(Reuters) - Long-time suitor ConAgra Foods Inc finally sealed a deal to buy private-label foods maker Ralcorp Holdings Inc for $5 billion, to tap into the booming business for packaged food that stores sell under their own brands.
Demand for private-label foods has outpaced growth in branded packaged foods as consumers buy more lower-priced options marketed by stores. ConAgra Chief Executive Gary Rodkin said he expects that growth to continue.
Combining Ralcorp's scale as a leading private-label provider with ConAgra's innovation and category management, "you've got a very powerful story in a very fragmented private-label industry," he said.
The deal, broadens ConAgra's exposure to faster-growing retailers with robust private-label brands, like Whole Foods and Costco, he said.
"We'll be able to capitalize on the long-term growth momentum in the private label business, which has been growing about twice as fast as branded on a dollar basis over the last 13 years," Rodkin said on a conference call.
Ralcorp is the top private-label maker of large and growing categories like cereal, pasta, crackers, jams and jellies, syrups and frozen waffles, he said.
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Good for shareholders. Not so good for consumers.