OAK BROOK, ILL. — During an Aug. 8 conference call with securities analysts to discuss second-quarter results, private label food and beverage maker TreeHouse Foods, Inc. confirmed its intention to divest a “significant portion” of its meal preparation segment in favor of its snacking and snacks business. beverage unit.
“We continue to work very hard to reshape the TreeHouse portfolio through the divestiture of a significant portion of our meal preparation business to build leadership and depth around a focused group of categories in our higher growth snacking and beverage businesses,” said Steven T. Oakland, President and CEO.
Investors reacted positively to the company’s results for the second quarter. In early morning trading on August 8, TreeHouse stock hit $46.54 per share, up 9% from the August 7 close of $42.68 per share.
TreeHouse posted a loss of $29.4 million in the second quarter ended June 30, which compared with net income of $8.4 million, or 15¢ per share, in the same period a year ago. Adjusted EBITDA from continuing operations, meanwhile, was $66.5 million, down 28% from $92.6 million in the same period a year ago.
TreeHouse net revenue in the second quarter was $1.19 billion, up 19% from $1 billion in the same period last year. The sales increase was primarily driven by favorable pricing to recover inflation in raw material and freight costs, as well as increased volume in the snacking and beverage segment, the company said.
“We had strong revenue growth, up 19.4% to $1.2 billion,” said Patrick M. O’Donnell, chief financial officer, who was named interim CFO of TreeHouse in June.
“Pricing drove 17.7% of growth, while volume rose 2.1%, offset by 48 basis points of foreign exchange,” Mr. O’Donnell. “Our ability to capture growing incremental volume across multiple categories in snacking and beverages in particular has been encouraging.”
Direct operating income in the TreeHouse Meal Preparation segment was $56 million, down 14% from $65.2 million in the same period of fiscal 2021. Quarterly sales were $766 million, up 18% from $648 million in 2021. The increase in sales was primarily attributed to pricing and partially offset by lower volume due to labor and supply chain constraints, the company said.
Direct operating income in the Snacking and Beverage business increased 5% to $38.8 million from $36.9 million. Sales of the Snacking and Beverage business unit in the second quarter were $432 million, an increase of 21% from $356 million in the second quarter of 2021.
“Increased demand for private label resulted in strong category performance as the consumer seeks cheaper alternatives in the inflationary environment,” the company said. “However, volume growth was partially muted due to labor and supply chain disruptions.”
Mr. Oakland said supply chain disruptions were less severe in the company’s snacking and beverage segment than in its meal preparation segment. He also highlighted greater demand in snacking and beverages, where consumers spend more time away from home.
“As the economy has opened up, a lot of the snack and beverage mix is the stuff that’s on the go,” he said.
As inflation drives shelf prices higher, private label is gaining momentum, Mr. Oakland.
“The combination of high shelf prices and high-priced gas translates into a dollar savings for a basket of private label goods that has never been greater,” he said. “You can see that the pandemic-related trends of the past two years actually started to reverse this year, and that private label gains have been accelerating since March.”
Mr. O’Donnell added perspective.
“History will tell you that during periods of economic downturns, private label gains trial, new consumers and, as a result, increases in share,” he said. “Historically, these periods have been incremental changes for private labels. Today, private label is positioned significantly better than in previous periods of economic slowdown.
“Firstly, the quality and range of private label has improved dramatically. The number of options now includes a spectrum from natural and organic to national brand matching value proposition.
“And secondly, the retail landscape has also changed dramatically. The growth in the number of stores is largely driven by private label-focused discount retailers. Today, there are also retailers whose private label programs not only drive traffic, but play a key role in their store image.”
Mr. Oakland added: “Overall, I am encouraged by our progress and I believe we are very much on track and will continue to improve service and profitability throughout the year as we begin to reach our seasonal peak. We are managing inflation effectively pricing, partnering with our customers and executing our efforts to drive cost savings across the network.”
