Dive overview:
- Treehouse Foods is spending $100 million Acquires Northlake, Texas coffee facility and non-direct store delivery coffee business from Farmer Brothers Company. The transaction is expected to close within the next 60 days.
- Built in 2017, the facility will bring roasting, grinding, flavoring and blending capabilities to Treehouse Foods, complementing its existing single-serve pod and instant coffee businesses, the private-label food manufacturer said. rice field.
- In addition to adding brands, food and beverage manufacturers have expanded existing product offerings and acquired factories and capacity to meet future growth in demand.
Dive Insight:
Treehouse has been trying to streamline its business over the last year, especially by selling much of its meal preparation business for nearly $1 billion, but the private-label food company hasn’t lost sight of the importance of building and strengthening its existing business. .
To grow Treehouse’s remaining business, Chief Executive Steve Oakland told analysts in February that the company was looking to buy manufacturing capacity rather than new brands.
“I think acquisitions for us are capability-driven, not necessarily new business, adjacencies, or things we’ve done in the past,” Oakland said. “We think we belong in a great category group. There is demand, so we need to sell more.”
Manufacturing assets, which have historically been relatively unimportant M&A targets, have become invaluable as the challenges of the pandemic era put pressure on costs, supply and workforce. Building new manufacturing facilities is expensive and takes years, and many companies are looking to purchase manufacturing facilities to increase their production capacity.
Oakland said in a statement that the purchase of the coffee plant from Farmer Brothers will give Treehouse additional capabilities and “a more vertically integrated coffee maker that can further penetrate this high-growth, high-margin category.” He said he would create a company that
The acquisition will give Treehouse more control over the entire coffee-making process, potentially increasing profit margins in the category. It also gives the Illinois-based company an even deeper presence in a fast-growing sector.
Coffee consumption has reached a 20-year high, According to data released by the National Coffee Association in 2022,. Americans consume nearly 500 million beverages each day, making it the most popular beverage after water, tea and juice. It is also becoming popular among the younger generation. The NCA reports that 51% of young people aged 18 to 24 drink coffee, an 11% increase since July 2021.
TreeHouse is the latest commodities company to look to M&A to increase production.
Hershey announced in April that it would acquire two popcorn businesses from a co-manufacturing company to increase capacity and flexibility for its burgeoning Skinny Pop brand. And when the snack giant bought Dot’s home-style pretzels in 2021, a key part of the acquisition was the three manufacturing sites used to make salty snacks for Dot and other customers.
Other companies are also adopting this strategy. last year, B&G Foods Acquires Growers Express’ Frozen Vegetable Manufacturing Business. The company, which manufactures, produces, packs and sells frozen vegetables, has produced products under the Green Giant brand.
In 2021, Utz Brands acquired the largest manufacturer of On The Border branded tortilla chips.
