A healthy choice for transition - Phil Fletcher appointed new CEO of food company ConAgra Inc - Cover Story

Chief Executive, The, Nov-Dec, 1992 by J.P. Donlon, Joseph L. McCarthy

Turnaround and acquisitions wizard Mike Harper took food leviathan ConAgra from poorhouse to penthouse. But new CEO Phil Fletcher, hamstrung by sagging brand loyalty and cutthroat price wars in frozen entrees, may find it hard to keep up the pace.

What's it like to follow a corporate legend? Ask Citibank CEO John Reed about the inevitable comparisons with Walter Wriston, nominally chairman emeritus of the entire banking industry. Check the pulse of Chrysler's heir apparent, Bob Eaton, each time Kirk Kerkorian tries to postpone Lee Iacocca's scheduled retirement at year end.

Similarly, you might expect the new CEO at food giant ConAgra, Phil Fletcher, to be wincing in the spotlight after stepping into Mike Harper's shoes in September. But he downplays the transition, quipping: "There's no way I'm going to be another Mike Harper. He's a size 14. I'm a 12."

Kidding aside, Fletcher knows comparisons are inevitable. Charles Michael Harper pulled Omaha, NB-based ConAgra from the brink of bankruptcy in 1974 and built it into a $20 billion powerhouse. He gobbled competitors and turned out blockbuster products as had few before him in the food business. When the dust cleared, ConAgra stood as the nation's second largest food company: Only the Kraft General Foods unit of Philip Morris is bigger, with annual sales of $30 billion.

In pillaging the food sector, Harper stockpiled an impressive arsenal of brand firepower--Butterball turkey, Orville Redenbacher's popcorn, Peter Pan peanut butter, and Armour luncheon meats--and developed a reputation for picking up acquisitions at a discount to their real value. Plunking down billions of dollars, he landed more than 100 companies, including Golden Valley Microwave Foods (1991), Beatrice Inc. (1990), and Armour Food (1983), and, in an age of specialization, Harper confounded conventional wisdom by offering products that span the entire food chain, from crop-protection chemicals to grains to flour to spaghetti; from poultry and meats to branded frozen entrees and desserts. But it's hard to argue with the results: Ten-year compound sales growth weighs in at 29 percent. If you bought 10,000 shares of ConAgra stock for $30,000 in 1974, today you would hold 135,000 shares valued at $5.5 million. Six years running, Harper has been among the ten finalists in CE's Chief Executive of the Year competition.

"Needless to say, it is a challenge to succeed Mike Harper," says Nomi Ghez, food analyst with New York investment bank Goldman Sachs.

Undoubtedly, Fletcher, 59, also faces more personal comparisons. His silver-gray hair combed neatly in place, he cuts a decidedly more polished--well, more CEO-like--image than Harper. Though both men share a passion for sports cars--Fletcher's latest is a jet-black 1991 Dodge Stealth--the new boss describes himself as "dull, old Phil." An operations commando "with black boots and a whip," he gained repute while forging efficiencies at H.J. Heinz, Campbell Soup, and Heublein. "No one has a keener eye for process on the factory floor," says James R. Tindall, president and chief operating officer of ConAgra Prepared Food Companies, roughly the position Fletcher held before being appointed corporate president and chief operating officer in 1989.

By contrast, Harper--a grizzly of a man at 6 feet 6 inches--prefers rumpled short-sleeved shirts and well-worn shoes. Raiment aside, however, there are few CEOs more flamboyant. Harper earned a pilot's license several years ago, and to celebrate his 60th birthday, he flew a Cessna 182 from San Francisco to New York. Upon winning tax concessions from the state of Nebraska after a nasty fight in 1987, he dressed up like Gen. Patton and serenaded members of the Omaha press club in an effort to mend political fences. Ever the corporate predator, he proudly displays a plaque in his office of two vultures perched on a branch. "Patience my ass," says one bird to the other. "I'm gonna go kill somebody."

Fletcher may be forced to discard such bravado as he navigates a transition period both for ConAgra and the broader food industry. Domestic sales growth seems likely to taper somewhat, compared with the 1980s when declining tax rates and cheap raw materials propelled top food companies to double-digit earnings gains. A new thriftiness among consumers has chipped away at brand loyalty, effectively capping pricing premiums. To boot, the frozen entree business is entrenched in an ugly war in which prices have plunged 30 percent in the past year.

But the new CEO also faces difficulties more specific to ConAgra. Amid slimmer profit margins at home, Fletcher has set as a goal the expansion of ConAgra's beach-head in tough-to-crack international markets. Currently, overseas operations comprise less than 10 percent of total sales, compared with Sara Lee (44 percent) and Heinz (42 percent). In addition, while other companies are cutting costs to the bone, Fletcher will hold fast to a more expensive, decentralized strategy that hands near-total autonomy to independent operating companies. The approach boosts motivation and productivity, and enables ConAgra to attract highly skilled managers, he contends. But the downside: Each of ConAgra's business units maintains separate--in some cases, overlapping--operations and personnel. IOCs are free to purchase raw materials, including meats and grains, outside the company that they could buy from one another. Sometimes Mission Control in Omaha is left in the dark: Fletcher recalls finding out in a newspaper article that Minneapolis-based Cargill Inc. was a major supplier to a ConAgra unit. But he promises closer coordination among subsidiaries: "We need to buy as a $20 billion company. I can't afford to let $1 million of shareholder value slip away simply because managers can't figure out how to work with one another."