Dive Brief:
- TreeHouse Foods announced a multi-year restructuring program on Thursday. As part of the initiative, TreeHouse said in a press release that it plans to close plants in Brooklyn Park, New York, and Plymouth, Indiana. The company also announced it will move non-peanut packaging operations out of its Dothan, Alabama facility. An estimated 375 workers will be laid off as a result of the changes.
- "These measures are required if we are to remain competitive in a rapidly changing marketplace for packaged foods," Sam Reed, TreeHouse Foods’ chairman and CEO, said in a statement. "In order to win in today's marketplace, we must not only produce the finest quality at the lowest costs, but also fully utilize the capacity of our plants and the capability of our people in doing so."
- TreeHouse also reported that net sales for the second quarter totaled $1.52 billion compared to $1.54 billion for the same period last year, a decrease of 1.2%.
Dive Insight:
During the quarter, TreeHouse faced a number of challenges including adverse market conditions, a lag in prices following commodity cost increases and operating inefficiencies related to lower than anticipated volumes.
Sam Reed, the company's CEO, was smart to quickly responded by announcing the plant closures and job cuts as part of a broader multi-year restructuring program through 2020 to cut costs and better position the private-label food manufacturer to compete in an increasingly competitive environment. The facility closures are expected to cost about $44.5 million.
TreeHouse, which makes snacks, meals, baked goods and condiments, appears to be facing many of the same challenges plaguing brand-name players such as General Mills and Campbell Soup. Consumers are turning away from packaged food products in the center of grocery stores in favor of fresh and healthier items, many of which are organic or are made with a slimmed-down list of ingredients that consumers can recognize.
"It is clear that we are witnessing an evolution in the retail landscape, as digital technology and bricks and mortar compete for the attention of consumers in a slow to no growth food and beverage marketplace," Reed said. "As we enter the back half of the year, the environment remains highly competitive, which is pressuring volumes across nearly all of our divisions. We are diligently working to improve our operational effectiveness, aggressively simplify our offerings, and reduce our cost structure."
It's evident TreeHouse recognizes it has areas where it can trim costs, even if it comes through the loss of jobs. While the company plans further "aggressive actions" to manage its category and customer portfolio and improve its manufacturing and supply chain, it's uncertain if it will work — or occur soon enough to allow it to respond to the changes taking place within the industry.
During its second quarter, net sales totaled $1.52 billion compared to $1.54 billion for the same period last year. TreeHouse said volume and price each fell 0.3% during the period. As the company's struggles mount, TreeHouse lowered its earnings guidance in its fiscal year to a range of $3.15 to $3.30 from $3.50 to $3.70. After the announcement, the company's stock plunged 6.5% to $78.78 in mid-morning trading.