ConAgra Sees Growth Amid Slump

CEO expects hot market for health-conscious foods, defends charges of windfall profits. INTERVIEW

CHARLES M. HARPER, Mike to his friends, was honored this month by the University of Chicago Graduate School of Business as its 1991 distinguished alumnus. Looking at ConAgra Inc., of which Mr. Harper has served as chairman since 1981, it's not hard to see why. The food and agribusiness colossus based in Omaha, Neb., was nearly bankrupt when Harper joined it as chief operating officer in 1974.

This year, he says, sales will reach $20 billion. Despite the recession, Harper adds, things ``certainly looks good'' for ConAgra's 1991 fiscal year, which ends in May, to be the 16th in a row for meeting tough financial objectives:

At least 15 percent per year after-tax return on year-beginning common shareholder's equity, with a multiyear average exceeding 20 percent. Last year's result was 24.3 percent

Earnings per share in excess of a 14 percent growth trend line from a 1973 base. Earnings grew 17 percent last year.

Last year ConAgra also ranked 12th among Fortune 500 companies in 10-year average annual returns to investors, at 35 percent.

The food and agribusiness arenas can be as controversial and competitive as they are profitable. In an interview, Harper shared his views on several of issues.

Farmers complain that the price they are paid for wheat is a fraction of the retail price of bread.

Dairymen have also seen milk prices decline by 30 percent in a year, even as retail cheese prices rose. That prompted Senate Agriculture Committee chairman Patrick Leahy (D) of Vermont last month to call for a federal investigation of ``windfall profits.'' Kraft General Foods, a ConAgra competitor, denied the charge but early this month cut its cheese prices 17 cents per pound.

Harper, of course, pleaded ignorance about Kraft's situation. As for ConAgra, ``our cheese pricing has gone up and down with the price of milk.''

Harper said he thought that farmers receive a fair price for their produce, based on the functioning of supply and demand laws taught in Economics 101. ``If consumers want to go out to the farm and get the corn, they can do that. If they want it delivered to their supermarket shelf, and properly preserved and packaged, then they'll do that. As far as I know, there are no monopolies in the food business yet, and if there are they should be broken up.''

The critical issue for the food business, Harper said, is getting industry and government to work together rather than be antagonists. ``The Japanese, when they go after market share, their government, their financial institutions, their labor, their management, businesses, gang up on it. They work together. Not us.''

``We've got example after example of Big Brother looking over your shoulder, instead of holding people accountable with very clear rules,'' Harper says.

One of ConAgra's subsidiaries, Monfort, is a meatpacking company. Rep. Tom Lantos (D) of California recently labeled that industry a ``disgrace'' because of work-related health problems. A former Monfort employee testified to a subcommittee headed by Lantos that a company supervisor consistently placed her in repetitive-motion jobs, despite contrary instructions from the company doctor.

``Our people have hired full-time PhD's in this area,'' Harper says. ``They conduct training programs. They conduct exercise programs prior to the start of shifts, they move people around, have a pretty good program, and we're still learning.

``We proposed to the federal government that we work with them to try to make an even better program. This was a cooperative proposal we made, and it was received very well. At the last minute, the task force that was going to work with us was disbanded. And within a month, why we were cited for a million dollars' worth of fines: `This form was mislabeled, that form was not filled out correctly.' It was all petty stuff, really petty.''

``Now, sure we had made some mistakes,'' Harper says. ``But we had aggressively spent a ton of money trying to do a good job here. And we had put our best foot forward. We want our workplace to be as safe as humanly possible. Why fine people on things like that? It's nuts.''

ConAgra invented a new kind of grocery item, food that is intended to taste good without being bad for the body. Marketed under the label ``Healthy Choice,'' the line of low-salt, low-fat frozen meals and entrees had sales of $190 million in 1990, its first year.

Prior to that introduction, Harper says, ``there were a lot of products aimed at the `diet' market. But no product aimed at the health market, other than health foods - but no mass market approach. That market segment has surprised everybody.''

Volume will hit $300 million this year, ``which is a phenomenal new product introduction in the grocery industry. I think someday it will be a billion dollar business, and will probably be the most important new product introduction in this decade,'' Harper says. Other food companies have jumped into the act, but ConAgra maintains the lead.

Does Harper see any risk in the fact that Americans seem easily swayed by the newest food fad or possibly-spurious health claim? For instance, what if the government suddenly announced that salt was good for you?

``If they do, then we'll put more salt in it,'' Harper says.

``What you try to do in consumer products,'' he explains, ``is to design products and test them that give people what they want. It's not government regulation that gives people what they want, it's hard research.''

``We sell some products that have higher fat and a higher sodium level, because there's a certain segment out there that wants that. We're not going to deny that to them. Some other competitor will supply it.''

``Now, through education that will probably go down. But there will still be substantial volumes of people that like salty things. And if they like them, they're going to get them. We will supply what people want.''

``For Healthy Choice and Healthy Foods, we will support more and more advertising for ourselves and increase that segment to the detriment of the fatty, salty products, but we will supply both,'' he says.

One of ConAgra's businesses sells crop protection chemicals and pesticides to farmers. Use of such substances on the farm has drawn increasing scrutiny from scientists who track waterborne and airborne pollution back to its sources. Consumers have also expressed concern about the possibility of chemical residues in food.

``We are environmentalists. We are good environmentalists,'' Harper says. ``I think that the farmer is a good environmentalist - probably the best in the world, in terms of the protection of his land - because he makes his living off of it. He's the one that drinks the water that comes from underneath his land.''

``Most people I know in the food business have kids and grandkids and they want to protect the environment for them, and they want a safe food supply - which we have.''

Harper mentions the Alar scare. (ConAgra does not make Alar or produce apples.) ``It's just a crying shame that emotion got in the way of good, scientific data. The Food and Drug Administration has to have the courage to stand up and say, what is correct from a technical standpoint.''

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