OAK BROOK, ILL. — In the wake of TreeHouse Foods divesting its meal preparation business last year, management has shifted its focus to scaling its remaining snacks and beverages businesses. During the company’s June 13 investor day presentation, executives highlighted recent investments meant to deliver top- and bottom-line growth.
“We are going to be shifting from cost cutting to capability building,” said Steve Landry, chief operations officer. “We are trying to achieve much higher goals than we have ever thought we could ever achieve before. This is forcing us to think differently. We can't do the same thing over and over and expect different results.”
Steven T. Oakland, president and chief executive officer, added, “To be successful in private label, you need depth … but depth is much more than quality, price and service. You've got to have the capabilities to help the customer grow.”
Keys to TreeHouse’s growth include competing in highly appealing categories and building winning capabilities, said Timothy J. Smith, division president of snacking and beverages. The focus on snacks and beverages places the company squarely in growth categories. Now management is making investments to add capabilities.
“We understand our competitive position,” Mr. Smith said. “So, we can compete in a better way over time — that's cost, quality, service and the full suite of offerings. We see the growth runway.
“Off of those spaces that we play, are we taking advantage of the white space that exists within the space on those core items? Do we have the distribution at our core customers like we would like to have? Where we don't, we're going after it.”
Using TreeHouse Foods’ crackers business as an example, Mr. Smith said the company is adding capacity.
“The total addressable market (crackers) is massive,” he said. “We can grow here. (It has) strong category trends. Consumers and snacking occasions are a tailwind for this category, and incredibly relevant to the retailer.”
The company is taking a two-prong approach to adding capacity. First, it’s unlocking capacity on existing cracker lines and, second, it’s investing to enhance capacity — converting lines from slower-moving categories to faster-moving ones through investments in new lines.
The company also made a $14 million acquisition in April to enhance its pretzel-making capabilities.
“We have historically played in traditional and filled pretzels, two very nice businesses for us,” Mr. Smith said. “We've watched the seasoned (pretzel) space for a bit. As it began to mature, we built our internal plan and made an investment in internal capacity. As we were doing that, we identified an external co-manufacturer that had some assets that were complementary to our internal investment and took the opportunity to step into it more quickly as we had a number of customers ask again to get into this space.”
In coffee, TreeHouse Foods made an acquisition to grow beyond its single-serve pods and ready-to-drink businesses. On June 8, the company said it was acquiring Farmer Brothers’ Northlake, Texas, coffee facility for approximately $100 million. The plant features grinding, flavoring and blending capabilities.
“The Farmer Brothers acquisition overnight gives us a leadership position in the space that enhances our ability through green coffee purchasing, through formula development — we can now create custom formulas for our strategic partners — through roasting and grinding, flavoring and a fuller pack assortment. This investment takes us from a slight disadvantaged position in coffee to now being an advantaged player in this space,” Mr. Smith said.
As part of the investor day presentation, TreeHouse Foods updated its full-year guidance of net sales growth of 6% to 8%, which represents a range of $3.66 billion to $3.73 billion and adjusted EBITDA to be in a range of $355 million to $370 million.
TreeHouse Foods investing in growth - Food Business News
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