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08/10/2021

TreeHouse acquisition impacts Post Holdings Q3

The company behind Pebbles and Post cereals acquired TreeHouse’s ready-to-eat private label cereals in early June.
Dan Ochwat
Executive Editor
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During its third quarter ended June 30, Post Holdings completed the FTC-delayed deal for TreeHouse Foods’ ready-to-eat cereal business for $85 million, and it was reflected in a strong overall quarter for the packaged goods company, although Post’s private brand sales were soft.

St. Louis-based Post Holdings reported net sales of $1,589.8 million, up 19% or $253.4 million, compared with the year prior, including net sales of $78.5 million in net sales from acquisitions. The company also acquired the Egg Beaters and Peter Pan nut butter brands. In 2019, Post Holdings and TreeHouse announced a deal for $110 million over the ready-to-eat cereal business but the Federal Trade Commission filed a lawsuit opposing the acquisition, claiming the two companies are only two of three significant manufacturers of private label ready-to-eat cereals in the U.S. The agency said the move would give Post a more than 60% share and eliminate competition between the companies. The two food manufacturers ended the deal shortly after the FTC interference but completed a renewed deal in early June.

Post said some of the company’s business units in foodservice, BellRing Brands and Weetabix showed big growth, offsetting some declines seen with its Post Consumer Brands arm and refrigerated retail products. Gross profit reached $479.4 million, for the quarter, or 30.2% of net sales, an increase of 9.8%, or $42.6 million, compared with a year ago.

Net sales from the TreeHouse ready-to-eat private label acquisition and Peter Pan brand generated $38.4 million in Q3.

Post said net sales from its ready-to-eat private label and Peter Pan acquisitions netted $38.4 million for the quarter, but net sales still decreased 11.2% overall, or $59.4 million compared with a year ago, due largely to lapping increased purchases a year ago when pandemic shopping patterns were high.

The company did say it has seen a continuing broader softness across value and private label cereal products. Robert Vitale, president and CEO of Post Holdings, said during the reporting call that it’s possible that a recent increase in discretionary income has produced a trade-up effect, where shoppers are buying less on value and private brand. 

“We expect that to normalize, and we further expect that cost reduction enabled by our recent acquisition of to two cereal plants from TreeHouse will provide us further differentiation opportunities in the value segment,” he said. The Post-branded cereals demonstrated a 12.5% market share, driven by the Pebbles brand.

Vitale added that most of the challenges came in the refrigerated retail segment.

Post owns 60.5% common equity interest in 8th Avenue, which is an unconsolidated affiliate that manufacturers and distributes private label peanut and other nut butters, pasta, dried fruit and nut products, and the division also reported a nearly 12% decrease in net sales for Q3, or $28.9 million compared with a year ago. 

Net loss was $7.1 million, a decrease of 282.1%, or $11.0 million, compared to the prior year period. Adjusted EBITDA was $16.3 million, a decrease of 36.3%, or $9.3 million, compared with the prior year period.

For the nine months ended June 30, 2021, net sales were $664.5 million, a dip of 4.4%, or $30.7 million, vs. a year ago. Net loss was $8.2 million, a decrease of 95.2%, or $4. Million.