ConAgra JV to Invest $150M for Netherlands Plant Extension
The joint venture (:JV) business of U.S.-based packaged food company ConAgra Foods, Inc. (CAG) and the Netherlands’ Meijer Frozen Foods have planned to shell out roughly $150 million for intensifying the frozen potato business in Bergen op Zoom, the Netherlands. The new investment plan introduced by Lamb Weston/Meijer comes in the wake of ConAgra’s global growth strategy.
Investment Insights
Backed by the new investment, a second production line will be supplemented into the plant. The new chain will expectedly begin its operations in the middle of 2016. Notably, the entire investment will be funded by Lamb Weston / Meijer.
Paybacks of the Investment
The new production line will augment Lamb Weston / Meijer’s potato producing capacity. In addition to creating 50 jobs, the investment will boost the company’s French fry and frozen potato business.
The deal is consistent with ConAgra’s internationalization strategy. Global frozen potato consumption is predicted to improve by 1.8 billion pounds through 2018. Standing at this juncture, ConAgra aims to tap the burgeoning demand for frozen potato products through a strategic dual sourcing model.
Moving Forward
ConAgra is a prominent packaged food firm of North America. The organization offers specialized food and restaurant services across several economies worldwide.
Lamb Weston, a premier brand of ConAgra, offers sweet potato, frozen potato, vegetables and appetizers in the market. A strategic business alliance between ConAgra’s Lamb Weston trading segment and Meijer Frozen Foods was formed in 1994. The JV produces dried potato flakes and frozen potato products at five different manufacturing facilities located in Austria, United Kingdom and the Netherlands. However, these products are traded only under the Lamb Weston brand in more than 100 countries around the world.
Future Growth Prospects
ConAgra is confident about its financial performance in fiscal 2015. The company aims to stabilize its business through several cost-reduction programs and increased Lamb Weston foodservice segment sales.
In June, the company extended its frozen potato facility in Boardman. Next, the company kick-started its first plant in China by opening a new Lamb Weston potato dispensation facility in Shangdu, Inner Mongolia. The Chinese potato processing plant began its operations from Nov 20, 2014. Apart from the new $150 million investment in the Netherlands, ConAgra also aims to open new manufacturing facilities for sustaining the local sourcing and manufacturing activities in booming economies such as China. Such lucrative growth plans would surely escalate the company’s margins and earnings in the upcoming quarters.
With a market capitalization of $15.51 billion, ConAgra currently carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the industry include Aramark (ARMK), Pilgrim's Pride Corporation (PPC) and Sanderson Farms, Inc. (SAFM). While both Aramark and Pilgrim's Pride sport a Zacks Rank #1 (Strong Buy), Sanderson Farms has a Zacks Rank #2 (Buy).
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