The demand for ready-to-eat foods has increased more than ever because of today’s fast and busy lifestyles. Packaged food products have experienced higher sales than the other retail grocery store segments, and demand is expected to rise further. The industry is projected to expand by almost 15% between 2010 and 2015. In 2015, it is expected that sales will exceed $92.7 billion. Almost all of the industry players are expanding their operations because of this projected expansion, either through organic growth or acquisition-based growth.
Manufacturer TreeHouse Foods Inc. (NYSE:THS) has made two purchase agreements in 2013. In its latest agreement, the company has announced plans to acquire Associated Brands, a private-label manufacturer of powdered drinks, specialty teas, and sweeteners. Associated Brands’ dry mix categories, including powdered drinks, oatmeal, and side dishes, complement TreeHouse Foods Inc. (NYSE:THS)’s portfolio. TreeHouse Foods Inc. (NYSE:THS) will gain a stronger foothold in the North American market and enter the specialty tea category with this acquisition. The company’s pro forma 2013 sales will be around $2.5 billion, approximately 13% higher than the prior year’s sales, while its adjusted EBITDA will be around $350 million. The transaction is expected to have a neutral effect on 2013 earnings for TreeHouse Foods Inc. (NYSE:THS), but looks poised to benefit the company’s investors in 2014. The company’s per-share earnings are expected to be up by approximately $0.14 to $0.16 in the next year.
TreeHouse Foods Inc. (NYSE:THS) previously acquired Cains Foods, a privately held manufacturer of shelf-stable foods. As with the Associated Brands acquisition, this acquisition is also expected to have a neutral effect on the company’s 2013 earnings. It is expected to increase earnings by roughly $0.05 per share in 2014.
Due to an improved mix of sales and operating efficiencies, the reported gross margins of TreeHouse Foods Inc. (NYSE:THS) in the second quarter of 2013 increased by 0.6% year over year. The company’s direct operating income and margins improved in all of its segments. The adjusted EBITDA of the company grew by 8.3% to $0.65 per share. TreeHouse’s full-year EPS is projected to be in the range of $3.07 to $3.12, an improvement of 22.5% to 24% over 2012.
TreeHouse has also made some strategic changes. In May 2013, the company made some changes in its senior management. Christopher D. Sliva, its senior vice president and COO of the operating unit Bay Valley Foods, was promoted to executive vice president of the company and president of Bay Valley. Silva had an outstanding career at various consumer packaged goods companies, and has strong experience in managing operations. This change may have a positive impact on the company’s financial stability in the long run.
