TreeHouse Foods redefining value

by Keith Nunes
Share This:
Search for similar articles by keyword: [TreeHouse Foods], [Retail]

Private label products, TreeHouse Foods
TreeHouse is shifting away from its reliance on offering national brand equivalent products.

BOSTON — One of the most significant changes to the market for private brand products is segmentation. The same strategies that influenced branded consumer packaged goods companies to create tiers of value, standard and premium product varieties has taken hold in private label. The strategy is altering the marketplace and one of the category’s largest companies: TreeHouse Foods, Inc., Oak Brook, Ill.

Sam Reed, TreeHouse Foods
Sam K. Reed, chairman, president and c.e.o. of TreeHous

“What has changed is our understanding of the marketplace,” said Sam K. Reed, chairman, president and chief executive officer of TreeHouse Foods. “It has rapidly evolved, and customer brands are now some of the greatest growing intellectual properties in the C.P.G. world. And as that marketplace has changed we’ve had to adapt to it.”

Looking back, Mr. Reed said TreeHouse’s primary strategy was focused on building a portfolio of national brand equivalents.

“ … Now, much like other branded companies, we’ve evolved with the marketplace, really focused not only on size but segmentation of this category portfolio,” he said. “In strategy we’ve moved to growth and begun to look at individual customers. At first there was only grocery, supermarkets, and it was conventional good, better, best offerings. We now have a strategy of customer intimacy …”

Rachel Bishop, chief strategy officer for TreeHouse, said the most significant change in the market is how consumers think about private label products and define value.

Rachel Bishop, TreeHouse Foods
Rachel Bishop, chief strategy officer for TreeHouse

“…in the early 2000s it was about price, and private label was really kind of the price fighter alternative, a product you would choose if you couldn’t afford or didn’t care to spend for the brand,” she said. “It’s now about a combination of specific benefits that consumers are looking for and the price that they pay for them.

“So, in some cases, if a private label product has more benefit at a price which is perhaps better or higher than the opening price point but still competitive, people will pick up that price. And so value is coming to mean this combination of benefits and price.”

She said millennials also are bringing a different perspective to the marketplace, because brand names are much less important to that group.

Private label ready-to-drink beverages
TreeHouse plans to fuel growth through private label single-serve beverages.

“Overall what they say is they don’t have a real preference between private label and national brands,” she said. “They will try them all equally. For them it’s purely about what’s inside the package. And for us at TreeHouse that gives us a lot of confidence that we can continue to innovate and put new products on the shelves for our customers and consumers will try them. And if the quality is there, they’ll continue to buy them.”

Going forward, top-line growth for the company will come from three areas, said Chris Sliva, chief operating officer. The first is private label single-serve beverages, a category that has grown $150 million to $160 million in net sales annually and is on pace to deliver that level of growth in 2016, he said.

Chris Sliva, TreeHouse Foods
Chris Sliva,c.o.o. of TreeHouse

“The other two places that growth emanates in our business model is at either end of the spectrum,” he said. “We are no longer obligated to simply make a knock-off of the national brand in the given category in which we operate. Our premium and better-for-you products have been growing at roughly a 15% rate, and our natural and organic products have grown at a 50% rate this year to date.

“And at the other end of the spectrum, our opening price point products, those that sit and deliver the greatest value to consumers on a fixed budget have been growing at roughly a 10% range.”

The challenge facing the company is the bulk of TreeHouse’s business has been in the value, national brand equivalent category, Mr. Sliva said.

“The biggest challenge for us is moving faster, is in retailers establishing a three-tiered system,” he said. “So, effectively generating new brands (and) creating new brands. We need retail partners who are committed to private label and committed to segmenting their private label offerings into these three spaces effectively.”

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Baking Business News do not reflect those of Baking Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.