BOSTON – Companies manufacturing frozen foods and those processing products perceived as better-for-you are two market segments where TreeHouse Foods is interested in exploring an acquisition. Company executives outlined the private-label manufacturer’s merger and acquisition strategy Sept. 9 during the Barclays Global Consumer Staples Conference.
Dennis Riordan, chief financial officer, said the M.&A. market remains attractive with interest rates remaining low, but added a potential interest rate increase this fall may have an impact.
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| Dennis Riordan, c.f.o. of TreeHouse Foods |
“We believe there's an increased appetite for private equity, in particular, and some family businesses to be a little more aggressive in bringing their companies to market sooner,” he said. “Our deal team has been that much more involved lately than we have in a long time in looking at a variety of assets. So we think it all bodes very well for future M.&A. for TreeHouse.”
Mr. Riordan said TreeHouse Foods currently does not have a frozen foods business and called such an opportunity “a strong strategic fit.” Within the better-for-you category he said the company has interest in moving into such existing categories as organic, gluten free and natural.
In June of 2014, TreeHouse Foods acquired Flagstone Foods, a manufacturer of healthy snacks that are primarily sold within the retail produce department.
“One of the things Flagstone has allowed us to do is to participate in the produce aisle with healthier snacks,” Mr. Riordan said. “And that's really the fastest area of growth for us. It’s also the fastest area of growth for retailers as well. So we will be looking at that area very specifically.”
He added that with millennials focused on snacking, the category is where TreeHouse views an area of growth.
“It really is working well within the perimeter of the store as well,” he said.
As an example of how TreeHouse Foods has taken a staid brand and made it more relevant, Mr. Riordan pointed to the company’s 2007 acquisition of ED Smith, a Winona, Ontario, Canada-based manufacturer of salad dressings and marinades.
“At the time we bought it, we had in private label about a 12% share of salad dressings,” he said. “What we saw was an opportunity to expand that to organics, to naturals, and to expand the offerings from a standard national brand equivalent into premium. So we did all of that. We were one of the first to make all organic salad dressings for Safeway, by leveraging that expertise. Today, private label is about 23% share of salad dressing.”
Mr. Riordan described the market for private label food and beverages as fragmented and noted that TreeHouse sees “a lot of opportunities” to further its consolidation plan.
“We think there's a lot of opportunity here, and we're really gearing up to be able to affect that,” he said.
