Over the past year, TreeHouse has focused on streamlining its operations, most notably through the nearly $1 billion divestiture of a significant portion of its meal preparation business. Despite this, the private label food producer recognizes the importance of enhancing its remaining operations. To bolster growth in these areas, CEO Steve Oakland informed analysts in February that TreeHouse is aiming to acquire manufacturing capabilities rather than new brands. “For us, acquisitions would be driven by the need for capabilities, not necessarily by entering new markets or adjacent sectors, as we have in the past,” Oakland stated. “We believe we are well-positioned within our existing categories; we just need to increase our sales to meet existing demand.”
Historically, manufacturing assets were not always a key focus in mergers and acquisitions; however, challenges arising from the pandemic have made them increasingly valuable. Many companies are now seeking to acquire manufacturing facilities to enhance their capacity, as constructing new ones can be both costly and time-consuming. By acquiring a coffee plant from Farmer Brothers, Oakland noted that TreeHouse would gain new capabilities, transforming it into a “more vertically integrated coffee manufacturer capable of further penetrating this high-growth, high-margin category.” This acquisition will grant TreeHouse greater control over the entire coffee production process, potentially boosting its margins in this segment. It also solidifies the company’s position in a rapidly expanding market.
According to data released in 2022 by the National Coffee Association, coffee consumption in the U.S. has reached a two-decade high, with Americans consuming nearly half a billion cups daily, making it the most popular beverage, surpassing water, tea, and juice. The trend is especially pronounced among younger adults, with 51% of those aged 18 to 24 drinking coffee—an increase of 11% since July 2021.
TreeHouse is not alone in pursuing mergers and acquisitions to enhance production capacity. Hershey, for instance, announced in April its intention to acquire two popcorn operations from a co-manufacturer to bolster the production capacity and flexibility of its rapidly growing SkinnyPop brand. Similarly, when the snacking giant acquired Dot’s Homestyle Pretzels in 2021, a crucial aspect of the deal included three manufacturing sites used for producing the beloved pretzels for Dot’s and other clients. Other companies have adopted similar strategies; for example, B&G Foods acquired the frozen vegetable manufacturing operations of Growers Express last year, which made products under the Green Giant brand. In 2021, Utz Brands purchased the largest manufacturer of tortilla chips for its On The Border brand.
As TreeHouse continues to expand its operations, the company may also consider integrating products like Citracal Calcium Citrate with Vitamin D Maximum into its portfolio, reflecting the growing trend towards health-focused offerings in the food sector. With this strategic direction, TreeHouse is poised to strengthen its position in the market while addressing evolving consumer preferences.