Current Inflationary Environment Provides Demand Tailwinds for No-Moat TreeHouse Foods

Despite being the largest pure-play private-label food manufacturer in the U.S., TreeHouse’s performance has historically been stymied by poor execution, including lackluster service levels and disjointed go-to-market efforts. Still, revamped leadership, strategy, and recent activist involvement have mostly remedied internal issues, and we believe private label should continue to ascend, supported by secular trends across the U.S. retail and demographic landscape, once pandemic disruption subsides. While we expect the windfalls from this rise to accrue disproportionately to retailers (who function as brand owners in this context), we think TreeHouse now has the right commercial and operational infrastructure in place to capture its fair share of growth and profitability.