With a cheeky nod to Campbell Soup’s signature slogan, TreeHouse Foods, Inc. said its acquisition of a Canadian private label soup maker is “Mmm mmm great.”
The company’s $150 million deal for Protenergy Natural Foods represents more than a broader reach into the competitive category of soups, broths and gravies. The transaction positions TreeHouse to leverage Protenergy’s innovative packaging array, which includes aseptic cartons and other recloseable formats, for adjacent categories. Richmond Hill, Ont.-based Protenergy specializes in carton and recart broth, soups and gravies for private label and corporate brands and co-manufactures products for large national brands.
“We have followed Protenergy’s progress from its startup to its emergence as a leader in both private label and food technology,” said Sam Reed, chairman, president and chief executive officer, during an April 21 call with analysts to discuss the acquisition. “They have pioneered their transformation from steel cans to aseptic cartons in the soup, broth, gravy, and sauce categories, proving in the process that private label need not follow brands in either innovation or technology.”
Aseptic packaging has transformed broth from a “private label laggard” into a customer brand growth engine, with 70% of broth now packaged in cartons as cans continue to slowly decline, he said.
“First, we believe that other segments of the soup, broth, gravy, and sauce categories will follow a growth trajectory of broth into cartons,” Mr. Reed said. “Secondly, we believe that consumer demand for health and wellness coupled with convenience, especially among millennials will drive growth across a broad array of center-of-store staples. Shelf-stable recloseable packaging formats will accelerate this trend as the sauces and prepared meals categories undergo a transformation from post-World War II baby boomer product formats to those of our children and grandchildren.”
Ultra-high temperature packaging formats are forecast to grow approximately 9% compounded over the next three years, he added.
“The importance here is that we have not only white space within the soup/broth category, but that we also now have a technology play similar in a way to coffee in that we will offer something here that other private label competitors do not have,” Mr. Reed said. “And that is that full array of products and packaging formats that are so critical here.”
Packaging plays a role in the interests of millennial consumers, who are driving a conversion from conventional, full-size family formats.
“(For millennials), family formation is later in life, and there is greater emphasis on convenience, meal assembly rather than meal preparation, and health and wellness year by year is moving up to the very top considerations with regard to customer brands where those retailers want to differentiate themselves,” Mr. Reed said. “And so I think that in this instance what we will see is that the technological capabilities will allow us to make incursions and growth in relatively staid categories, where without that, and I think as I mentioned, we see that cans continue their slow decline. So it’s trying to leverage all of the capabilities that we’ve got in place in other aspects of our operations and supply chain with now the advent or the use of that technology.”
For TreeHouse, the transaction may be one of several this year.
“I think we have indicated early on that there is a lot of the year to go and market conditions are such that we believe that there are more things coming, and they will be in all shapes, sizes, and sorts,” Mr. Reed said. “We will find — we believe we will find — strategically attractive businesses later in the year. With regard to organizational readiness … we are at a point now in terms of proficiency, readiness, capability that we have never been this capable before. We are quite confident in our ability to not only continue to improve internally, but to do so while we expand externally.”
