2010 Processor of the Year: TreeHouse Foods

Otherwise known as 'the biggest company you never heard of,' four former Keebler executives build a $2 billion company on private label.

By Dave Fusaro, Editor in Chief

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"The integration of these acquisitions is the key," says Harry Walsh, another of the Keebler ex-pats, who oversees precisely that as a corporate senior vice president and president of Bay Valley Foods. "We try to make one plus one equal three.

"[The acquired company] created a culture that made them successful as a small company," he continues. "We look at how they succeeded and how we can add to that. Not so much how they can adapt to us but how we can adapt to them."

The kind of scale brought to a deal by TreeHouse can immediately improve a smaller company's distribution, food safety, purchasing, research & development, finances and "intellectual synergies," says Walsh.

Product development at TreeHouse seems to follow two strategies. "Good-better-best" refers to the range of potential products; TreeHouse can deliver items from economical to high-end. Another common phrase is to be a "fast follower" -- so whenever a national brand delivers a product innovation, TreeHouse wants to be able to copy it quickly.

Product develop is done collaboratively with the retailer. "Seldom does a retailer come at you with a fully developed product idea. They usually don't have their own R&D departments," says Walsh. "They look at the category and its trends [and develop] a wish list, and we apply our R&D and manufacturing to that list.

"There's a certain set of retailers that are selling on the premium end, and those are more in tune to innovation," he continues. "A lot of folks simply want to get to the highest quality of an existing product with an economic price point, and that's an art in itself. And there are those, especially in these times, that are looking for quality, but entry-level pricing is most important."

"Really, they all approach it differently, each in accordance with its unique private label strategy" adds Reed.

"And it's a testament to our R&D and manufacturing people that we can operate across that spectrum," says Walsh.

As hinted at earlier, the company sells to more than 250 food retailers in North America, including 47 of the 50 largest food retailers; more than 450 foodservice customers, including 74 of the 100 largest restaurant chains; and the 200 largest food distributors. Its 10 largest customers account for approximately 47 percent of sales, although Walmart Stores, at roughly 20 percent of sales, is the only one accounting for more than 10 percent.

Manufacturing, of course, is a big part of the equation. "You have to be able to produce a high-quality product on a consistent basis in the low-cost neighborhood – and service the customer," says Reed.

While there have been four plant closings in TreeHouse's history, in almost every case an acquired plant's throughput and capacity utilization go up, not down, with the broader reach of TreeHouse.

If there is one growth target that has proven elusive, it's food away from home. Currently just 15 percent of TreeHouse's business, foodservice is an attraction for this group of executives. And maybe further down the road, refrigerated and frozen foods.

What direction is TreeHouse moving in? One direction made of two intertwined components: more acquisitions and more focus on private label. With a healthy bottom line and credit available, the company remains on the lookout for acquisition candidates.

When the five ex-Keebler executives set up the company in 2001-2005, they had a goal of building a $2 billion (sales) company, but believed it would take the rest of their careers to do so. Reed acknowledges they've moved faster than even he believed possible.

"Now we believe the [private label] opportunity far exceeds our $2 billion target," says Reed. That opportunity and assurances that they're "still having fun" implies a lot more wheeling and dealing ahead for TreeHouse Foods.

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