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WIKI ANALYSIS
Company Overview
TreeHouse Foods, Inc. (TreeHouse), incorporated on January 25, 2005, is a food manufacturer servicing primarily the retail grocery and foodservice distribution channels. The Company’s products include non-dairy powdered coffee creamers, private label soups, salad dressings and sauces, sugar free drink mixes, hot cereals, macaroni and cheese, skillet dinners, Mexican sauces, jams and pie fillings, pickles and related products, infant feeding products, aseptic sauces, refrigerated salad dressings, and liquid non-dairy creamer. TreeHouse manufactures and sells private label products to retailers, such as supermarkets and mass merchandisers, for resale under the retailers’ own or controlled labels; private label and branded products to the foodservice industry, including foodservice distributors and national restaurant operators; branded products under its own brands, primarily on a regional basis to retailers, and products to its industrial customer base, for repackaging in portion control packages and for use as ingredients by other food manufacturers. [1]
Business Segments
Pickles
TreeHouse produces pickles and a variety of related products, including peppers, pickled vegetables, sauces and syrups. It produces private label and regional branded offerings in the pickles category. These products are sold to supermarkets, mass merchandisers, foodservice and industrial customers. Pickles represent 328 million dollars in sales (18 percent of total revenue). Sales have remained flat for last 4 years.
Main Competitor: Vlasic Pickles (Pinnacle Foods Group LLC) Vlasic founded in 1912 in Detroit Michigan. It was acquired by Pinnacle Foods in 2001. Vlasic produced 974 million dollars of sales for Pinnacle Foods in 2010. Jovny the Stork, the Vlasic mascot is consistently named one of the most recognizable advertising icons. [2]
Soup and Infant Feeding:
Soup, broth and gravy are produced and packaged in cans of various sizes, from single serve to larger sized cans. TreeHouse primarily produces private label products sold to supermarkets and mass merchandisers. It co-packs organic infant feeding products for a branded baby food company, which is included in the Industrial and Export segment. During 2010, soup and infant feeding sales represented 17.8% of its consolidated net revenues, with the majority of the sales coming from soup sold through the retail channel
Main Competitor: Campbell Soup Company The U.S. Soup, Sauces and Beverages segment includes the following retail businesses: Campbell’s condensed and ready-to-serve soups; Swanson broth and canned poultry; Prego pasta sauce; Pace Mexican sauce; Campbell’s Chunky chili; Campbell’s canned pasta, gravies, and beans; Campbell’s Supper Bakes meal kits; V8 juice and juice drinks; and Campbell’s tomato juice. Campbell Soup and sauces represent 3,700 million worth of sales for Campbell soup making its largest business segment by sales. [3]
Non-Dairy Powdered Creamer:
Non-dairy powdered creamer is used as coffee creamer or whitener and as an ingredient in baking, hot and cold beverages, gravy mixes and similar products. Product offerings in this category include private label and branded products packaged for grocery retailers, such as supermarkets and mass merchandisers, foodservice products for use in coffee service and other industrial applications, such as portion control, repackaging and ingredient use by other food manufacturers. During 2010, non-dairy powdered creamer represented 16.8% of its consolidated net revenues.
Main Competitor: Coffee-mate (Nestle Foods) In 1961, Coffee-mate was introduced as the world’s first non-dairy powdered creamer. Coffee-mate soon established its position as America's most popular non-dairy creamer. This favored status was strengthened with the introduction in 1989 of nestle Coffee-mate liquid, which quickly became the number one non-dairy liquid creamer on the market, a position it still holds today. [4]
Buyers:
Treehouse currently supplies more than 250 food retail customers in North America, including 49 of the 50 largest food retailers, and more than 450 foodservice customers, including 53 of the 100 largest restaurant chains and the 200 largest food distributors. A relatively limited number of customers account for a large percentage of the consolidated net sales. For the year ended December 31, 2010, the ten largest customers accounted for approximately 52.1% of the Company's consolidated net sales. For the year 2010, the largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 18.5% of Sales. No other customer accounted for 10% or more of the Treehouse consolidated net sales.
Major Cost Drivers:
Raw materials consist of ingredients and packaging materials. Cost of Sales for Tree House foods was 76.3% of Sales
Ingredients
Principle ingredients used in operations include processed vegetables and meats, soybean oil, coconut oil, casein, oats, wheat, cheese, corn syrup, cucumbers, peppers and fruit. These ingredients generally are purchased under supply contracts, and Treehouse occasionally engages in forward buying, when determined such buying to be to their advantage. These ingredients are generally believed to be available from a number of suppliers.
Packaging Materials-
The most important packaging materials and supplies used in THE operations are glass containers, plastic containers,corrugated containers, metal closures and metal cans, operating supplies and energy. Most packaging materials are purchased under long-term supply contracts. these packaging materials are generally available from a number of suppliers
Distribution
Products are shipped from production facilities directly to customers, or from warehouse distribution centers, where products are consolidated for shipment to customers, if an order includes products manufactured in more than one production facility. This consolidation of products enables improved customer service by offering customers a single order, invoice and shipment. Selling and distribution cost represented 6.6% of total sales for 2010.
Porters Five Forces
Buyer Power- Buyer Power is a very significant threat to TreeHouse Foods. Will their Top 10 Customer Making up 50% of their sales if they lose a single major contract they will have significant financial repercussions. Wal-Mart alone makes up nearly 19% of their sales for 2010. Although TreeHouse is the largest private label supplier for many of its products, it is always possible that a buyer will decide to use a different supplier to fill their private label needs. This would be relatively easy to for the buyer because unless there is a significant drop-off in product quality the consumer would likely not know the difference.
Supplier Power- Is not a signifgant problem for TreeHouse Foods. The majority of the raw materials used are agricultural commodities thefore no one supplier has enough power to significantly impact prices, however the natural volitlity in these markets do pose a risk a TreeHouse because it is very difficult for them to pass on higher cost to consumer because TreeHouse customers are always trying to push the cost of their private label brands downward.
Threat of Substitute Products- Is of paramount importance to TreeHouse foods. Because TreeHouse foods provides primarily private label brands, they are constantly fighting for shelf space and sales with the larger brand name food producers. And not only does TreeHouse have to compete with the direct competitors to their products, they also need to compete with entirely different products substituting in. For example in there Hot Cereals) segment, they need to not only compete against Quaker Oatmeal (A Pepsico brand) but also against all dry cereals and all other breakfast foods.
Rivalry within the Industry- The consolidation trend is continuing in the retail grocery and foodservice industries, and mass merchandisers are gaining market share. As TreehHouses customer base continues to consolidate, competition will intensify as they compete for the business of fewer large customers.
Notable People
From its founding in 2005 to May 2007 Michelle Obama severed on the board of directors of TreeHouse Foods. She resigned after Barack Obama made critical remarks about Wal-Marts employment practices. TreeHouse foods is a major supplier to Wal-Mart. [5]
Recent Moves
In 2010 Treehouse foods exited the retail infant food business. The infant food represented a small fraction of the Soup and Infant Feeding division. And a much smaller part of overall sales.
October 2010 Treehouse foods acquired S.T. Foods, a manufacturer of private label macaroni and cheese, skillet dinners and other value-added side dishes. ST foods has annual net sales of approximately $100 million. The acquisition added additional categories to the product portfolio for the retail grocery channel [6]
References
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