TreeHouse Foods, Inc. THS is well positioned, owing to its robust endeavors like focus on portfolio refinement and Structure to Win program among others. Let’s delve deeper into the aspects, which are likely to keep aiding this manufacturer of packaged foods and beverages.
Portfolio Refinement on Track
Like many other food companies, such as Hershey HSY and Sysco SYY, TreeHouse Foods has been focused on expanding its product offerings through acquisitions. In February 2016, the company acquired Private Brands business, which has added to TreeHouse Foods’ revenues and helped lower the company’s debt. Some of the company’s other acquisitions include Flagstone Foods, PFF Capital Group, Inc. Cains Foods, L.P. and Naturally Fresh, Inc.
On the flip side, the company remains committed toward exiting underperforming businesses and shifting its focus toward areas with high growth potential. To this end, management is on track with the sale of ready-to-eat cereal business to Post Holdings POST. Also, TreeHouse Foods closed the divestiture of its snack nuts and trail mix business to Atlas Holdings in the second quarter. These divestitures are expected to be accretive by nearly 19 cents to the bottom line in 2019.
TreeHouse 2020 Bodes Well
The company is on track with its TreeHouse 2020 strategic plan, which has been designed to restructure and realign the business as a whole. Alongside cost savings, this initiative is expected to manage the company’s portfolio, and optimize production and supply chain. The plan aims to improve TreeHouse Foods’ operating margin by 300 bps by the end of 2020, on the back of complete business integration and expense-reduction initiatives. The company expects to invest these savings in market-differentiated capacities, in a bid to cater to consumers’ ever-changing demands.
Focus on Structure to Win Plan
TreeHouse Foods’ Structure to Win program focuses on aligning the company’s SG&A expenses with its division structures. This, in turn, is likely to enrich customers’ experience. Markedly, the company generated Structure to Win savings of $75 million in 2018, which exceeded its original full-year target of $30 million and run-rate target of $55 million. The company expects to maintain its solid cost control in 2019 as well, wherein it anticipates the Structure to Win plan to continue yielding. This will help cut SG&A expenses, which were earlier projected to drop nearly $20 million (on a net basis) in 2019.
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