Treehouse’s Playbook going into 2020

Treehouse (THS) held their Investor Breakfast Meeting earlier today and as I’ve come to expect they present a textbook strategic argument in favor of Owned Brands/Private Label as a CPG market segment that they choose to pursue as a private label manufacturer (PLM) as well as exactly how they plan to differentiate themselves from their competitors. 

As I said several years ago, in TreeHouse’s Playbook for All to See, while they are disclosing significant information to their competitors, similar to the Green Bay Packers under Vince Lombardi, they are apparently not afraid to let their opponents know their plays, as they still have to stop them.

To that end, I suggest that anyone competing in the private label market place review the presentation, and if they have the time, listen to the rebroadcast of the meeting, especially the Q&A at the end. If nothing else is serves as an excellent reference point for a PLM to benchmark their own strategies and tactics against those of the largest player in the market. 

As Sun Tzu would say, if you do not know your enemy, “for every victory gained you will also suffer a defeat. . . if you know the enemy and know yourself, you need not fear the result of a hundred battles.'' Even if one knows THS’s plan, the challenge is whether a competing PLM can execute their plan better and quicker than THS can execute theirs. 

To that end a couple of things stuck out for me in the presentation. 

• After what I considered a very professionally prepared and decidedly upbeat presentation, the first question from the audience focused on Surprises, THS's last three earnings releases have resulted in price declines, as the market was surprised. While hopefully they are on their way to improving on their five for six record of declines in the quarters leading up to the appointment of their current CEO Steve Oakland almost three years ago, they are obviously still learning. So even if PLMs haven’t been taking advantage of THS’s self described “dark period” it may not be too late.   
• When THS announced Treehouse 2020 their comprehensive strategic restructuring plan in August 2015, I described it as A Massive Undertaking. To their credit they report to be on track relative to the key deliverables which will ultimately allow their pivot toward growth in 2020. While some of their “ah ha moments” have been jaw dropping to those who have spent more time working in private label as opposed to just competing against them: production schedules if not focused on/locked down can result in yield variances (February 2018); Account managers in charge of key accounts are starting to learn the customer's strategic positioning of their "own brands" for each of their accounts (November 2019), they are learning. 
• The scariest thing for competitors is that they are apparently leading these initiatives by focusing on their people. This includes: Adjusting their compensation programs to attract and then motivate their top sixty executives by getting them to focus on the metrics which are important at the time - fill rates in 2019; fill rate and modest 2% growth in 2020/21; Focusing on the well being of the employees in their plants by reducing excessive overtime and improving safety, and in general fostering a High Performance Culture of Continuous Improvement. 

People who have worked with me know that I’m a big believer in the financial benefits that can accrue to an organization which adheres to the leadership lessons of a Michael Abershoff and his grassroots leadership methods outlined in It's Your Ship and the benefits of employing the Open Book Management scheme advanced by Jack Stack in The Great Game of Business.  

While any PLM can employ techniques to engage and motivate their employees, especially those in the plants and in operations, if a company the size of THS can actually pull it off and sustain it, that will make them that much more of a formidable competitor.

• THS management repeatedly made a point about how they are winning back customers they have lost, due to the fact that customers are incurring “hidden costs” as a result of moving away from THS during their dark period when they could not reliable deliver product. While this could simply be a red herring on THS’ part, if a PLM is not employing lean management or other practices where they are focusing on waste or costs that their systems are passing on to their customers, they are necessarily vulnerable to competitors who understand these costs and work collaboratively with their customers to reduce them. 
• Finally, THS’s new Chief Strategy Officer made an interesting presentation, developed it seems primarily from IRI data, highlighting the importance of trends in the growth of the Millennial and Gen Z populations and store growth by format, on private brand purchases. He also outlined a couple of examples of categories where the ability of PLMs/THS to quickly imitate new on trend brands represent opportunities, as there is currently little private brand penetration. While at a minimum, other PLMs can compare their strategic presentations to those of THS, they can also focus on their own capabilities, and explore growth opportunities within natural adjacencies.

No one has ever advised against going to school on a competitor, and seeing as the presentation is that of a publicly traded company, the likelihood of material elements of disinformation are likely low so, what do you have to lose.

Obviously if some of these areas/ideas are applicable and attractive to your business, but you are not sure you currently have the talent in-house to execute against them, the team at GRN Edgewater and the broader Global Recruiters Network stand ready lend our assistance. 

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