PI Aquino - AES Partners Sam K. Reed - TreeHouse Foods, Inc. Rachel Rothe Bishop - TreeHouse Foods, Inc. Dennis F. Riordan - TreeHouse Foods, Inc..

Farha Aslam - Stephens, Inc. David Cristopher Driscoll - Citigroup Global Markets, Inc. (Broker) Andrew Lazar - Barclays Capital, Inc.

Robert Moskow - Credit Suisse Securities (USA) LLC (Broker) Amit Sharma - BMO Capital Markets (United States) Akshay Jagdale - Jefferies LLC John Joseph Baumgartner - Wells Fargo Securities LLC Jonathan Feeney - Consumer Edge Research LLC Joshua A. Levine - JPMorgan Securities LLC Jon R. Andersen - William Blair & Co.

LLC Karru Martinson - Jefferies LLC Evan Morris - Bank of America Merrill Lynch.

Please stand by. Welcome to the TreeHouse Foods conference call. This call is being recorded. At this time, I will turn the call over to TreeHouse Foods for the reading of the Safe Harbor statement..

Good morning. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include all statements that do not relate solely to historical or current facts and can generally be identified by the use of words such as guidance, may, should, could, expects, seeks to, anticipates, plans, believes, estimates, approximately, nearly, intends, predicts, projects, potential, promises, or continue, or the negative of such terms and other comparable terminology.

These statements are only predictions.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause the company or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievement expressed or implied by these forward-looking statements.

TreeHouse's Form 10-K for the period ending December 31, 2015, and other filings with the SEC, discuss some of the risk factors that could contribute to these differences.

You are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented during this conference call.

The company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in expectations with regard thereto, or any other change in events, conditions or circumstances on which any statement is based.

For the purpose of our discussion today, statements such as Private Brands or the Private Brands business refer to the recently acquired TreeHouse Private Brands business. Private label, on the other hand, refers to the customer and corporate brand industry.

At this time, I'd like to turn the call over to the Chairman and Chief Executive Officer of TreeHouse Foods, Mr. Sam K. Reed..

baked goods, beverages, condiments, meals and snacks, will be formed as frontline business units, each engaging our customers across all channels with a market basket of closely related products sold in the same aisle rather than the entire TreeHouse cornucopia.

As Rachel and Dennis will discuss, this realignment will both increase our go-to-market focus as well as improve our operational performance.

Lastly, before handing off first to Rachel and then to our new President, I will offer a strategic perspective that after a dozen such deals over the past decade, our acquisition of ConAgra Private Brands will soon prove to be the most successful of all, as our initial disappointments will be overshadowed by extraordinary gains in 2017, 2018, and years to come.

With that, I'll segue to Rachel.

Rachel?.

an update on our premium business; our broader marketplace trends and implications; and finally, an update on the Private Brands integration. Although Q3 did not fully deliver on our expectations, we do believe we have some bright spots in the portfolio and the right mindset around our strategic priorities.

With our integration fully on track, we have even greater confidence today that we can capitalize on the transformative opportunity ahead. First, in our premium, natural and organic business, we continued to see strong performance.

This business now comprises approximately 19% of net sales, for legacy North American Retail Grocery and has maintained double-digit growth. As a result, we continue to make capital investments to expand our capacity in areas of premium growth, such as coffee, tea, filled pretzels, and crackers, supporting the expansion of our premium segment.

Steady growth continues to define the healthy ingredient snack market, with the segment achieving a compound annual growth rate of 4.7% between 2011 and 2015.

While we have a strong portfolio in this space, we have been lagging industry trends this year and are driving towards an integrated snack business to give us a stronger base from which to compete. Next, let's step back to look more strategically across the 26 categories in our portfolio.

Our 2017 planning process this year has been deeply integrated into the operational side of both the legacy Bay Valley Foods business as well as the Private Brands business. As we look at the markets, we see many trends and changes that align well with our unique capabilities and value proposition.

