OAK BROOK, ILL. — TreeHouse Foods, one of the largest manufacturers of private label food and beverage products, has undergone a series of renovations during the past six years, whether it is related to the company’s expansion into single-serve coffee, the acquisition of Flagstone Foods or the acquisition of Conagra Brands’ Private Brands business. At the same time, the market for private label food and beverage products has evolved rapidly and TreeHouse management has reorganized the company to capitalize on its added scale and the new capabilities it may offer to the marketplace.
Today, the company generates approximately $6.2 billion in annual sales, sells products into 32 different food and beverage categories, employs 16,000 and operates more than 50 processing plants. At the center of TreeHouse Foods’ transition is Sam K. Reed, chairman and chief executive officer, who has been with the company since its founding in 2005.
During an interview with Food Business News at the company’s headquarters in Oak Brook, Ill., Mr. Reed said his role with the company in the early “run and gun” days was to seek new investment opportunities that would allow TreeHouse Foods to add capabilities and scale. Today, his focus is more on strategy.
“I’ve moved from taking money, buying plants and building systems to developing people, IT systems and infrastructure,” he said. “And really importantly, create a unified strategy. This marketplace is evolving, and you have to reinvent yourself to stay ahead.”
The process of reinvention has required TreeHouse Foods to become more consumer- and solutions-centric. Mr. Reed said the focus has shifted from developing a value or national-brand equivalent product and fighting with customers over price, to developing a deeper understanding of how consumer trends are changing and helping the company’s customers capitalize on those changes.
“That stereotypical baby boomer consumer who was very focused on value first and foremost and wanted the national-brand equivalent a penny a can cheaper is still our mainstay,” Mr. Reed said. “But as their children grew up the things that count with them are really quite different than their parents’ generation.
“So we have had to move from products that used to be center of store packaged in a can, box or bag that would last for a year or two. Now, approximately 20% of our legacy private label business is in premium, natural, better-for-you and organic. Last year it grew 30% with higher margins than the center of the store.
“You have to rearrange your entire industrial base to do that stuff. We now have a supply chain that stretches over 73 countries.”
This past November, following the company’s fiscal third quarter, TreeHouse Foods announced a major reorganization.
“We are at the point where we are covering 32 product categories,” said Dennis Riordan, president, of the reorganization. “As we’ve been growing, growing and growing it seemed like we have not been able to do as an effective job of selling as our competitors who handle just one or two categories.”
As part of the reorganization, five divisions have been created covering baked foods, beverages, condiments, meals and snacks. Each unit engages TreeHouse customers across all channels. A second group focuses on customers and customer needs, Mr. Riordan said.
“Their responsibility is to sell TreeHouse to the customer,” he said. “They’re establishing relationships with the senior members of that customer, the chief merchandiser and chief operating officer. And what they are trying to do is sell them on why TreeHouse Foods is the right solution.”
Mr. Riordan added that the TreeHouse reorganization is occurring at the same time when many of the company’s customers are trying to differentiate in the competitive retail marketplace.
“What’s happening is the customers are doing a better job of identifying their consumers and the changes in consumer trends,” he said. “I think for years you could kind of pigeonhole a customer type: the traditional grocer, the dollar stores, the value discounter, etc. It was all the same, and people just shopped at those stores.
“But now, with the buying habits of millennials, everybody is being affected. You can’t look at one type and say that all they want are cheap products. It’s different and you have to understand the customer and how they act.”
He said TreeHouse Foods is seeing consumers moving from the national brand equivalent to either “right or left,” to value-oriented items or premium better-for-you offerings.
“What it is telling us is we have to do a better job of doing two things,” Mr. Riordan said. “One is better formulations and product assortment for the premium space, but we also have to do a much better job of managing our cost structure to be able to manage that value product so our customers make money and we make money. So it’s a different world than the one where we lived in with just national brand equivalents.”