Investments, Birds Eye acquisition seed future growth for Pinnacle Foods Group.

Talk about a field trip. One mid-summer afternoon found Pinnacle Foods Group executives tromping around a central Minnesota farm field – more than a thousand miles away from the company’s home office in Mountain Lakes, N.J.

Officials were quite literally minding their peas and Q’s. This July day had farmers harvesting peas for a Birds Eye® frozen vegetable plant in nearby Waseca, Minn. As for Q’s, Pinnacle Chief Executive Officer Bob Gamgort found he had too many questions – and he couldn’t pass up the opportunity to ride inside one of three 13-foot pea harvesters.

Later, Gamgort was smiling and walked up to have his picture taken.

“It’s amazing how efficient these machines are at harvesting this field. However, with a top speed of only 2 miles per hour, they aren’t going to set any speed records,” he said.

By comparison, life has been moving faster at Pinnacle, a diversified CPG company whose well-known frozen and dry retail brands rank No. 1 or No. 2 in eight of 12 supermarket categories.

Pinnacle was a $1.5 billion company in 2007 when New York City investors Blackstone Group bought the business from affiliates of J.P Morgan Partners, J.W. Childs Associates, CDM Group and former bondholders of Aurora Foods. At the time, Pinnacle’s frozen food portfolio included Hungry-Man® and Swanson® entrees, Aunt Jemima® breakfast entrees, Celeste® pizza, Mrs. Paul’s® and Van de Kamp’s® seafood, and Lender’s® bagels.

Blackstone soon added more names to Pinnacle. A new management team would include company veterans such as Craig Steeneck, chief financial officer, and Chris Kiser, chief customer officer. Both men had broader industry leadership experience and led a broad range of functions in addition to their traditional CFO and CCO roles. In late 2008, Pinnacle hired Sally Genster Robling as executive vice president and chief marketing officer. Robling previously held similar marketing and general management responsibilities at Trane Inc., Campbell Soup Co. and Kraft Foods.

Gamgort, a veteran of Mars Inc., Major League Baseball and Kraft Foods, then joined Pinnacle in July 2009.

“I was fortunate to be able to select from a number of options and I joined Pinnacle for three reasons,” he notes. “First, Pinnacle has great brands with high awareness that have the ability to endure shifts in the marketplace. I believe these brands – coupled with our investments in enhanced consumer insights and innovations – continue to have untapped potential.

“Second, I love our team here. We have a lean group of highly experienced professionals. After working for larger companies, I wanted to work with a smaller, nimble, action-oriented company. Third, Blackstone is a wonderful partner. Their vision for Pinnacle’s brands and team involves more of a transformation. Part of that ‘end game’ is to take this company public. With that goal in mind, in means we’re in the process of building a company for the long term.”

Four months after Gamgort started, Pinnacle Foods Group announced a $1.3 billion deal to acquire Birds Eye Foods Inc., Rochester, N.Y. Completed last December, the deal netted another $0.9 billion in annual sales, of which, approximately $0.6 billion involved sales of Birds Eye frozen vegetables, fruit and side dishes. That deal raised Pinnacle Foods to mid-cap investment status, increased the number of manufacturing sites to 14 and brought the total employee count to 4,600 people.

Last but not least, the deal gave Pinnacle more than $1 billion in total frozen food sales – ranking it fifth among the largest retail frozen food processor-suppliers. In conjunction, Pinnacle promoted Robling to president of a newly formed Birds Eye Frozen Division.

Behind the scenes, officials say Pinnacle also has invested heavily in product quality and food safety, processing and packaging equipment upgrades and comprehensive consumer insights research.

It is for these reasons – a pivotal acquisition and for timely, competitive investments – that Refrigerated & Frozen Foods honors Pinnacle as the magazine’s 2009-10 “Frozen Food Processor of the Year.”

“The [Birds Eye] acquisition made strong strategic sense. It creates value, strengthens the company’s financial position and gives us scale in frozen,” says Gamgort. “Although it’s evolved slowly and been one of the more ‘quiet’ trends, NDP Group data show that the percent of dinners involving frozen products has risen from 9 to 16 percent during the past 20 years.

