PLMA Investor Day

Monday, November 18, 2013

Forward-looking Statements
This presentation may contain forward-looking statements. These statements reflect the
Companys expectations or beliefs concerning future events that involve risks and uncertainties.
Although the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will prove to have been
correct. The Company disclaims any intention or obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise. These
forward-looking statements may contain the words believe, anticipate, expect, estimate,
project, will be, will continue, will likely result, or other similar words and phrases.
Forward-looking statements and the Companys plans and expectations are subject to a number of
risks and uncertainties that could cause actual results to differ materially from those anticipated;
and the Companys business in general is subject to certain risks, including, but not limited to, the
risks identified in the Companys Form 10-K filing for the year ended December 31, 2012 and
Form 10-Q filings on file with the SEC. You may get these documents for free by visiting EDGAR on
the SEC Web site at www.sec.gov or on our website www.treehousefoods.com under the Investor
Relations section.

The Evolution of Private Label

Sam K. Reed
Chairman, President & CEO

Private Label Family Tree

Value Added
Destination
Brands

Premium Tiers
Own Brands

Private Label

Generic
Commodity

Historic Milestones
1869

The Great A&P Company

1915

U.S. District Court

1928

Marks & Spencer

1984

Loblaws

1988

Supercenter

1993

Safeway

2005

NYSE:THS
5

Evolutionary Forces
The End of an Era
Retail Consolidation
Niche Marketing
Home Cooked Assembled Meal
Information Technology
Millennial Consumer

The Dawn of a New Age

Retail Grocery Private Label Trends

$140

$133
$126

$130
Dollars in Billions

$104
$98

$100

$93
$83

$87

18.8%
18.3%

18.5%

18%

18.0%

17.6% 17.7%
17%

17.1%

$80
$70
$60

19%

$112

$110

$90

$120

PL GROWTH 2x BRANDS

16.5%

Percent Penetration

$120

20%

16%

15.8%

$50

15%
2008

2009

2010

2011

Private Label Dollars

2012

2013f 2014f 2015f 2016f

Private Label Share

Source: Packaged Facts; The Future of Food Retailing in the U.S.: Shopper Insights and Market Opportunities, 4th Edition, July 2013

Everyone Buys Private Label Food

99+% Household Penetration Across All Income Levels

Private Label Buying Rate

$700
$600

$651

$666

$662

$638

$595

$615

< $15K

$15K+

$25K+

$35K+

$50+

$70K+

$100K +

+0.7

-1.0%

+1.4%

+1.8%

+1.2%

+0.8%

+1.3%

$551

$500
$400
$300
$200
$100
$0
% Ch. vs.
YA

Source: IRI Consumer Shopper Insights, Total US All Outlets, Total Edibles, 52 weeks ending 11/03/2013

Private Label Genome

Identity

Range
Parity

Value

Cost
9

Storewide Private Label Growth

40%

Private Label Dollar Share

36%

35%
30%

28%

17.4% AVG
(+2.1 pts)

25%
20%

20%

19%

19%

17%

17%
15%

15%

14%
11%

10%
5%
1%

0%
Dairy

Deli

Frozen
Foods

Fresh
Produce

Fresh
Meat

2006
Change

-0.8

+6.9

+2.4

+5.8

+1.7

HBA

Non-Food
Dry
Packaged
Grocery Grocery
Meat

General
Merch

Alcoholic
Bevs

+2.5

+0.4

2013
+5.0

+4.2

+1.1

+1.4

Source: Nielsen Scantrack, FDM w WMT 52 weeks ending 12/30/2006 and Nielsen Scantrack, Total U.S. All Outlets Combined, 52 weeks ending 08/31/2013,
UPC-coded

