TreeHouse Foods Inc. is bulking up on its private label broths, soups and gravies business, with plans to acquire a Canadian food company for about $150 million.
Oakbrook, Ill.-based TreeHouse, which makes private label soups at the former Heinz plant on the North Side, announced this morning it will buy Protenergy Natural Foods, including its headquarters in the Toronto area and a second plant in Cambridge, Md. Protenergy employs about 300 people and reported 2013 sales of about $118 million.
“The acquisition of Protenergy is expected to expand our existing packaging capabilities and enables us to offer customers a full range of soup products, both wet and dry,” Sam K. Reed, chairman, president and CEO of TreeHouse Foods, said in the official announcement.
In a conference call with analysts this morning, Mr. Reed said the Canadian business has proven that private label companies don’t have to wait for brand name operators to take the lead in innovation and technology, which has helped it grow rapidly.
“Our plans are to continue that remarkable growth along two parallel paths,” he said. “First, we believe that other segments of the soup, broth, gravy and sauce categories will follow a growth trajectory of broth in the cartons. Aseptic packaging has transformed broth from a private label laggard to a customer brand growth engine.” He said 70 percent of broth is now packaged in cartons, and private labels' share of that business is growing.
Secondly, TreeHouse will move to use the technology across other product lines in the center aisles of the grocery store.
Mr. Reed said there will be cost savings as a result of the deal, which is expected to close in the second quarter. “Typically it’s going to take about a year, especially with a business like this, to get those synergies in place,” he said. By next year, he said, some sourcing savings may be found as well as distribution synergies “as we move them into the network.”
Sometimes, he added, the gains are less in cost savings and more in growing the sales base.
Along with announcing the acquisition, TreeHouse said net sales in the first quarter were up 14.6 percent from the same period a year ago. Earnings are expected in the range of 77 cents to 80 cents per share. Full quarterly results are set to be released in May.
The company’s shares were trading at $72.56 midafternoon today, up 41 cents.
Teresa F. Lindeman: email@example.com or at 412-263-2018.