“These products are absolutely on-trend with consumers’ increased interest in quality, convenience, health and nutrition,” he continues. “We know we’re in the right place in the store and – because we’re in all segments of the freezercase (outside of ice cream) – we believe we can leverage more category insights to add value to our customers. Meanwhile, we can compete with anyone because of our scale, speed, agility and an aggressive, entrepreneurial spirit.”

Case in point. To better serve retail customers, Pinnacle combined its legacy Pinnacle and Birds Eye sales, manufacturing and supply chain operations. Just six months after the close of the acquisition, it was able to offer customers the advantage of placing just one order for all Pinnacle frozen products, arriving on just one truck and with just one invoice.

“It’s difficult to compete in consumer goods without scale,” says Steeneck, a 20-year CPG veteran. “Even though Pinnacle Foods’ legacy portfolio had a number of good brands, the deal for Birds Eye gave us a powerhouse brand in vegetables and complete bagged meals, as well as greater overall scale.”

Steeneck relates that Pinnacle originally planned a two-week road show to meet investors and raise $1.1 billion to acquire Birds Eye Foods. In the end, Pinnacle officials never left their own conference room and secured the necessary funding in just one morning.

“Investors saw that our synergies made sense,” he says. “[Quick financing] was a wonderful statement about their commitment to this portfolio. It also speaks about the quality of the management team, which is as strong as I’ve been around. We’re demonstrating our capacity to integrate the businesses and get things done.

“The next piece is to work on a sustainable productivity program – where we’re improving manufacturing and driving cost savings,” he says. “It also means taking a holistic view to improve the efficiency of our trade promotional activities. The deal for Birds Eye was a game-changing event for Pinnacle and we believe the future is bright.”

Pinnacle officials acknowledge that the macro food industry environment is challenging. In a second quarter earnings statement this August, Pinnacle reported that its branded retail frozen food sales grew slightly during the six-month period ended June 27, 2010, while total company retail sales were roughly flat.

Even so, officials note that product performance enabled Pinnacle to gain share on brands representing more than 80 percent of its portfolio. Despite limited sales growth, Steeneck says consolidated EBITDA increased 14 percent during the first half of 2010, due to favorable commodity purchases and increased productivity.

It’s important to note several actions behind the scenes. Although it closed Birds Eye Foods’ Rochester, N.Y., headquarters, Pinnacle kept Birds Eye’s research and development facilities in Green Bay, Wis., and expanded the R&D team’s responsibilities to encompass all frozen products. Meanwhile, as mentioned, the company is investing in original consumer insights research across the entire freezercase.

“Our frozen team is aligned with our marketplace goals to enable Pinnacle Foods to operate as a leader,” says Robling. “Our food-driven culture is made up of vegetable people who know how to grow quality Birds Eye vegetables – as well as culinary and product development people who have the skills to drive brand renovation and innovation.

“My experiences with previous employers have given me an outsider’s perspective – not just of a company but also this industry,” she continues. “It’s made me extremely aware of the power of marketing. At Trane, my role was ‘change agent’ and my mission was to drive growth through the consumer. Now, because of Pinnacle’s dedication to renovation and change, I regard that earlier experience as invaluable.”

Gamgort picks up that theme and shares a story. However, this moment occurred back in New Jersey.

“We brought in our top 80 managers and realized that they have a collective 2,000 years experience with blue-chip companies,” he says. “We also recognized that nearly half had joined as a result of the Birds Eye acquisition or were brought on by Blackstone after its acquisition of Pinnacle.

“I told them, ‘What an opportunity we have to question the status quo and create a new company. During the next five years, that’s exactly what we intend to do.’” 

At a glance: Pinnacle Foods Group

Headquarters: Mountain Lakes, N.J.
Top executive: Bob Gamgort, chief executive officer
Annual sales: Approximately $2.6 billion

Birds Eye Frozen Division
Brands / Products – Birds Eye multi-serve meals, entrees, vegetables, side dishes and fruit; Aunt Jemima breakfast entrees; Mrs. Paul’s, Van de Kamp’s seafood, Hungry-Man, Swanson dinners and entrees; Celeste pizza; Lender’s bagels 

Duncan Hines Grocery Division
Brands / Products – Duncan Hines baking mixes and frostings, Vlasic pickles, peppers and relish; Open Pit barbecue sauces; Comstock, Wilderness pie fillings; Mrs. Butterworth’s, Log Cabin syrups; Bernstein salad dressing; Armour, Nalley and Brooks canned meats

Specialty Foods Division
Brands / Products – Tim’s Cascade, Snyder of Berlin snack products


SIDEBAR

Ingredients for change
Powerhouse R&D center, product quality and marketing investments point to brighter future.