10

Consumers & Natural Selection

Private Label Mindset
Good Alternative

73%

Equal Quality

64%

Value for Money

67%

Innovation Parity

53%

Store Selection

#3 Factor

Sources: 1) Nielsen Homescan, Panel Views surveys, 2013

2) Saatchi & Saatchi X Report, 2007
3) Packaged Facts; The Future of Food Retailing in the U.S.: Shopper Insights and Market Opportunities, 4th Edition, July 2013

11

Growth Through Innovation

Private Label Share of New Products in US Food & Drink
25,000

35%

TreeHouse Era
30%
20,000
25%
15,000

20%
15%

10,000

10%
5,000
5%
0

0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM
Number of New Products

Source: Mintel GNPD, as of October 2013

Private Label % of New Products

12

Private Label Supplier DNA

Services
Brand Innovation

Customer
Marketing
NBE Quality

Fast Follower

Lowest Cost
Product

13

Leverage Our Go-To-Market Presence

THS Share of Private Label in Core Categories

100%

Unit Share of Private Label

$1.6Bn in Retail Sales*

75%

50%

25%

0%
Powdered
Creamer

Rank
in PL

#1

SF Powdered Single Serve

Drink
Coffee

#1

#1

Pickles &
Relish

Salad
Dressing

#1

#1

Condensed Mac & Cheese

Soup

#1

*North American Retail Grocery net revenue sales for last twelve months ended September 30, 2013, per SEC filings
Source: IRI with Management Estimates

#1

Oatmeal

#1

Salsa

#2

14

Low

Systems
Raise productivity through simplification
Invest in BVF infrastructure

Profitability

Marketplace
Assume a flat consumer sector
Expect marginal input inflation

High

Survival of the Fittest in 2014

Growth
Generate organic growth
Acquire another growth category
Extend private label beyond center of the store

Low

Growth

High

STAY ON STRATEGY!
15

A New Private Label Paradigm

Destination Brands
The store is the brand
Relevant brand personality
Product
Environment
Experience

Emotional link to lifestyle

Deliver beyond expectations
Brand value > product utility

16

Our Evolving Opportunity

$112 Billion

Private Label Grocery

General
Non-Foods Merch
Grocery
Health &
Beauty Aids

Non Shelf
Stable
Edibles

18.5%
growth rate
2009-2012

Dry Grocery

Non Shelf Stable Edibles includes Dairy, Frozen Foods, Fresh Produce, Deli, Packaged Meat, Fresh Meat and Alcoholic Beverages
Source: Nielsen Scantrack, Total U.S. All Outlets Combined, 52 weeks ending 08/31/2013, UPC-coded

17

To Misquote Charles Darwin

It is not the strongest nor the most intelligent that

survives, it is the one most adaptable to change.

18

Business Simplification

Chris Sliva
EVP, TreeHouse Foods & President, Bay Valley Foods

19

Private Label Growth Avenues

Top-Line
Growth

Grow Share
of Current
Categories

Innovate to
New
Categories

Acquisitions

Business Simplification and Operational Execution

20

The TreeHouse Success Model

Broadening Product Portfolio
Enhanced
by

An increasingly capable centralized

Customer Marketing, Product Development
and Supply Chain Management Team
Sold
to

Focus on large and growing set

of customers
21

Choice is Imperative to Our Success

The resources we need to grow at
our strategic customers and in our
growth categories are all around us
brilliantly disguised as important
work that drives no return.

22

TreeHouse Focus On Business Simplification

TreeHouses focus on Business Simplification will
yield the resources we need to continue to grow the
business.