The growth of the premium and value segments, the ongoing evolution of the channels, including growth in space is often overlooked by typical IRI or Nielsen scan data and even the growing blur between the food away from home and retail channel, driven by new disruptive technologies, all create great opportunities for us.

Our strategic challenge then is to maintain the cost competitiveness and flexibility that our private label customers require, while also relentlessly managing ways to address the risks of complexity in our business. For 2017, each of our divisions will be developing relevant and unique ways to address this challenge in a sustainable way.

Now, let me give you an update on our integration process. Our program continues on track. From an IT perspective, we have hit each of our major milestones to-date. In September, we opened our Omaha office, a symbol of stability and a physical representation of the back office integration work we've done.

In October, we've rolled out our integrated benefits plans, bringing our teams together onto a singular platform for the first time, but as you know, the most complex systems integration has been our operational SAP rollout. Let me walk you through the work that we've done there and what remains.

This is an enormous undertaking and we have hit all of our milestones thus far without impacts to our customers or to our operations. The work required to carve-out each plant varies, based on the legacy system at each location from a simple order to cash conversion to a more complicated full plant transition.

We have completed three of our six full plant conversions required for the carveout as of today, with one more scheduled for later this month, and the remaining two set for the first-half of 2017. The remaining plants require only the simpler order-to-cash conversions that we will execute throughout 2017.

We continue to have confidence that we're on track to exit the TSA as planned at the end of January 2018. Turning then to the operating and functional integration.

Our approach has been to maintain separation between the Private Brands and the legacy TreeHouse operating companies, while we bring together the support functions and learn the intricacies of the business.

This approach has served us well, as we now have a deeper understanding today of the categories and processes within the Private Brands organization and are beginning to leverage some of their best practices within the legacy TreeHouse system.

Our functional teams are also aligned and nearly ready to transition into the unified operating company in 2017. However, this idea of parallel businesses has been challenging for our sales team as they bridge the different processes and business units to present a united front to our customers.

That impact is being seen in our top-line shortfall of the Private Brands business and felt by our teams. To address this, we have designed our operating and go-to-market structure for 2017 to give our teams the alignment they need to sell more effectively.

In this structure, each division will have a dedicated sales force of experts in their category, able to bring deep category expertise and the advantage of the full TreeHouse scale to our customers. This vision has already been tested and proven by our condiments team, who was the first to be integrated in July.

As Dennis will detail, that team has found ways to more efficiently serve customers and leverage their shared capability to win incremental business. Today, we are even more convinced of our transformative opportunity as an integrated private label food and beverage leader.

We have a unified management team that will benefit from legacy TreeHouse's strengths in sales, consumer insights and procurement, and from Private Brands' strengths in plant operations, product formulation and customer logistics. Bay Valley's entrepreneurial leadership is now balanced by Private Brands' pragmatic process orientation.

This unified skill set will be critical throughout our strategic transformation. With that, let me now turn it over to Dennis to walk you through the details of the third quarter and the outlook for the balance of the year.

Dennis?.

Thanks, Rachel. As Sam has discussed, we did not finish the quarter, nor will we finish the year, where we thought we would. However, our fundamentals remain strong, and in this regard, I believe our operations are actually in better shape than I thought they would be when we started the year.

Our legacy businesses had a second straight quarter of North American Retail Grocery volume mix of at least 4% growth, and this growth was not the result of relying just on the strong performance of our coffee business. Nearly 70% of our legacy product category showed positive volume trends in the quarter, compared to the run rate for the year.

Operationally, our legacy businesses also performed well. Direct operating income from legacy categories improved by 80 basis points, showing the benefits we are realizing from simplification programs. Which brings me to a discussion of our Private Brands business, I think it's fair to say we were disappointed with the sales in the third quarter.

While we did show improved volume growth in most categories compared to the year-to-date run rate, we fell behind our net sales expectations. Compared to last year, volumes were down about 3.1%, and the primary reason we missed our earnings target this quarter was due to the sales shortfall. Let me give you some thoughts on that.

