TreeHouse Foods, Inc. (THS, Financial) is a leading vendor of private label food to supermarkets.While the food business is a low growth industry, private label is a fast growing segment within this industry. Private label growth allows TreeHouse to grow units at twice the rate of branded food companies, as it takes share from second tier products. This is because consumers save money on less expensive private label items, and retailers earn approximately 500 basis points higher margin selling the private label equivalent. Domestic private label penetration is only 17%. It surpasses 45% in many European countries. Additionally, TreeHouse's higher margin premium segment accounts for approximately 15% of sales but is the fastest growing segment, as retailers attempt to distinguish themselves from competition. We believe TreeHouse should continue to increase market share within the growing segment of private label foods, as it introduces additional products and integrates acquired product through its distribution network. (Michael Baron)
From Baron Funds fourth quarter commentary 2013.