Business
Simplification

Growth
Investments

23

Simplification Without Sacrificing Growth

Salad Dressing Revenue
($ in millions)

$350

Over 700 Formulas eliminate

the 25% that drive 1% of
revenue

$300

Over 40 Containers - emphasize

NBE packaging

$250
$200

Eliminate One Batch Runs

drop lowest volume SKUs

$150
$100
$50
$0
2008 2009 2010 2011 2012 2013
LTM

Reduce Manufacturing
Redundancies better planning
and forecasting tools to improve
line scheduling

Invest savings to maintain growth

24

Product Segmentation Defines Investment

Strategy

HIGH
LOW

PROFITABILITY

CATEGORIES
Generate
Cash

Reduce
Exposure

Invest
For
Growth

Improve
Returns

Shopper
Knowledge,
Customer Marketing
Product Development
and Strategic Acquisition

Business Simplification
LOW

HIGH

GROWTH

25

Customer Segmentation Defines

Participation Strategy

HIGH

Tactical
Collaboration

Strategic
Partner

Customized
Services

Product Differentiation
LOW

VOLUME

CUSTOMERS

Commodity
Supplier
LOW

Strategic
Supplier
HIGH

Operational Efficiency

GROWTH

26

Customer / Product Segmentation Matrix

Defines THS Business Plans
PRODUCTS
Invest for
Growth

Generate Cash

Improve
Returns

Reduce
Exposure

Aggressively
invest

Invest for a
defined return

Invest in a
standardized
manner

Reduce
investment

Tactical
Collaboration

Invest for a
defined return

Balance share
and margin

Invest if
minimum
thresholds met

Reduce
investment

Strategic
Supplier

Invest
appropriately

Focus on
maintaining
share

Drive efficient
process

Reduce
investment

Commodity
Supplier

Invest in a
standardized
manner

Drive efficient
process

Drive efficient
process

Eliminate
investment

CUSTOMERS

Strategic
Partner

27

The Path Forward

A Broadening Product Portfolio

An Increasingly Capable
Centralized Team
Focus on Large / Growing
Customers

Double our net revenue

via our 3 Core Growth
avenues
Grow the size / cost of our
central capabilities at less
than the rate of revenue
Work with our customer
partners to drive out low /
no value added cost

28

The State of the Private Label

Customers and Consumers
Harry Overly
Senior Vice President, Marketing

29

Private Label Accepted Across Consumer

Groups
Total Edible Store*
Private Label Brand Share by Economic Segment
Dollar Share

25%
22%

24%
21%

23%
20%

Unit Share

24%
22%

24%
22%

27%

26%
23%

24%

All
Households

Carefree

Savvy Shoppers

Optimistics

Higher Income

Start-Ups

Cautious and
Worried

Downtrodden

Lower Income

*Total Edible Store: Frozen, General Food, Refrigerated, Beverages (Excludes Liquor)

Source: IRI Consumer Network, Total US All Outlet, Latest 52 Weeks Ending 06-16-13

30

Retailers with High Performing PL

Programs Outperform the Market
Same store sales growth by PL penetration
Percent
3.1%

1.2%
0.6%

Retailers
Above 22% PL
Penetration

Retailers
Below 22% PL
Penetration

Sources: PLBuyer Top 35 Private Label Retailers for 2012, public company reports, and independent research.
Note: Private label penetration statistics reflect total store private label sales, not exclusive to GF&B

Top 31
Retailer Total

31

Winning Retails Drive both Brands and

Private Label
Retailers that have concurrently used
brands and private label to drive growth

.outperform the market by a significant

margin
Highlighted
Retailers
Total

Brand

MULO
Total

3.3%

0.2%

2.4%

Private
Label

Source: IRI, Market Advantage, Q3 Release. Sample of 12 retailers shown 16 total demonstrated Q3 brand and private label growth

0.4%

5.7%

0.1%

32

Differentiation is Critical to Capture

Todays Consumers
44.7% Of retailers identified differentiation as the most important role of their store
brand program.
Fig. 1: Premium and value packaged food segments growing
at the expense of the mid-market, 2013-2017

Fig. 2: Hybrid vs. traditional consumption patterns

Sources: Fig. 1: Rabobank, 2013; Fig. 2: IBM Institute for Business Value analysis, 2008, Private Label Store Brands Research, 2013

33

Experience and Technology Driving

Millennial Purchase Behaviors

Marketing Communication
Elements Still Critical!

