Dive Brief:
- TreeHouse Foods reported a 43% boost in profit for the third quarter, coming in at $28.4 million over $19.9 million last year. This was due partially to the company cutting overhead expenses by about a quarter.
- TreeHouse saw a slight uptick in revenue to $798.6 million from $795.7 million in last year's period, but that still missed Wall Street estimates of $819.3 million.
- Sales volumes fell 4.3%, and was partially attributed to challenges in the single-serve coffee category, where competition has increased.
Dive Insight:
Still, the biggest news for the company is its recent deal with ConAgra to purchase its private brands business for $2.7 billion. This acquisition will make TreeHouse the largest U.S. producer of store-branded groceries with annual revenue of approximately $7 billion. However, the fruits of this deal may not come to TreeHouse right away.
"The structure of the deal may be described as a 'carve out,' which means TreeHouse is buying a business that does not include many of the functional support capabilities, such as I.T., that normally would be part of a standalone company. As such, TreeHouse management expects the transition to take as long as two years to complete and does not expect to see any earnings accretion until year two," Food Business News reported.
Each company has its own set of top products, which will offer TreeHouse opportunities for category expansion. For ConAgra, its private brands business's key categories are snacks, bakery, pasta, cereal, bars, and condiments, while TreeHouse Foods’ largest product category was beverages, followed by salad dressings, beverage enhancers, soup and infant feeding, and pickles.
"You can see from the categories that we will be adding a lot of new business in our key strength of shelf stable food categories, and we see synergy opportunities in complementary category like condiments, snacks, and bars," Dennis Riordan, TreeHouse’s CFO, said on a conference call.
ConAgra has also agreed to sell its Princeton plant to TreeHouse Foods, and spokesman Dan Hare said no jobs would be cut.