Sector News

TreeHouse Foods intent on making its size matter

February 26, 2019
Food & Drink

Steven T. Oakland, president and chief executive officer of TreeHouse Foods, Inc., sees a tight freight and logistics market as a positive. It will allow his company, the largest private label manufacturer in the United States, to leverage its scale and differentiate from competitors.

“The freight headwinds that everybody is feeling right now are difficult as we work our way through them today, but I think provide a unique tailwind for TreeHouse long term,” he said Feb. 21 during a presentation at the Consumer Analyst Group of New York conference. “Our national footprint, our ability to put multiple categories on the same delivery, our ability to serve the customer across a bunch of different businesses allows us to drive cost-down on logistics, allows us to take working capital out of their system and allows us to be a unique partner.”

In the past, TreeHouse Foods’ scale has been a hinderance. Mr. Oakland and his management team are working to reorganize the company’s structure and make its size an advantage.

“We were fundamentally not organized to take advantage of scale,” he said. “We weren’t organized from a logistics organization, from a supply chain organization. We weren’t organized in my mind, well, from what I saw walking in the door, to take advantage of it. When we had multiple touch points with a customer, but we didn’t link them all together.

“Can you imagine being the customer and having six different people from TreeHouse call on you, oftentimes with different formats, different fonts, different presentation values? If you have unique division sales people calling on the same customer, don’t have visibility to the entire business, you’re not able to use multiple categories on a truck. It’s very difficult to make those things happen.”

Since he took over as c.e.o., Mr. Oakland and his team have been working to reorganize TreeHouse Foods’ structure. Initiatives have included plant closures, manufacturing line rationalization, a stock-keeping unit rationalization program, implementation of a single I.T. platform throughout the company and the consideration of divestments. The company’s nuts and snack mix business is currently under strategic review and Matthew J. Foulston, chief financial officer, said two other businesses that generate less than $300 million in sales also may be divested.

“If you’re operationally excellent, you understand the customer, with the right group of people, if you apply that against the right portfolio of businesses in a growing category, it’s easy to put the kind of numbers out that we think are possible from TreeHouse,” Mr. Oakland said.

TreeHouse Foods is forecasting fiscal 2019 revenues to fall 5%. During fiscal 2018, ended Dec. 31, 2018, TreeHouse Foods generated sales of $5,812.1 million

Mr. Oakland expressed optimism about the company’s future based on a review of the private label market in North America.

“We have identified $1 billion of profitable revenue opportunities in our current categories by helping our customers both grow their categories — so bringing them products and tactics that we have proven across our network in other places — and by growing share, places where we know we have the right to win,” he said. “Then there’s the opportunity for innovation in adjacencies. Some of those adjacencies will come through our innovation organization. And over time, they’ll come with smaller bolt-on and synergistic acquisitions.”

Synergy will be a key focus of future acquisitions for the company.

“What we have talked to about future M.&A. (is) it’s about adjacencies, it’s about bolt-ons, it’s about things that fit in the current structure,” Mr. Oakland said. “So, the way we leverage scale isn’t by buying new, totally different businesses, it’s about buying something that’s closer in. I think we can organize to leverage scale, and I think we can have a different filter for M.&A. going forward.

By Keith Nunes

Source: Food Business News

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