US private-label heavyweight TreeHouse Foods has said it is actively seeking acquisition targets in a bid to improve its growth prospects.
Announcing TreeHouse’s second-quarter results yesterday (5 August), CEO Steve Oakland said the Illinois-based business – the largest private-label manufacturer in the US – “continued to navigate an unprecedented operating environment”.
He cited lapping last year’s heightened Covid-related demand, inflation, supply-chain disruption and lower-than-expected consumer demand for private label.
But speaking to analysts after the results were announced, Oakland suggested M&A could help the company to grow faster.
He said: “We are evaluating a shortlist of acquisition opportunities that would provide an incremental growth catalyst. We will remain disciplined in seeking the right fit and valuation.”
“We have plenty of capacity to do sizeable and bolt-on acquisitions. Our focus will be on existing categories and near-in adjacencies.”
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He added: “Growth categories are 40% of our business mix and we’ve got to change that. We will use M&A to bolster our growth categories and change the mix.”
In the second quarter, TreeHouse booked sales of $1bn compared to $1.04bn for the same period last year and recorded a net loss from continuing operations of $5.2m, double that of a year ago.
Expecting the tough operating environment to remain in place, TreeHouse adjusted its 2021 sales and earnings guidance downwards.
Speaking to analysts, Oakland said: “Higher commodity, packaging and freight costs [amounted to] US$160m to $170m this year. But our execution around pricing to recover these input costs has been successful.
He added: “Retail acceptance around pricing has been strong” and said “we will see pricing initiatives reflected beginning in the third quarter”.
Oakland pointed out “in seven of our ten largest categories, like crackers, pretzels and dressings, we have grown share in private-label in the quarter. However, total consumer demand for private-label has been lower than expected. We believe this is temporary”.
He said: “The good news is that this will not impede the execution of our strategy to drive long-term sustainable growth.”
TreeHouse has been carrying out a restructuring operation for three years.