OAK BROOK, ILL. — With the Aug. 11 announcement that it has agreed to divest a significant portion of its meal preparations business unit to Investindustrial for $950 million, Oak Brook-based TreeHouse Foods is “taking a significant step toward achieving our goal of being a more focused leader in attractive private label snacking and beverage categories,” said Steven T. Oakland, president and chief executive officer of TreeHouse.

Mr. Oakland’s comments were delivered as part of a conference call with analysts on Aug. 11 to discuss the sale of the business.

The divestiture includes 11 categories — pasta, pourable dressings, preserves, red sauces, spoonable dressings, syrups, dry blends and baking, dry dinners, pie fillings, pita chips and other sauces — with estimated revenues of approximately $1.6 billion and about $70 million in adjusted EBITDA in 2022.

Post-transaction, TreeHouse will have a presence in 18 categories — crackers, non-dairy creamer, pickles, single-serve beverages, refrigerated dough, broth, hot cereals, pretzels, in-store bakery, griddle, cookies, bars, cheese and pudding, powdered beverages, tea, other blends, liquid beverages and candy — with estimated revenues of approximately $3.5 billion and about $330 million in adjusted EBITDA in 2022.

“In addition to strengthening our financial profile, the transaction improves our strategic focus on higher-growth, higher-margin categories,” Mr. Oakland said. “A simpler company, better able to execute on a more consistent basis.”

TreeHouse said the divestiture will reduce complexity by removing 11 categories, 14 plants, 5,000 stock-keeping units and 1 ERP system from its portfolio. Post-transaction, TreeHouse will operate in 18 categories and have 26 plants, 9,000 SKUs and 2 ERP systems.

Moving forward, Mr. Oakland said TreeHouse is excited about the compelling growth prospects of the snacking and beverage aisles.

“Snacking and beverage is a large category: $170 billion of retail,” he said. “That as a whole grew 10% in the last 52 weeks, outpacing nearly every other aisle of the grocery store. Within private label specifically, growth has been 8%. Being a more focused business will better position us to continue our momentum in these categories and to benefit from the strong underlying consumer demand for our products.”

During the presentation, Mr. Oakland pointed to several categories that TreeHouse already is capitalizing on. Year-over-year sales increased 20% in the company’s cookies category during the second quarter, while other strong gains were noted in pretzels (up 18%), crackers (up 17%), in-store bakery (up 12%), single-serve beverages (up 11%) and broth (up 4%).

“As a simpler, more focused business, we will be even more closely aligned to how our customers think about growth and consider the role of snacking and beverage within the store,” Mr. Oakland said. “We’ll look to expand our strategic partnerships with customers and see greater opportunities to lead our categories through depth and capabilities. We’ll continue to invest to build a world-class supply chain, driving efficiencies and optimizing our footprint, all with the goals in mind to focus on the customer, drive revenue growth and improve profitability.”

The strategy of simplifying and focusing came up often during the call with analysts, and Mr. Oakland provided a little more color on why TreeHouse chose to exit some businesses while holding on to others in answering one analyst’s question.

“I think we are leaders in pasta,” he said. “If I talk about divested categories, we are leaders in some of those categories. They’re just not the same growth and margin profile over time that we think we can be if we focus on snacking and beverage. So when you think about depth, market share is really important. But think about capabilities, right? Do we have natural and organic? Do we have convenience packaging? Do we serve all channels? So I think when you hear us talk about the depth we’ll build in the snacking and beverage categories, it will be those capabilities, and those capabilities will then drive share over time. So I would say this transaction was designed to put us in more advantaged categories, more categories that are more consumer trend-friendly. And we’ll just build depth where we don’t have it, right? We have a lot of it in cookies, crackers, pretzels, broths … but we have opportunities in single-serve beverage, we have opportunities in crackers, we have opportunities across all those segments.”

Pressed about the decision to exit pasta, a category that TreeHouse recently boosted its presence in with the $242.5 million purchase of several regional brands from Riviana Foods, Mr. Oakland responded: “Pasta is a great category. And the transaction we did with Riviana for our shareholders is a great value. If you remember, with synergies, we paid mid- to high single digits for that, and we sold it for significantly more. So … we always felt that building our pasta business and building those assets was the right decision. We had the opportunity to monetize the synergies.”

He added that pasta’s EBITDA has been hurt by a lot of inflation.

“There’s been a lot of volatility in durum wheat, it’s actually going the other way right now,” he explained. “But that’s been incredibly volatile. But no, the pasta business and the synergies delivered. But pasta is by far the biggest business in the divestiture.”

Mr. Oakland also said the transaction will unlock value for its employees, customers and supplier stakeholders. In the case of employees, it opens the possibility for a faster-growing, more profitable company, he said, while customers will notice an improved category focus and go-to-market speed and suppliers will see reduced complexity and relationship continuity.

“We learned through COVID that complexity can get in the way of consistent execution,” Mr. Oakland said. “This transaction simplifies the business in a way that better positions both the divested business and TreeHouse to pursue the right strategies for their businesses and thrive with the right capital structure, ownership, and ultimately benefit the stakeholders of both businesses.”