The new business currently exists as three separate segments within Ralcorp, beginning with the company’s legacy private brand ready-to-eat and hot cereal business. The second unit is Snacks, Sauces and Spreads, which Mr. Hunt said was created through 16 acquisitions and integrations and competes in 14 different categories. Less than a year ago, the division completed a consolidation of five different sub-segment headquarters into the company’s St. Louis headquarters and currently operates with a single, central sales, marketing, operations and finance team.
The final segment in the new business is the pasta unit, acquired in July 2010 with the purchase of American Italian Pasta Co.
Mr. Hunt cited Mr. Koulouris’s work in bringing together the disparate pieces of the Snacks, Sauces and Spreads segment in announcing the promotion.
“Rich successfully led the consolidation project in Snacks, Sauces and Spreads so he and his management team are experienced in these efforts,” Mr. Hunt said. “The business will be headquartered in St. Louis, and the Kansas City office will be closed at the end of the calendar year. The management team of this new business will include key leaders from across the Cereal; Snacks, Sauces and Spreads; and Pasta operating units.”
Explaining the strategic rationale for the move, Mr. Hunt said the dry grocery private brand business will have $3 billion in annual sales “with superior scale and capability.” He said the business competes in 22 different categories and holds top two share positions in 18 of these.
“We possess significant category knowledge and value-added capabilities, and we’ll effectively utilize the category management tools and consumer insights data that are critical to helping our customers grow,” Mr. Hunt said. “We will also have an unmatched private brand national supply chain. This new organization will allow us to take full advantage of our scale resulting in a leaner organization that will have one set of processes across all functions, including sales, marketing, customer service, research and development, logistics and operations.
“This streamlined structure is intended to enable the new segment to operate effectively and efficiently and provide the highest level of quality, customer satisfaction and service. We believe this new structure will enhance working relationships with our customers and create a more focused approach to the marketplace.
“We are instituting a national account structure whereby we will form regionally-based customer sales teams that will call on buyers of their products within a company, eliminating overlapping sales calls to the same buyer. This will allow us to create simpler, standardized internal processes and make it easier for our customers to do business with us.
“Further, we plan to provide more resources where needed, be more responsive to our strategic customers and easily assimilate new product offerings and acquisitions in the future.”
Beyond the consolidation’s strategic benefits, Mr. Hunt said it will generate significant cost savings — between $26 million and $31 million in fiscal 2013 with incremental savings the following year. The move is expected to lead to $17 million to $22 million of one-time expenses related to employee separation and related expenses. Half of these costs will be recorded in the current fiscal year with the balance in fiscal 2013, Mr. Hunt said.
