TreeHouse Foods positions for potential sale as earnings outlook slashed

TreeHouse Foods has flagged the possibility the US private-label business may be sold as the company slashed its earnings guidance.

The company said its board of directors has approved a plan to “explore strategic alternatives”.

TreeHouse’s options include “a possible sale of the company or a transaction to allow the company to focus on its higher growth snacking and beverages business by divesting a significant portion of its meal-prep business”.

It added: “The determination follows the company’s ongoing, board-led strategic review which began earlier this year.”

Under president and CEO Steven Oakland, TreeHouse has restructured over the past three years, slashing SKUs in an effort to improve profit margins. As part of that endeavour, the company sold the ready-to-eat cereals business this year to US peer Post Holdings. TreeHouse has also expanded the portfolio with the purchase of pasta brands from Ebro Foods in 2020 and, as recently as August, hinted at engaging in M&A.

However, the group came under pressure earlier this year with the emergence of an activist investor, New York-based hedge fund Jana Partners, which acquired a 7.3% interest in the business in February.

Ann Sardini, the chair of TreeHouse’s board, explained the rationale in a statement today: “The board’s decision to explore strategic alternatives follows careful consideration as well as engagement with many of our shareholders over the past year.

“The TreeHouse team has executed a major transformation since 2018, improving the ability to support its private-label customers and navigate a challenging operating environment. This progress and the strong long-term consumer demand trends for private label provide a favourable backdrop as the board thoroughly reviews and considers strategic options with a commitment to maximising value for all shareholders.”

COP26 - “Transformative” food system needed to curb methane emissions – campaign group

A campaign group says governments need to be more aggressive in tackling agriculture-related methane emissions if they are serious about combatting climate change.

The Changing Markets Foundation argues the Global Methane Pledge promoted at this week’s COP26 summit in Glasgow, does not go far enough. It believes a more “transformative” approach is required to encourage people to adopt plant-based diets.

More than 100 countries joined the pledge – an initiative first revealed in September with less than ten signatories – to reduce methane emissions by 30% by the end of the decade. China and Russia, and also Australia, a major meat and dairy producer, were not party to the commitment.

“It’s not enough,” Nusa Urbancic, a campaign director at Changing Markets, tells Just Food, adding “the 30% target is really problematic because it’s a collective target. Science says at least 45% is needed by 2030 and this gap could be bridged with more transformative action on agriculture.

“I hope governments will come up with some type of process where they will be able to ramp up this ambition as soon as possible because methane is an urgent issue. We shouldn’t only be looking at the energy sector, we should also be looking at agriculture, which is the biggest source.”

Adopting a plant-based diet devoid of dairy and meat would go some way toward addressing the methane issue, Urbancic says, pointing to the downside of consuming too much meat believed to contribute to health-related diseases such as diabetes and certain types of cancers.

“They are stopping short of going the whole way, which is basically reducing emissions also by reforming the food systems, like moving to diets with less meat and dairy. And governments taking a more active approach.”

She continues: “Latin America, North America, Europe, Australia and New Zealand, they consume more than twice the amount of meat that is considered healthy. These kinds of measures would not just be good for the climate they would be really good for health and good for the budgets of those countries.”

Beyond Meat rebuffs suggestions of waning plant-based appetite in US

Beyond Meat has rebuffed any suggestion of a tail-off in general appetite for plant-based products in the US as the company’s third-quarter sales there declined.

Sales in the US dropped across retail and foodservice in the three months to 2 October, while demand in international markets surged. CEO Ethan Brown suggested the US decline was down to a “pause” in consumer demand rather than any structural issue in the appetite for meat-free.

Beyond Meat was also coming off a record second quarter, when global sales reached US$149m. Net revenues for the latest quarter were $106.4m, an increase of 12.7% over the corresponding period a year earlier.

However, third-quarter revenue in the US fell 13.9% to $67.5m, with retail down 15.6% and foodservice minus 7.3%. Brown said Beyond Meat faced challenges from an uptick in Covid-19, labour shortages and supply chain constraints, and “highly variable demand”.

The CEO said during a follow-up call with analysts: “There’s no indication in my view that coming off of a record quarter of revenue in the second quarter to this quarter that there’s some fundamental change in the consumer mindset toward our products.

“I don’t think there’s any sector issue or any segment issue. We continue to see strong year-over-year growth in terms of overall annual revenue. And, if you look at 2022 and the work we’re doing there, I think there’s tremendous excitement in our company about what’s coming.

“And so this is a bit of a kind of the pause. And had the pandemic and labour issues and supply chain stuff not interfered, I think this quarter would have been quite
different.”

Beyond Meat’s international revenues rose to $38.9m in the latest quarter, an increase of more than 140% from a year earlier.

Ahead of the results, the company had downgraded its third-quarter sales outlook last month, citing one factor as a “decrease in retail orders that persisted longer than expected from a Canadian distributor”.

Beyond Meat provided a revenue outlook for the current fourth quarter of $85m to $110m, which implies a decline of as much as 20% or a gain of 3.3% from the third-quarter number.

“The headline for the third quarter relative to our expectations at the onset of 2021 is that it was a difficult operating environment, [with] highly variable demand, reflecting the Q2 retreat and then [a] Q3 re-emergence of Covid in the form of the Delta variant.

“Sustained labour shortages impacting certain customers, as well as our own facilities and other high-impact supply chain disruptions are among the challenges characterised in the quarter,” Brown said.

UK relaxes HGV driver, butcher rules to ease bottlenecks

The UK government has announced a series of temporary measures to try to help ease a shortage of lorry drivers and butchers to alleviate bottlenecks in the supply chain.

