CAGNY Day 3: TreeHouse Foods and PepsiCo Moving in Opposite Directions

Feb. 21, 2020
TreeHouse Foods is having another difficult year while PepsiCo continues to thrive.

TreeHouse Foods and PepsiCo are companies moving in opposite directions, it was apparent at this year's Consumer Analyst Group of New York Conference. We reported on Day 1 of the event and Day 2 earlier this week. 

They were the only two food companies presenting in Day 3 of the annual CAGNY meeting, where the CEOs and CFOs of publicly held food and beverage companies report to the financial community.

TreeHouse is coming off its fourth straight year of revenue declines. Sales were just south of $4.3 billion; they were just north of $6.1 billion in 2016. CEO Steve Oakland said the revenue shortfall will continue into the first half of 2020.

PepsiCo is coming off one of its better years, its third straight year of revenue increases. 2019 saw sales of more than $67 billion, plus net income of $7.3 billion – down from 2018's stellar $12.5 billion but still a handsome sum and bigger than at least the three previous years.

Oakland has been heading TreeHouse since early 2018 when he replaced founder Sam Reed. Reed built the company by acquisition, but bit off more than the company could chew when he bought Conagra's private label business in late 2015 for $2.7 billion. Even at that bargain price, TreeHouse has had difficulty turning a profit on those acquired lines.

So Oakland was brought in to prune and focus the company, and it's apparent his work is not done. Despite revenue drops in 2017 and 2018, the company turned profits. Not last year, as TreeHouse lost $16 million.

The revenue declines are necessary evils, as TreeHouse sheds underperforming and non-strategic businesses. And, as Oakland pointed out, private label remains a category with great potential, and TreeHouse remains the undisputed leader in that segment.

PepsiCo, too, has a new CEO after 12 years of leadership by a builder even bigger than Reed. Indra Nooyi turned over the reins in 2019 to Ramon Laguarta, and the company looks like it hasn't skipped a beat.

One of the financial analysts noted in the Q&A that Laguarta did effect a turnover of several top and long-tenured managers. Vice-chairman Hugh Johnston, one of the few carryovers, boasted of new products, financial wisdom and social responsibility and said PepsiCo remains true to its goal of "be[ing] the global leader in convenient foods and beverages."

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