Sources: SymphonyIRI Retailer & Brand Loyalty Survey, Q2 2012, SymphonyIRI Market Pulse Survey, Q2 2012

34

Multi-Faceted Brand Evangelism

Tailored Private Label Programs

35

Winning Retailers are Using Multiple

Strategies to Win
Consumer Shopper KPIs
Index vs YA

Generating more Private

Label Trial (more HHs) &
Repeat.
Getting Shoppers to buy
more Private Labelmore
often & more per trip.
Converting more Shoppers
into Private Label buyers
while growing Private
Label loyalty.

Total US
Multi Outlet

Winning
Retailers*

% HH Buying

100

103

% of Buyers, 2x+ Buyers

100

101

Unit Sales per Buyer

99

104

Product Trips per Buyer

99

102

Unit Sales per Trip

99

101

Buyer Conversion Among Retailer Shoppers

100

102

Retailer Share of Dollars among Converted

Buyers

100

103

*Average of Indices for Winning Retailers

36

Winning Retailer Example

Q3 2013 Change in PL Assortment (Items/Store)

Above average growth due to:

Expanding valuable Core Regional Retailer
consumer households
Communicating higher value Private Label
to consumers/shoppers with in-store
Quality Merchandising tactics
Establishing a better Assortment, adding
more items than Multi-Outlet Competition

Total US - Multi Outlet

Core Retailer
Private Label
Consumer

Core consumer is more valuable and growing faster 1+ Children

than Average consumer

Trips /Yr

Dollars/Yr

21.4

Source: IRI Market Advantage POS, Total US MULO; Q3 vs YA; PE 10.06.13

Q3 2013 PL Quality Merchandising

Total US - Multi Outlet

40.7; -0.4

106

112

Trips per Buyer

Dollars per Buyer

HH's Buying

Core

101

Avg.

Core

103

Avg.

Core

Avg.

$264

Core

Avg.

27

HHs Buying & Conversion

Index vs YA

$402

39

Regional Grocer

HH Income
$70+
HH Size 4+

Frequency & Buy Rate

13.4

Regional Grocer

55.9; +0.2

Buyer Conversion
Source: IRI Market Advantage POS, Total US MULO; Q3 vs YA; PE 10.06.13

Source: IRI Market Advantage POS, Total US MULO; Q3 vs YA; PE 10.06.13

37

Cost to Serve

Judy Clark
Senior Vice President, Customer Solutions

38

The Role of Logistics

Forecast

Production

Distribution

Consumer
Programs

Formula
Optimization

Store
Replenishment

Logistics is the face of the partnership in Private Label

Efficient

Responsive

Margin Enhancement
On Time
Low Cost
Agile
Ship in Full
Collaborative

39

The Evolving Distribution Network

Meeting the needs of all customers
Direct from Producing
Plant
Full Pallet

Weekly
or Bi-Weekly Order
Cycle

Full Truck

Full Truck

Lowest Cost Bracket

Direct from Producing

Plant
Full Pallet
or Case Pick

Mixed
Categories to
Reach Weekly or
Bi-Weekly orders

Lowest Cost Bracket

Direct from Producing

Plant

Partial Truck

Full Pallet
or Case Pick

Mixed
Categories to
Reach Weekly or
Bi-Weekly orders

Lowest Cost Bracket

40

The Efficiency Variance

LOW

HIGH

Cost to Serve Customers

Cost to Serve Customers

Reduce Cost by:

Single Buying Office
Full Pallets
Full Trucks
Efficient Deliveries or Pickups
No Special Handling Requests
Full EDI Communications
On Time EFT Payments
Providing Adequate Lead Time
Accept Standard Shelf Life /
Stop Ship Life
Common Formulas / Packaging

Providing Cost to
Serve based programs
to meet the needs of a
variety of customer
supply chains.

