Milling & Baking News - August 23, 2022 - 13

TreeHouse divestiture reflects
move to be simpler, focused
OAK BROOK, ILL. - With the Aug. 11
announcement that it has agreed to divest
a significant portion of its meal preparations
business unit to Investindustrial
for $950 million, Oak Brook-based TreeHouse
Foods is " taking a significant step
toward achieving our goal of being a more
focused leader in attractive private label
snacking and beverage categories, " said
Steven T. Oakland, president and chief
executive officer of TreeHouse.
Mr. Oakland's comments were delivered
as part of a conference call with
analysts on Aug. 11 to discuss the sale of
the business.
The divestiture includes 11 categories -
pasta, pourable dressings, preserves, red
sauces, spoonable dressings, syrups, dry
blends and baking, dry dinners, pie fillings,
pita chips and other sauces - with
estimated revenues of approximately $1.6
billion and about $70 million in adjusted
EBITDA in 2022.
Post-transaction, TreeHouse will have
a presence in 18 categories - crackers,
non-dairy creamer, pickles, single-serve
beverages, refrigerated dough, broth, hot
cereals, pretzels, in-store bakery, griddle,
cookies, bars, cheese and pudding,
powdered beverages, tea, other blends,
liquid beverages and candy - with estimated
revenues of approximately $3.5
billion and about $330 million in adjusted
EBITDA in 2022.
" In addition to strengthening our financial
profile, the transaction improves our
strategic focus on higher-growth, higher-margin
categories, " Mr. Oakland said.
" A simpler company, better able to execute
on a more consistent basis. "
TreeHouse said the divestiture will
reduce complexity by removing 11 categories,
14 plants, 5,000 stock-keeping units
and 1 ERP (enterprise resource planning)
system from its portfolio. Post-transaction,
TreeHouse will operate in 18 categories
and have 26 plants, 9,000 SKUs and 2
ERP systems.
Mr. Oakland said TreeHouse is excited
about the compelling growth prospects of
bakingbusiness.com
the snacking and beverage aisles.
" Snacking and beverage is a large category:
$170 billion of retail, " he said. " That
as a whole grew 10% in the last 52 weeks,
outpacing nearly every other aisle of the
grocery store. Within private label specifically,
growth has been 8%. Being a more
focused business will better position
on to others in answering one analyst's
question.
" I think we are leaders in pasta, " he
said. " If I talk about divested categories,
we are leaders in some of those categories.
They're just not the same growth
and margin profile over time that we
think we can be if we focus on snacking
and beverage. So when you think about
depth, market share is really important.
But think about capabilities, right? Do we
have natural and organic? Do we have
convenience packaging? Do we serve all
" Pasta is by far the
biggest business in
the divestiture. "
- Steven T. Oakland, TreeHouse Foods
us to continue our momentum in these
categories and to benefit from the strong
underlying consumer demand for our
products. "
During the presentation, Mr. Oakland
pointed to several categories that TreeHouse
already is capitalizing on. Yearover-year
sales increased 20% in the company's
cookies category during the second
quarter while other strong gains were
noted in pretzels (up 18%), crackers (up
17%), in-store bakery (up 12%), single-serve
beverages (up 11%) and broth (up 4%).
" As a simpler, more focused business,
we will be even more closely aligned to
how our customers think about growth
and consider the role of snacking and
beverage within the store, " he said. " We'll
look to expand our strategic partnerships
with customers and see greater opportunities
to lead our categories through
depth and capabilities. We'll continue
to invest to build a world-class supply
chain, driving efficiencies and optimizing
our footprint, all with the goals in mind
to focus on the customer, drive revenue
growth and improve profitability. "
The strategy of simplifying and focusing
came up often during the call with
analysts, and Mr. Oakland provided a
little more color on why TreeHouse chose
to exit some businesses while holding
channels? So I think when you hear us
talk about the depth we'll build in the
snacking and beverage categories, it will
be those capabilities, and those capabilities
will then drive share over time. So I
would say this transaction was designed
to put us in more advantaged categories,
more categories that are more consumer
trend-friendly. "
Pressed about the decision to exit
pasta, a category that TreeHouse recently
boosted its presence in with the $242.5
million purchase of several regional
brands from Riviana Foods, Mr. Oakland
responded: " Pasta is a great category. And
the transaction we did with Riviana for
our shareholders is a great value. If you
remember, with synergies, we paid midto
high single digits for that, and we sold
it for significantly more. So ... we always
felt that building our pasta business and
building those assets was the right decision.
We had the opportunity to monetize
the synergies. "
He added inflation hurt pasta's EBITDA.
" There's been a lot of volatility in
durum wheat, it's actually going the other
way right now, " he explained. " But that's
been incredibly volatile. But no, the pasta
business and the synergies delivered. But
pasta is by far the biggest business in the
divestiture. " MBN
MILLING & BAKING NEWS 13
TREEHOUSE FOODS
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Milling & Baking News - August 23, 2022

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