TreeHouse Foods, Inc. (THS, Financial) is a leading provider of private label food, one of the few growing segments within the food industry. Private label penetration in the U.S. is considerably lower relative to in other countries, despite the lower costs to consumers and 500 basis points higher margins to the retailer. We anticipate this market size to grow over time as retailers place more emphasis on offering a unique product selection, consumers recognize the value and suppliers grow their distribution capabilities. Additionally, the private label food industry is highly fragmented domestically and TreeHouse is rapidly consolidating the business with strategic product and geographic acquisitions. The company, in our opinion, should be able to increase its market share in this growing industry. Finally, and potentially most intriguing, is TreeHouse's ability to completely alter the private label industry. While, historically, private label was an inferior but cheaper product compared to branded goods, TreeHouse is increasingly producing higher quality products at similar prices to its branded competition. These products should produce higher revenue and superior margins for the company. (Michael Baron)
From Ron Baron’s Baron Funds third quarter 2013 report.
From Ron Baron’s Baron Funds third quarter 2013 report.
