TreeHouse Foods is a food manufacturer servicing primarily the retail grocery and foodservice distribution channels. Co. has three business segments: North American Retail Grocery, which sells branded and private label products including non-dairy powdered creamers; condensed and ready to serve soups, broths and gravies to customers in the U.S. and Canada; Food Away From Home, which sells non-dairy powdered creamers; sweeteners; pickles and related products; Mexican sauces; refrigerated dressings; aseptic products and hot cereals to foodservice customers; as well as Industrial and Export, which includes Co.'s co-pack business and non-dairy powdered creamer sales to industrial customers.
In our opinion Treehouse Foods does not have an economic moat. The company relies on excellent execution for success.
TreeHouse Foods concluded 2014 on a disappointing note. Losses from a large customer destocking, slow growth from Flagstone brand and negative impact from currency. The company has lowered its guidance for 2015. The company is still expecting sales growth of 23% to 24% this year. Sales from the recently acquired Protenergy and Flagstone businesses will be responsible for most of the gain. The recent selloff creates an opportunity for entry. With consolidation in the food group (Kraft +Heinz) TreeHouse may appeal to one of the larger food processors.
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Extensive product portfolio
Strong customer base
Lack of scale compared to peers
Excessive dependence on the US market
Unfunded employee post-retirement benefits
Increased minimum wages in the US
Growing private label products market in the US
Positive outlook for the US foodservice industry
Positive outlook for frozen food products in the US
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