Add Cost by:

Limited Technology
De-Centralized Purchasing
Small Order Sizes
High Case Pick
Frequent Deliveries
LTL Shipments
Order Changes
Deductions
Inefficient Receiving Practices
Multiple Orders per Truck
Reduced Shippable Days
Unique Formulas or Packaging

41

Expected Results
Changes in
Customer
Behavior

Margin
Gains

Volume
Gains

A Culture of
Cost to Serve

Streamlined
Order
Fulfillment

Strategic,
Collaborative &
Transparent
Partnerships

Lower
Average
Product Costs
42

Tracking the Success Customer View

On Time Reflects Delivered Orders

43

Tracking the Success TreeHouse View

2006 - 2013:
200 Basis Point Improvement
44

Delivering TreeHouse and Customer Value

Direct Plant
Shipper Programs

CPU Program to
Leverage Fleet

Network
Optimization
Intermodal
Shipping Program

Forecast
Collaboration

2012 Partner
Award of Excellence

Consolidation Program
to Drive Turns
Custom RDC
Programs
45

Acquisition and Integration Strategy

Todd LeBlanc
Vice President, Strategy

46

Integration Playbook Drives Execution

Advance planning
Cross-functional infrastructure
Clear guideposts and milestones
Robust tracking and monitoring

47

Team Infrastructure
Steering
Committee

Set direction and make decisions

Project
Management
Office

Integration
Team
Support
Functions

Integration
Team Operations

Coordinate the effort

Integration
Team
Go to Market

Drive execution

48

High

Initiative Prioritization
Supporting Activities

Multi-faceted assessment

Integrate
Email

Time required
Resources required
Impact

Ease of Execution

Ease of implementation
Functional
interdependencies

Quick Wins Must Do

Procure
ment
Key
Accounts

SOX
work
Deprioritize over
First 90 Days

Order to
Cash
Selectively launch
early in integration

Synergy impact
Cultural impact
Full SAP
Low

Consistency with
guiding principles

Supply
Chain

Low

Immediate Impact

High
49

Tracking and Monitoring

Overview of functional integration agenda
Team Charters

Broad timelines for execution

Interdependencies and potential risks to plan

Team Workplans

Critical path activities and sequencing

Deliverable owners

Progress against functional agendas

Weekly Updates

Upcoming activities and priorities

Risks and remediation plans

50

Case Study Cains

Transaction closed July 1, 2013

Innovation platform in premium salad
dressing and mayonnaise
Gateway to North East market
Deployed team to guide integration
Captured procurement efficiencies
On-track to deliver against stated
financial and strategic expectations

51

Acquisition Landscape

Erik Kahler
Senior Vice President, Corporate Development

52

Opportunity Creation
New
Categories

Strategic
Relationships

THS M&A
Strategy

Bolt-ons

New
Platforms

53

Enhanced Acquisition Filter

Category Dynamics

Company Attractiveness

Strategic Fit with THS

Category size and

growth
Current and emerging
consumer trends

Historical performance
and market position
Innovation capabilities

Leverage core
competencies
Expand our horizons

54

Portfolio Evolution
Then

Now

Current portfolio may be the ugliest

in industry *

Diversified and Growth-oriented Partner

Hot cereals
Beverages
Salad
dressings

Other
Pickles

Non-dairy
creamer
Mexican
and other
sauces

Nondairy
Creamer

Pickles
Jams
Soup

* Equity analyst research, July 2007

Aseptic &
other
products

Dry dinners

55

Acquisitions Aligned with Consumer

Trends
Better-For-You

Convenience

56

Themes for 2014

Buoyant M&A
Market

THS Acquisition
Proficiency

Better, Not Bigger

Invest For the Future

Over Scale

Support Portfolio
Strategy

Drive Higher Margins

and ROI
57

Financials & Concluding Remarks

Dennis Riordan
EVP and Chief Financial Officer

58

September 2013 Operating Segments

Nine months ended September 30
($ in thousands)

