TreeHouse earnings flat on soft consumer environment
by Keith Nunes
OAK BROOK, ILL. – Aggregate consumer demand in the food and beverage sector continues to sputter in fits and starts, Sam K. Reed, the chairman, chief executive officer and president of TreeHouse Foods, Inc., said in a conference call with financial analysts on Nov. 7.
“My view on this is that the demand for aggregate food and beverage is going to essentially remain flat for the coming year, and that the primary driving force behind that are kind of the microeconomics at the family and household level,” Mr. Reed said. “And what we have to focus on is how can we operate better in that environment and still post improved earnings. And that is the extraordinary challenge.
“With regard to why this is happening, when I saw that only 1 household in 10 has had its real income improve at least at a 1% rate since 2008 that just indicates how pervasive the softness in the consumer sector is. And we are going to have to live with this until such time as you see full-time unemployment improve, you see real wages improve and that the uncertainty that is always there kind of comes back to kind of more normal levels.”
Dennis Riordan, chief financial officer of TreeHouse Foods, said food industry sales volume has been difficult to come by during the year.
“Consumers continue to buy less, shop for values and migrate towards better-for-you foods and beverages,” he said.
For the third quarter ended Sept. 30, TreeHouse Foods earned $22,665,000, equal to 62c per share on the common stock, up 5% from the same quarter of the previous year when the company recorded net income of $21,554,000, equal to 60c per share.
Sales for the quarter were $567,150,000 compared with $538,112,000 during the third quarter of fiscal 2012.
Looking toward 2014, Mr. Reed said market dynamics may be similar to 2013.
“2014 will be yet another year of little to no real growth across the general food and beverage sector,” he said. “Input inflation should be limited, as a combination of slack export demand and oil and gas fracking will make domestic supplies, commodities and energy plentiful.
“Private label in aggregate will continue its slow and steady advance as customer brands gain new ground in traditionally-branded enclaves, such as coffee, hot beverages, snacks and better-for-you products.
“The grocery industry will become increasingly bifurcated as retailers choose between the strategic segmentation and differentiation of their house brands versus the transactional advantage of national brand discounting.”
Mr. Riordan said other food companies have invested in promotional programs to attempt to drive up their volumes, but TreeHouse is investing in culinary options, new packaging concepts and customer promotions that better fit today’s customer needs for better-tasting, better-for-you and more convenient food options.
“A great example of this is our instant cereals made with whole grain oats,” he said. “While coffee is the most visible of our new introductions, our culinary teams have been busy with new offerings in many of our other categories, including skillet sauces, with many new flavors of marinades, an expanded line of premium preserves, a new line of liquid beverage enhancers, new cereal offerings, including new flavors of regular and steel-cut oats, and even our pickle category is expanding its offerings with more organic choices and new farmers’ market recipes with pickle chips and vegetables. And finally, we are now shipping our new filtered, single-serve tea products in a variety of flavors to complement our single-serve coffee items.”