Treehouse Foods will be on the acquisition trail in 2012 as it seeks to drive consolidation in the private label sector via “strategic acquisitions”.
The firm, which posted a 22.1% rise in net income to $30.4m on net sales up 13.7% to $528.1m in the third quarter, said aggressive pricing actions taken earlier in the year to offset higher input costs had begin to pay off, with margins now on the road to recovery.
Chief executive Sam Reed said 2012 would be a” year of strategic expansion, driven internally by organic growth and externally by strategic acquisitions”.
He added: “The opportunity for TreeHouse to continue its role as a leading consolidator within the private label space remains strong and vibrant. As always, we are focused on strategy, category dynamics and go-to-market synergies as we evaluate potential acquisition candidates.”
The rise and rise of private label
Speaking at the Barclays Capital Back to School conference in Boston in September, Reed said US retailers were increasingly recognizing that private label could help them boost profitability, differentiate themselves and improve consumer loyalty.
“Private label generates retailer gross margins that are more than 20% higher than those of comparable brands.”
Treehouse, which has leading positions in the private label market in nine categories including macaroni cheese, salad dressings, pickles, soup, and hot cereals, had tripled sales from $708m in 2005 to an estimated $2bn+ in 2011, said Reed.
“We have tripled the size of the business in our first six years and solidified our place as a real leader in the industry.”
*According to market researcher Packaged Facts, sales of private label products in US food retailing are set to grow from $92bn in 2010 to $113bn in 2014, while their market share is predicted to rise from 19.1% to 23% over the same period.