NEW YORK — TreeHouse Foods’ next acquisition will most likely take place in the better-for-you snack space, said Sam K. Reed, chairman, president and chief executive officer of the company. TreeHouse already has a strong presence in the center-of-the store and the company’s next moves will most likely be toward the perimeter.
In addition to the company’s established business, TreeHouse also has its eye on the demographic du jour — millennials.
“… Their increasing buying power in food and beverage over the foreseeable future will triple that of the loss of my generation so that we’ve got to follow that consumer to where the growth is,” Mr. Reed said May 27 during the Citi Global Consumer Conference. “And it’s to this point they’ve led us to snacks. And it is my belief, even with a difficult start, that Flagstone will prove to be the basis for a several billion dollar platform in better-for-you snacks across a wide array of product categories.”
TreeHouse Foods acquired Flagstone Foods in 2014 for approximately $860 million. Flagstone is a manufacturer of private label snacks, including snack nuts, trail mixes and dried fruits. The businesses’ products primarily are sold on the perimeter of supermarkets nationwide and, at the time of the acquisition, TreeHouse executives hailed it as the next significant phase in the company’s growth.
Unfortunately, the acquisition has gotten off to a rocky start. On May 7, TreeHouse lowered its earnings and sales outlooks for the year, in part, because the growth expected in snacks has not materialized. The slow start, however, has left management undaunted about the prospects for Flagstone.
With regard to the size of a potential acquisition, Mr. Reed said it would probably be in the range of $300 million to $500 million.
“… What we’d like to find is a new category where it has adjacent economies of scale, but one that’ll give us a new presence,” he said. “And historically, that’s been the $300 million to $500 million range.”
Given what the better-for-you product category has done for TreeHouse in the past few years, it is understandable why the company is looking to increase its presence.
“I think where private label is unique and where we are unique in addressing it is we are actually developing more and more organic, natural, and better-for-you (products), which is where the growth is,” said Dennis Riordan, chief financial officer, during the Citi conference. “Roughly 12% of our retail volume is in that premium, natural and better-for-you (space). That has been growing at north of 40% for the past couple of years. Again, it’s relatively small piece, but growing.”
