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Treehouse Foods: 'The premium segment of retail grocery has been our fastest growing'

By Elaine WATSON , 22-Feb-2013

Private label expert Treehouse Foods says the premium segment of the US grocery retail market “has been our fastest growing over the last two quarters at least”, echoing a recent report from Hartman Strategy claiming that firms most attuned to the tastes of ‘upscale’ shoppers are more likely to succeed.

Asked about the potential of natural and organic products in the private label space on the firm’s Q4 earnings call yesterday, Treehouse CEO Sam Reed said: “I'll tell you, the driver of all of this and it is that the premium segment of retail grocery has been our fastest growing over the last 2 quarters at least.

“I think it's related to the bifurcation of the consumer market where the 1% are doing pretty damn well and it shows up in those retailers who focused on natural or on organic and premium products with their brands.

“And that has been a great opportunity for us across a number of categories and frankly, something that has materialized in a bigger and faster way than I would've expected a year ago when we were completely preoccupied with dealing with the discount side of the business.

“But I welcome that market development and we're in good position to leverage it.

On the acquisition trail: As the deal market opens, we expect to lead the pack

Treehouse, which posted revenues of $592.8m in Q4 versus the consensus of $577.9m, will also be on the acquisition trail this year, said Reed.

We anticipate that 2013 will usher in another era in food and beverage consolidation, affecting both the glamorous global brands and their more homely private label counterparts.

“No one can be better prepared or more capable in this circumstance as it relates to private label than Treehouse. As the deal market opens, we expect to lead the pack as strategic acquirers and financial investors seek M&A-based expansion in the food sector.

“Midsized transactions of $100-500m, the sweet spot of private label consolidation, should be particularly active as earnings transparency improves and deal multiples return to their prerecession norms.”

 

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