- As TreeHouse Foods muddles through a period of transition, sales were up 0.9% from last year when divestments and SKU rationalization are taken into consideration, according to the company's latest earnings report. Without adjusting for the sale of the private label manufacturer's soup and infant formula divisions and company-wide cutbacks on less profitable products, net sales for the quarter were $1.46 billion, compared to $1.52 billion a year ago.
- Gross profit as a percentage of net sales were also down compared to a year ago — 16.2% now compared to 18.2% then. This decrease primarily comes from a five-month strike at a California nondairy creamer plant, as well as increased freight and commodity costs.
- Less than five months into his tenure as TreeHouse CEO, Steve Oakland said in the report he is encouraged by what he sees at the company and is prepared for the company to take advantage of its power of scale. "While our work around process improvement and better discipline in order to drive costs out of the system is ongoing, one of my priorities has been thinking through how we can position our portfolio to best serve the changing retail environment," Oakland said in the report. "We have reinvigorated a strategy process across the company, and we are in the process of refining our priorities. I look forward to communicating more detail on our strategy before the end of the year."
TreeHouse Foods has faced challenge after challenge, ranging from executive turnover to plant closures and massive layoffs. Oakland has been in his position a little more than a quarter, being tapped to replace then-CEO Sam Reed in March. He took the helm of a ship that had been navigating choppy waters since last year's abrupt resignation of President Robert Aiken after just a few months on the job.
Oakland inherited a company that was in the midst of scrutinizing all of its business practices through a program called TreeHouse 2020. The goals — business integration and expense reduction — were by no means easy. So far, the company has decided to close a pretzel and cereal snack mix plant in Visalia, California, by the first quarter in 2019, affecting 294 employees. It's also closing its administrative office in Omaha, Nebraska, which will impact about 200 workers.
And while administrative costs in this quarter have dropped $10 million when compared to last year — down to $72.9 million — there was little positive movement in other segments.The only division that saw improvements in net sales was snacks, with a bump of 0.2% to $317.7 million. (The SKU rationalization process alone reduced sales by 7.1%.) Condiments, beverages, baked goods and meals all posted losses, mainly due to sales, streamlining, commodity costs and freight.
But Oakland could not be more right about the assessment of the company he made in the earnings report: Private label is becoming more popular among both retailers and consumers. As the largest private label manufacturer in the United States, TreeHouse should have the size and market control to always be profitable or for business to at least be stable. This process now is painful to shareholders, but if it's done right, the company may be better in the long run. Cutting through the issues that keep TreeHouse from being there — which may date back to some of the brands' previous life as Ralcorp — could bring the private label manufacturer not only to the top of its game, but as one of the top companies in food and beverage.