North American Retail Grocery

2013
2012
Inc/(Dec)
Net Sales
DOI
DOI %

Food Away From Home

2013
2012
Inc/(Dec)

Industrial & Export

2013
2012
Inc/(Dec)

$1,163,733

$1,135,204

2.5%

$264,357

$253,061

4.5%

$205,516

$201,079

2.2%

$188,705

$176,835

6.7%

$35,888

$32,844

9.3%

$38,038

$30,497

24.7%

16.2%

15.6%

60 bps

13.6%

13.0%

60 bps

18.5%

15.2%

330 bps

Strong topline growth, both organic and through

strategic acquisitions, complemented by operating
efficiencies, results in solid DOI margin improvement.
59

TreeHouse Debt Capacity

Revolving Credit(1)

Senior Notes(5)

High Yield Notes

Total Debt

Outstanding as
of 9/30/2013

Availability

Interest Rate

Expiration

$505 mm

$235 mm(3)

L+120 bps(4)

September 2016

6.03% Fixed

September 2013

$400 mm

7.75% Fixed

March 2018

$905 mm(2)

Proforma leverage is expected to be less than 3.0 times debt to EBITDA

at 12/31/13 (after the acquisition of Associated Brands is completed).
Notes:
(1) Amended revolver in September 2011 to tighten pricing by 50bps across the grid and extended maturity by 1 year
(2) Includes $5.4 million of tax increment financing and other debt
(3) Excludes outstanding letters of credit totaling $10.8 million that are issued but undrawn
(4) Applicable rate as of September 30, 2013
(5) Senior notes paid off in September 2013 using capacity under revolver

60

Volume Analysis Nine Months 2013

($ in thousands)

Retail
Grocery
$ 384,663 100.0%

2012 Net sales

Volume / Mix
Pricing
Net from operations

9,024
358
9,382

Acqs / rationalization
Foreign currency

10,352
(2,490)

2013 Net sales

2.3% 1
0.1%
2.4%
2.7%
-0.6%

$ 401,907 104.5%

Food Away
From Home
$ 89,827 100.0%

Industrial
& Export
$ 63,622 100.0%

Total
$ 538,112 100.0%

(5,179)
1,164
(4,015)

-5.8% 2
1.3%
-4.5%

1,460
(153)
1,307

2.3%
-0.2%
2.1%

5,305
1,369
6,674

1.0%
0.3%
1.2%

11,486
(429)

12.8%
-0.5%

3,518
(73)

5.5%
-0.1%

25,356 3
(2,992)

4.7%
-0.6%

$ 96,869 107.8%

$ 68,374 107.5%

567,150 105.4%

1 Excluding soup declines, due to partial loss of a retail customer, retail grocery
volume/mix increased 4.2%
2 Declines primarily in the aseptic and pickles categories
3 Naturally Fresh acquisition in April, 2012, the Aseptic cheese and pudding
business from Associated Milk Producers, Inc. in November, 2012 and the
Cains Food acquisition in July, 2013
61

2014 Working Assumptions

Sales growth will come from coffee and related
product line extensions
Legacy categories will be relatively flat, based on
current food industry run rates
Input costs are assumed to be flat in total, but we will
need to address the probability of wider movements
(up or down) as the year progresses

62

2014 Working Assumptions

New acquisitions will have lower than average gross
margins - in the range of 17% to 18%.

Year One of new acquisitions generally add very little

incremental revenues
Sales team integration activities
Long sales lead times in private label

63

2014 Working Assumptions

2014 SG&A spending:
Incremental IT spending to address the conversion of Cains and
Associated Brands on a more accelerated basis
Additional investments in demand planning and forecasting to
accommodate new businesses
Expect SG&A leverage to very modestly increase as a percent of net
sales in 2014

Tax rates should revert to historic average of about 32%

Interest rates will rise only slightly in 2014
Future acquisitions will be incremental to these assumptions
64

Growing Strong, Standing Tall

65