testing a pizza dish for schools made without partially hydrogenated oil and may expand the product nationally in response to demand for healthier student lunches, according to a company executive.
The company sold its Max Whole Grain Pizza Quesadilla to a U.S. school district and will sell it to more by yearend, said Chris Meinerding, ConAgra's school food-service marketing director. She declined to identify the district. Partially hydrogenated oil contains trans fat, which has been implicated in heart disease, according to the American Heart Association.
Locally, ConAgra has operations in St. Charles, Naperville, Glen Ellyn.
ConAgra, also the maker of Egg Beaters and Healthy Choice frozen dinners, is addressing calls for more whole grains and no trans fats in the 31 million lunches served daily on average at public schools. Industrywide sales of food sold to U.S. schools will rise this year, while the recession cuts revenue in other areas of food service, according to Technomic Inc.
"Even when the economy is struggling, there are always going to be pockets of opportunity," said Darren Tristano, a research analyst for Technomic, a Chicago-based restaurant consulting firm. "This is an area that will likely lead to a greater opportunity for suppliers."
ConAgra's food-service sales to schools are more than $100 million annually, and Max is the biggest brand in that unit, said Teresa Paulsen, a spokeswoman at the Omaha, Nebraska-based company. Total revenue rose 10 percent to $12.7 billion in the fiscal year through May, according to a company filing.
In addition to the pizza quesadillas, ConAgra is developing other school lunch products that reduce or eliminate certain ingredients deemed less healthy, Paulsen said. She declined to elaborate, citing competition concerns.
U.S. sales of food and non-alcoholic beverages served outside the home will fall 2.6 percent in 2009 after rising less than 1 percent last year, according to Technomic. The drop is driven by a decline in dining at restaurants and bars, which account for two-thirds of the total.
Sales to primary and secondary schools will increase 3 percent after jumping 4.5 percent in 2008, according to Technomic, as rising unemployment pushes more kids into federal free and reduced-price lunch programs.
The average daily participation in the National School Lunch Program will rise to 32.1 million students in fiscal 2010, from about 31 million this year, according to the Agriculture Department.
A government push for more disclosure of food ingredients in school lunches will further boost demand for healthier meals, Tristano said in an interview Aug. 31.
During the past five years, ConAgra has added whole grains to almost two-thirds of the pizza and handheld food, such as bread sticks, it sells to schools, Paulsen said. The company also cut salt and fat content, she said.
"We are constantly looking to improve the nutritional profile of our products that we sell to schools," Meinerding said in an Aug. 28 interview. "If we do not meet their requirements, certainly our sales are going to be eroding."
ConAgra rose 10 cents to $20.02 at 4:15 p.m. in New York Stock Exchange composite trading. They have advanced 21 percent this year.
Out of 14 stock analysts tracked by Bloomberg, 12 have hold ratings on ConAgra and two recommend buying the shares. The company's operating profit margins, while improving, lag behind peers in the food industry, said Craig Hutson, an analyst at bond research firm Gimme Credit LLC in Chicago.
"They are headed in the right direction," Hutson said. "There's still a large contingency of analysts that really need the company to prove to them that they can get to the next level."
The number of schools that agreed to make changes toward healthier lunches doubled in the past year to 5,100, said Ginny Ehrlich, executive director of the Alliance for a Healthier Generation. The four-year-old advocacy group, co-founded by former U.S. President Bill Clinton, helped negotiate a soda ban in elementary and middle schools in 2006.
ConAgra's new pizza quesadilla has no trans fat, compared with a half-gram in the original version of the product. It's filled with mozzarella and substitute cheese made of soybean oil and milk protein, and a salsa-style sauce.
The formula was adjusted to keep production costs and the price to schools at about the same level as the original, Meinerding said. That's an advantage to ConAgra, said Christopher Shanahan, an analyst at Frost & Sullivan Inc. in Mountain View, California.
"It was the cost that was the most inhibitive factor in terms of adopting healthier and healthier lunches," Shanahan said. "Schools don't have larger budgets for lunch. That's a fixed budget effectively."