US own-label supplier TreeHouse Foods has signed a deal to buy entities that operate the private-brand tea business of Harris Freeman, for $205m.
TreeHouse Foods CEO Steve Oakland said the deal “strengthens our competitive positioning in the fast-growing tea category” and brings “unique blending and sourcing capabilities”.
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Harris Tea, which is also a co-manufacturer for brands including Red Rose, is the “largest private-label tea packer” in the US, TreeHouse Foods said.
The acquisition includes Harris Tea’s facilities in Moorestown, New Jersey, and in Marietta, Georgia. Around 300 Harris Tea staff are set to join TreeHouse Foods.
In a statement, TreeHouse Foods said it expects the deal to provide “vertical integration” across its tea business and be “accretive” to overall growth and margins.
As well as producing a range of private-label food products, TreeHouse Foods also supplies powdered drinks, tea and coffee.
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By GlobalData“This acquisition aligns with our long-term strategy to build capabilities in our higher-growth, higher-margin categories,” Oakland added.
In July 2023, TreeHouse Foods acquired assets from Farmer Brothers Company for $100m, including a coffee facility in Northlake, Texas, and the Direct Ship bulk coffee business.
“The acquisition will augment the company’s presence in private-label tea by adding process capabilities and production capacity,” William Blair analyst Jon Andersen wrote in a note to clients. “The deal is similar in nature to the transaction completed last year by the company to extend its capabilities in coffee and, in this case, should enhance TreeHouse’s range of tea offerings and relationships with key retail accounts.”
The transaction, which is expected to close in the first quarter of 2025, will be funded primarily with cash on hand, the company said.
Concurrently, TreeHouse Foods has reiterated its 2024 full-year guidance, anticipating “sequential improvement” in volume growth and profit margin in the fourth quarter.
Last month, the company revised its 2024 sales forecast downwards by $100m after a challenging third quarter marked by a decline in net sales and a shift to a net loss.
The revised forecast now expects adjusted net sales to range between $3.37bn and $3.40bn for 2024, down from the previous projection of $3.43bn to $3.50bn.
In October, TreeHouse expanded a recall due to potential listeria contamination affecting products from one of its facilities in Ontario, Canada.