It’s a fact of life in food … sort of like the birds and the bees. Except we’re talking about frozen meals and vegetables.

Any winning new food product needs the right mix of ingredients. Likewise, a winning product development and marketing program needs a balance of consumer insights, research and development, production spending, packaging work, advertising, promotion and brand positioning.

Perhaps the first time in its history, Pinnacle Foods has just the right pieces in place. When it purchased Birds Eye Foods last January, Pinnacle kept Birds Eye’s Green Bay, Wis., R&D center, the powerhouse behind Birds Eye’s innovative Streamfresh® microwave packaging. Behind the scenes, Pinnacle’s investor owner, The Blackstone Group, boosted capital spending for new processing equipment and packaging, new product development and product quality improvements, consumer insights research and advertising.

“Pinnacle Foods is now positioned to operate as a true leader and our frozen team is better aligned with the marketplace,” says Sally Genster Robling, Birds Eye Frozen Division president. “Our food-driven culture is made up of vegetable people who know how to grow quality Birds Eye vegetables – as well as culinary and product development people who have the skills to drive brand renovation and innovation.”

She continues, “I’m particularly proud several things. We revitalized Van de Kamp’s with a switch to 100-percent whole filets. We renovated Hungry-Man with new packaging graphics and new tray dimensions. The new tray means that one extra variety fits on a freezer shelf.  I’m also proud of Birds Eye’s continued innovation. There, our new Steamfresh Lightly Sauced offerings combine aspects of microwave steam convenience with added flavor.”

Birds Eye also adds on-trend flavor profiles. Among nine new Lightly Sauced varieties debuting in July 2009 and July 2010 were new Roasted Red Potatoes with Chive Butter and a new Penne and Vegetables with Alfredo Sauce.

Brought in to manage Birds Eye’s future growth was 15-year global CPG veteran Rodrigo Troni. Most recently chief marketing officer at Sabra Dipping Co. (the joint venture between Pepsico Inc. and Strauss Group), Troni joined Pinnacle this summer and now serves as vice president of marketing for the Birds Eye brand and business.

“By focusing on innovation, variety and great taste, Birds Eye has done a wonderful job of bringing fresh vegetables – in frozen form – to the consumer’s table,” he says. “We will continue reaching out to consumers in a way that connects strongly with their needs.

“I think it’s important to simplify the shopper experience, which appears to be confusing in the [frozen vegetable] category,” he concludes. “We will continue to expand Birds Eye and provide great-tasting, nutritious solutions while we work on promotions that provide more of a ‘total solution’ for consumers. For example, we have the potential to make consumers’ lives easier by combining our vegetables with proteins from different, complementary brands.”

Pinnacle also has invested in its own complementary brands. During the past two years, officials say they have invested in numerous product quality upgrades, including a shift to 100-percent whole filets for Van de Kamp’s (Mrs. Paul’s already was there). Still more efforts involved new Aunt Jemima whole grain offerings as well as increased TV advertising and multi-media promotion.

Just last month, Pinnacle also refreshed its Hungry-Man frozen meal line with three new Pub Favorites. Officials say meal features a protein matched with bold, alcohol-infused sauces and a range of signature sides. Varieties include Chopped Beef Steak (with Brewhouse mushroom gravy), Beer Battered Chicken and a Grilled Bourbon Steak Strip. Each 16-ounce (one pound) meal retails for just $3.59.

“There’s hungry and there’s really hungry. Hungry-Man is only the solution for both types of hunger,” says Senior Brand Manager Kristen Thompson. “Our meals provide hearty portions of the food men love. The new Pub Favorites line consists of unique meals you would find at your local pub, only you can enjoy them in the comfort and convenience of your own home.”

And that’s exactly how the Birds Eye Frozen Division intends to complete – by giving consumers more on-trend products that are ready to eat whenever the need arises.

“We are an outward-looking company,” concludes Robling. “We are committed to winning in the marketplace, delighting the consumer and partnering with the customer.”