TreeHouse Foods Inc has announced it would introduce more premium, healthy snacks and popular drinks to revitalise the struggling private-label business it bought from ConAgra Foods Inc last month.
TreeHouse’s $2.7 billion acquisition of ConAgra’s business â€” its biggest ever â€” makes it the largest private-label food company in the US, with 2015 pro-forma sales of about $7 billion.
ConAgra’s business made cereal, snacks, condiments, pasta, and retail bakery products. This business, now a unit within TreeHouse, will be called TreeHouse Private Brands.
TreeHouse plans to introduce “better-for-you” gluten-free and organic foods, and foods with less preservatives and more natural colours to boost sales in the new business, Chief Financial Officer Dennis Riordan told Reuters on
“Products that are in that premium and better-for-you classifications have been rising at a rate of about 40 percent a year,” Riordan said.
Analysts had questioned the rationale of the acquisition as ConAgra had struggled to turn a profit in the business since it bought private-label foods company Ralcorp in 2013 for $5.1 billion.
The business, under ConAgra, had been plagued by integration costs and customer service problems as well as low profit margins due to price concessions to customers.
Riordan, however, played down concerns, saying problems with the business were mainly because of a lack of investments in new products and formulations.
The key will be to make that business relevant to retailers again, he said.
TreeHouse’s sales increased nearly 9 percent last year, on the back of a 28 percent jump in sales in 2014 when the company bought trail mix maker Flagstone Foods.
The company supplies private label products to supermarkets, specialty retailers, foodservice distributors and restaurant operators.
TreeHouse plans to expand its offerings of “on-trend” beverages, which include iced teas and fruit drink mixes and is also open to more acquisitions to boost its healthy food offerings, Riordan said, but declined to give further details.