- TreeHouse Foods will close its plant in Minneapolis before October as part of its ongoing effort to streamline its operations, the company said in a statement. The closure at the facility, which produces snack nuts and trail mix, will affect 120 jobs. TreeHouse said a strategic review of its premium nuts and trail mix business is still ongoing, but noted the snacks division continues to underperform.
- Separately, TreeHouse announced it has reached an agreement to sell its ready-to-eat cereal business to Post Holdings. The business, which TreeHouse acquired from Conagra in 2016, had sales of about $260 million in 2018. Financial terms of the agreement were not disclosed.
- During its first quarter, TreeHouse said it had net sales of $1.3 billion compared to $1.48 billion a year ago. In its second quarter, TreeHouse forecast sales between $1.27 billion to $1.31 billion versus $1.46 billion in 2018. The year-over-year decline is expected to be driven by weaker results in snacks and lighter volume in meal solutions, TreeHouse said.
In the year since Steve Oakland took the helm as CEO of TreeHouse Foods, the former J.M. Smucker executive has worked aggressively to cut low-margin products, improve the company's relationship with customers and shutter roughly 20 warehouses and offices.
His efforts to further reshape TreeHouse were on display Thursday with the announcement that it would close the snack plant in Minnesota and divest its ready-to-eat cereal business to Post. The cereal business provided only $260 million of the estimated $5.8 billion in sales TreeHouse generated in 2018 and clearly was not a core operation for the private label maker. In a statement, Oakland noted the ready-to-eat cereal category represents nearly $9 billion in revenue at retail, giving it "a long runway for growth" that could flourish under Post's ownership.
"Selling the ready-to-eat cereal business allows us to bring greater focus to the TreeHouse organization and represents another step on our portfolio optimization journey," Oakland said in a release announcing the sale.
The business moves are the latest push to improve operations at a company that has struggled for years — when it should have been enjoying a renaissance amid growing consumer and retail demand for private label products. TreeHouse, the combination of more than 40 mergers that add up to the nation's largest manufacturer of private label products, had too many offerings and was operating so inefficiently that it wasn't able to take advantage of its scale to expand distribution, Oakland told Food Dive in February.
“We’ve rethought the way we look at our operations. We’ve rethought the way we’re organized as a company. We’ve rethought the leaders in that and we’ve rethought, quite frankly, our relationship with the customer,” Oakland said in an interview. “I think our strategy is fundamentally different. I think our strategy is about how do we operate ... how do we recognize what this opportunity is and take advantage of it.”
TreeHouse has been working to streamline its underperforming snacks operations, and this latest plant closure is another step to improve a unit that continues to be a challenge for the company. It also announced last year it would close a pretzel and snack plant in Visalia, California by the end of the first quarter of 2019, impacting nearly 300 workers. The company is reviewing its snack nuts and trail mix businesses for a possible divestiture, which could include a sale. A more detailed update on the segment could come with its next earnings report in August. Given the segment's continual drag on results, a sale is the most likely outcome.
Still, Oakland has a big challenge ahead to turn things around for TreeHouse despite the meaningful progress he has made so far. The company's shares plunged more than 16% on Thursday morning to as low as $55.92 in trading after TreeHouse issued revenue and earnings per share guidance in the second quarter that significantly trailed Wall Street expectations.
Oakland has gone to grain lengths to turn around TreeHouse during his year on the job, but it's evident there is more work to be done to improve a company that lost the trust of its customers in its ability to execute before he came on board.