TreeHouse Foods, Inc. (THS Quick QuoteTHS - Free Report) has established a strong market position by capitalizing on two major long-term consumer trends, which include the increasing demand for private-label groceries in North America and the expanding popularity of snack products. With its diverse portfolio, THS is well-positioned to capture a growing share in this evolving market.

As private brands have steadily gained market share over the past 20 years, TreeHouse Foods has demonstrated its capacity to address consumer needs while maintaining attractive pricing. The elevated price gaps between national and private brands further support continued growth in the private label sector.

TreeHouse Foods has reinforced competitive position in the market by successfully executing its strategies in several key product categories, including cookies, refrigerated dough, pretzels and pickles. These aspects indicate growth in the second half of the year. Additionally, THS' strategic investments and an expanding net sales pipeline contribute to its strong market position. The abovementioned factors solidify the company's reputation as a leading supplier of private brands.

Shares of THS have gained 15.7%, outpacing the industry’s growth of 7.8% in the past three months.

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Growth Factors for TreeHouse Foods' Stock

TreeHouse Foods’ transformation journey is poised for success as it focuses on strengthening and expanding its presence in the snacking and beverage sectors. This effort includes improving supply chain operations and delivering exceptional service to drive organic growth and create long-term value for stakeholders.

Key initiatives to enhance the supply chain includes the implementation of the TreeHouse Management Operating System (TMOS) and improvements in procurement and distribution. These efforts are intended to enhance operational execution, increase profit margins and build stronger customer relationships.

In the first half of 2024, the TMOS initiatives have led to notable improvements in overall equipment effectiveness and service quality. TreeHouse Foods expects to achieve $50 million in gross cost savings in the second half of 2024, driving margin expansion. Additionally, the company expects increased volume during this period, fueled by seasonal demand in categories such as coffee, creamer, hot cereal, refrigerated dough and broth. It also foresees meeting its objectives by restarting broth facility during this time frame.

Strategic acquisitions have played a crucial role in expanding THS’ product offerings. Notable acquisitions in 2024, including Bick's pickles, Habitant pickled beets, Woodman's horseradish and McLarens pickled onions brands from The J.M. Smucker have significantly diversified the company's revenue streams and enhanced its portfolio. These additions have bolstered TreeHouse Foods' position in the market by catering to a wider range of consumers.

Roadblocks on THS’ Way

While TreeHouse Foods has made significant strides, ongoing supply chain hurdles remain a challenge. Issues related to increased labor costs and the restoration of the broth facility resulted in a $3 million headwind. The supply-chain disruptions also impacted the company’s gross margin, which fell to 16.3%, a 0.3% point decrease from the previous year, due to the costs associated with bringing the broth facility back.

The company has been battling with high operating expenses in the second quarter, which has put pressure on its profits. This uprise was driven by lower TSA income and increased personnel and capability investments. However, these impacts were partially mitigated by reduced freight expenses and TSA-related cost reductions.

How to Play THS Stock?

TreeHouse Foods has reinforced its market standing by focusing on private-label and snack products, aligning with key consumer trends. Although supply chain issues and rising operating costs pose challenges, the company's strategic initiatives and acquisitions suggest potential for sustained growth. Investors should consider a balanced approach, weighing the company's growth prospects against current operational hurdles. TreeHouse Foods currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Here, we have highlighted some better-ranked food stocks, namely, The Chef's Warehouse (CHEF Quick QuoteCHEF - Free Report) , Pilgrim’s Pride (PPC Quick QuotePPC - Free Report) and Ollie's Bargain Outlet (OLLI Quick QuoteOLLI - Free Report) . While The Chef's Warehouse and Pilgrim’s Pride sport a Zacks Rank #1 (Strong Buy) each, Ollie's Bargain Outlet carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.

PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average. The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.4%, respectively, from the prior-year reported level.

OLLI has a trailing four-quarter earnings surprise of 7.9%, on average. The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.6% and 12.7%, respectively, from the year-earlier level.