Dive Brief:
- TreeHouse Foods has announced it will close two plants that it acquired from ConAgra earlier this year in a deal for ConAgra's private-label brands business.
- The closures will cost about 720 jobs total from former ConAgra plants in Azusa, CA (bars and snack products), and Ripon, WI (sugar wafer cookies). The vast majority of those job cuts will be from the Azusa plant, which employs 660 people. Employees will receive severance pay.
- TreeHouse says its goal is to reduce excess capacity. The plant closures will cost the company about $17 million over the next five quarters.
Dive Insight:
TreeHouse, the largest U.S. private-label brands manufacturer, is taking a common post-acquisition approach in the food and beverage industry: acquire a large business and slim it down to make it a more profitable addition.
How much overlap exists and how much requires elimination will become more clear in the coming months.
TreeHouse is also cutting down on its own operations. Last month, the company said that its wholly owned subsidiary Bay Valley was shutting down its private-label and regionally branded spoonable dressings plant in Ayer, MA, next year. Previously, it announced in January that it would double the number of ConAgra hirees in Omaha as it searched for a site for a new office in the city, where employees will focus on customer service, finance, information technology, R&D, and supply chain.
As more retailers, both brick-and-mortar and online retailers like Amazon and Thrive, launch private-label brands, TreeHouse has an opportunity to capitalize on increased sales opportunities.
But cutting costs is just as important for private labels as it is for branded products, especially when one of private labels' main appeals is competitively low prices. And as private-label brands look to include more natural and trending ingredients, companies have to offset increased ingredient costs with cost-cutting in other areas. By becoming a slimmer organization, TreeHouse can adapt to that growth while remaining a profitable private-label manufacturer.