Heavy-goods vehicle drivers from the EU will be permitted to make unlimited trips in the UK over a two-week period before returning home, instead of the current two per week under so-called cabotage rules, which will be relaxed for up to six months when the measures take effect.

And as the pork industry struggles to process a backlog of pigs for slaughter, UK Environment Secretary George Eustice has announced 800 overseas butchers will be permitted to work in abattoirs under a temporary six-month visa allocation within the Seasonal Workers Pilot Scheme.
Eustice said they will be eligible to apply for the visas up to 31 December and expects the butchers to start arriving in the UK in November.

Nick Allen, the CEO of the British Meat Processors Association, greeted the abattoir measures with some scepticism.
Speaking to the BBC, Allen said the temporary visa scheme was a “glimmer of hope for pig farmers” and much will depend on how quickly the applications can be processed, which could be up to three weeks, he said.

The Government announcement was “greeted with howls of anguish across the industry”, he added.

Eustice said in a statement yesterday evening: “A unique range of pressures on the pig sector over recent months such as the impacts of the pandemic and its effect on export markets have led to the temporary package of measures we are announcing today. This is the result of close working with industry to understand how we can support them through this challenging time.”

The BMPA’s Allen said the body’s members have noted they are around 15-20% short of the usual number of pork butchers, who would normally take from 18 months to three years to fully train.

The addition of pork processors through the temporary visa scheme is on top of the “foreign butchers already being eligible since December 2020” through the Skilled Worker Route, the Government said.

It admitted, however: “Temporary visas are not a long-term solution and businesses must make long-term investments in the UK domestic workforce to build a high-wage, high-skill economy, instead of relying on overseas labour.”

UK government announces extended CO2 supply deal

The UK government has announced an agreement to ensure supplies of carbon dioxide – vital to the country’s food businesses – until the New Year.

CO2 is a by-product of fertiliser manufacturing and widely used in areas such as meat processing – in the slaughtering process – and the packaging of chilled foods.

Last Month, CF Industries, which accounts for 60% of the country’s CO2 production, shut down two fertiliser plants in northern England, blaming high gas prices. The move created fears of pressure on food supplies.

The Government subsidised a three-week deal with the US company which saw it re-open one of the plants but now says it has brokered an agreement for a longer period between suppliers and wholesalers.

In a statement, the Government said CF has agreed to continue supplies of the gas until early next year, allowing the Government and firms time to find other sources of CO2.

It said: “CO2 suppliers have agreed to pay CF Fertilisers a price for the CO2 it produces that will enable it to continue operating while global gas prices remain high, drawing on support from industry and delivering value for money for the taxpayer.”

Business Secretary Kwasi Kwarteng said: “Today’s agreement means that critical industries can have confidence in their supplies of CO2 over the coming months without further taxpayer support.

“The Government acted quickly to provide CF Fertilisers with the support it needed to kick-start production and give us enough breathing space to agree a longer-term, more sustainable solution.”

The deal runs until January 2022.

The Government also announced that another commercial CO2 producer, Ensus, reopened its plant last week following temporary closure for planned maintenance, further securing supplies. The plant at Wilton in south-west England can produce up to 40% of the UK’s CO2 requirements.

Ian Wright, chief executive of UK trade body The Food and Drink Federation, said: “Although welcome news, the increased cost of buying CO2 is yet another burden on the food and drink industry, which is already facing enormous stresses. This will of course add more pressure on prices for shoppers and diners.

“We continue to work with the government to ensure supply continues. Once we are certain that the immediate supply issues are resolved, we will then turn our attention to the need to build resilience into the production of CO2 to protect our food and drink supply chain.”

George Weston completes bakery exit with ambient sale to Hearthside Food Solutions

The remaining assets of Canada-based baker Weston Foods have been sold to US contract manufacturing group Hearthside Food Solutions.

George Weston Ltd., the owner of Weston Foods, had been looking for buyers for its bakery business to focus on its interest in retail and real estate. Three weeks ago, the group announced the sale of Weston Foods’ fresh and frozen businesses to “affiliated entities” of Canadian baker FGF Brands.

The CAD1.2bn (US$958.5m) deal with FGF Brands left Weston Foods’ ambient assets still on the block. Today (15 November), a deal was announced between George Weston Ltd. and Hearthside Food Solutions, a co-manufacturer with operations in North America and Europe.

A sum of CAD370m is being paid for the businesses, which sell products including biscuits and crackers to retail and foodservice customers in North America. The division also makes cones and wafers for the ice-cream industry.

“The Weston Foods acquisition is an ideal complement to our existing production network and business, bringing baking capacity, a roster of premier customers, expanded capabilities, and enhanced geographic coverage. These synergies benefit our current and new customers alike,” Chuck Metzger, Hearthside Food Solutions’ CEO, said.

Six factories – five in the US and one in Canada – are included in the deal, taking the number of Hearthside Food Solutions’ manufacturing facilities to 43. Some 1,100 staff work for the Weston Foods businesses that are part of the transaction.

Baking is one of Hearthside Food Solutions’ four “primary production categories”. The others are bars, food packaging, plus fresh and frozen entrées.

The deal remains subject to competition approval but the companies said they expect to complete the deal by the end of March.
Weston Foods had sales of CAD2.06bn and adjusted EBITDA of CAD200m in 2020, down, respectively, from CAD2.15bn and CAD223m in 2019. The assets sold to Hearthside Food Solutions accounted for around a quarter of sales in 2020.

“We have two high-quality buyers that are well-positioned to carry on the proud legacy of the Weston Foods business,” Galen G. Weston, the chairman and CEO of George Weston Ltd., said.

In 1882, an apprentice baker in Toronto named George Weston bought a bread-delivery route from his manager and set out on his own, the spark for Weston Foods, which has approximately 6,000 employees working across 33 facilities in Canada and the US.