Dive Brief:
- TreeHouse Foods will spend roughly $65 million on growth and supply chain initiatives after facing lingering service and production issues in half of its categories, according to a Feb. 13 earnings call.
- Half of the private label food manufacturer’s $130 million capital expenditure budget will go toward capacity expansion and innovation capabilities, Chief Accounting Officer Pat O’Donnell told investors. The other half will be put toward maintenance and infrastructure.
- Currently half of TreeHouse’s plants are operating at a normalized level of service, and the company forecasts the remaining half will improve throughout 2023, a spokesperson told Supply Chain Dive in an email.
Dive Insight:
TreeHouse continues to face production challenges in certain categories like cookies, creamer and single serve beverages, with O’Donnell noting that its “volume growth would have been higher had we not faced lingering supply chain and service constraints.”
The company delivered 3% volume growth in Q4, compared with 4.2% in Q3, according to O’Donnell.
“We're still seeing some pockets of labor challenges, a little bit of material availability and some line things, which is why you're seeing us invest in CapEx,” O’Donnell told analysts. He further noted that TreeHouse is putting more capital toward repairs and maintenance for its plants over the course of the year to help improve service levels.
Although the company exited 2022 with about 94% service in Q4, a hurricane impacted TreeHouse’s pickle business while a snowstorm in Buffalo impacted a cookie facility, a spokesperson said.
“We’re working diligently to resolve our supply chain challenges and by the end of this year, we expect most of our categories to be very close to our target service level of 98%,” O’Donnell told investors.
Material shortages and supplier issues throughout 2022 also drove a $35 million YoY increase in expenses during Q4, according to the earnings call presentation.
Like other companies facing supplier and labor issues, TreeHouse has been working to reevaluate and strengthen its supply chain to mitigate potential disruptions.
“Our teams have done a good job securing multiple new suppliers and either working with customers to adjust product specifications based on material availability or working with suppliers to ensure that they have the capacity to meet our needs,” O’Donnell told investors in Q3.
