OAK BROOK, ILL. — TreeHouse Foods ended fiscal 2015 on a positive note. After struggling during the first two quarters, the company reported improved results during the fourth quarter and for the full year. Now company management is focused on integrating the recently acquired Private Brands business from ConAgra Foods and writing the next chapter in TreeHouse’s history.
|Sam K. Reed, chairman, president and c.e.o. of TreeHouse Foods|
“Our union has established an industry leader the likes of which private label food and beverage has never seen before,” said Sam K. Reed, chairman, president and chief executive officer of TreeHouse Foods in a Feb. 11 conference call with financial analysts. “Not only are we now bigger, approaching $7 billion in revenues, but we will also be better, bringing unmatched capabilities and resources to fulfill our ‘value without compromise’ pledge to all.”
For fiscal 2015, ended Dec. 31, 2015, TreeHouse Foods’ net income totaled $114,910,000, equal to $2.67 per share on the common stock, and an increase compared with the previous year when the company earned $89,880,000, or $2.28 per share.
Sales rose during the year to $3,206,405,000, which compared with the previous year when sales were $2,946,102,000.
Driving the positive returns during the fourth quarter were improved performances from the company’s snacks and single-serve beverage businesses. Retail volumes for the Flagstone Foods snacks business rose 4% during the quarter, and Dennis Riordan, chief financial officer, said the business is seeing distribution gains that should continue into fiscal 2016.
Retail volumes for TreeHouse’s coffee business were also up in the fourth quarter. But Mr. Riordan added year-over-year pricing was down.
|Dennis Riordan, c.f.o. of TreeHouse|
“On a positive note we are seeing signs and measure channel data that single-serve coffee prices are leveling out, and that would bode well for 2016 full-year comparisons,” he said. “Also, although fourth-quarter brewer sales were relatively flat compared to the year before, data suggest that brewer penetration in households continues to increase. That should result in continued market growth for single-serve beverages.”
Net income during the fourth quarter totaled $37,255,000, or 86c per share, and an increase compared with the fourth quarter of fiscal 2014 when earnings were $33,917,000, or 80c per share. Sales during the fourth quarter fell to $865,414,000 from $903,513,000 the previous year.
In fiscal 2016, TreeHouse Foods executives expect company sales to be between $6.3 billion and $6.5 billion.
“For the Private Brands business we are estimating that in total sales for 2016 will have a slight decline as we begin the process of reinvigorating products with more on trend formulations and ingredients,” Mr. Riordan said. “Plus, our opportunity to meaningfully increase distribution will not be realized for 18 to 24 months. This is due to the usual cycle of activity in private label and is consistent with our past experience when buying private label companies. The first year after acquisition is spent establishing new sales programs with the goal that we are successful in the following year. That, along with the seasonality of many of our products, causes the nearly two-year time period for significant sales realization from new customers.”
In key “legacy product categories,” the company expects an increase in year-over-year sales for single-serve beverages and marginal increases in most other product categories.
When asked about the state of the U.S. private label food and beverage market, Mr. Riordan noted that private label has seen the same trends as branded companies, with volume declines in many categories and a push to introduce more clean label and natural products. Beyond non-dairy creamers, he added that almost everything else the company makes has a position in the clean label, natural segment.
“We are working hard on the Private Brands business to get that up to speed,” Mr. Riordan said.
Chris Sliva, president of TreeHouse’s Bay Valley Foods business unit, said the opportunity in clean label and natural is to get customers to commit to it.
|Chris Sliva, president of TreeHouse’s Bay Valley Foods business unit|
“The opportunity for us is to move customers along the spectrum from dabbling in that or having it be an idea to (them) actually having a clear strategy for how they are going to play in it,” he said. “…we see a secular trend emerging with our retail partners who are beginning to ask the question of all the growth that is coming from small brands or brands that didn't exist five years ago, why they can't create that growth in their own brand?
“And that is the optimal environment … in which we can partner with our customers.”