As Rachel pointed out, our integration activities are running extremely well. It's clear from her discussion that we are tracking well to the timelines we established at the beginning of the year.

In that regard, our integration teams have surpassed our highest expectations of beating our timelines and causing no disruptions to our internal operations or customer expectations. In fact, our order fill rates for the Private Brands business were at the 98% level, the same target we use for all of our legacy businesses.

In hindsight, we may have been too focused on the internal integration program and not focused enough on our go-to market activities. Our sales force integration activities have been carefully planned, and key managers were involved to ensure we make this a seamless transition for our customers.

While we have accomplished that, it appears we may have been too removed from our day-to-day sales activities and customer coordination. We believe this is the case, because we've not been losing customers, and in fact we continue to make inroads, albeit small right now, toward securing new business.

However, we have experienced sales challenges that we believe are the result of not having enough attention on programs and merchandising that could have and should have generated incremental sales opportunities at existing accounts.

Most of the sales shortfall took place in our cookies and crackers and ready-to-eat cereal categories, categories that require a lot of attention to promotions and merchandising to be successful. In other words, our goal of exceptional quality on integration activities has likely caused us to take our eye off the ball of great sales execution.

We realize that and are refocusing our sales efforts to address this. First, we're in the process of organizing our business into five key divisions that will become effective in the first quarter of 2017. This includes establishing sales teams that are aligned with each of the five divisions.

These sales teams will be trained to represent just the products of their teams, rather than trying to learn all of the nuances of our 26 product categories. At the same time, we will have senior sales executives who will be in charge of key accounts and coordinating the sales activities of the divisions.

We believe this new structure will refocus our selling efforts for the entirety of our company and not just our Private Brands group. And beginning in 2017, when the new divisions are fully in place, we will be changing our segment reporting to correspond to the new internal reporting structure.

Of course, the question is how can we be so sure this new structure will solve the issue. The best proof is looking at our Private Brands condiments business. Rachel talked about how the July integration has allowed the condiments team to leverage their shared capabilities. Let me give you a sense for how that translates into top line growth.

Heading into July, the Private Brands condiments volumes were down 14.6% at the end of Q1 and down 14.8% in Q2. Effective with the July integration, our July, August and September volumes of the Private Brands condiments categories were down 22.2%, down 14.2% and then plus 0.5% respectively, and the just-finished month of October was up 2.5%.

While the opening month was tough, we are clearly seeing improving trends in the integrated business. I think this demonstrates how narrowing the focus for our go-to-market teams can fairly quickly energize our sales execution.

We believe we will see similar turnarounds in volumes as we integrate the sales teams into the divisions in the first quarter of 2017. Looking at the results for the quarter, our North American Retail Grocery segment showed volume mix growth of 4.6%. If you recall on our last earnings call, I said the 4% volume mix growth was the best in years.

Now we have two straight quarters of very strong volume growth mix. Clearly this contrasts with the data that is normally attributed to private label by the big information firms. However, it does show how much volume has taken place outside the typical measured channels.

Private label plays very well in those specialty channels, so our thesis on continued growth still works for us, even if it's not obvious in the measured channel data. One other key item for the quarter is that pricing was down 1.5% in our Retail segment. Pricing is getting tighter primarily due to lower input costs.

Some of our key grain inputs have been down year-over-year, but recent pricings on the exchanges would indicate that the lower input costs will be short-lived as we approach 2017. In our Food Away From Home segment, sales improved in total due to the addition of Private Brands, but were down 1.8% in volume mix, excluding Private Brands.

We did see some softness in dressings and cheese sauce, which more than offset an increase in our foodservice pickles. Direct operating income margins were lower by 310 basis points, but this was due entirely to the mix of lower margin sales from the Private Brands business. Legacy margins actually grew by 240 basis points.

And in our Industrial and Export segment, sales grew as a result of the acquisition, while operating income dollars remained very steady at just over $16 million for the quarter. As we've said over the years, we will see sales come and go in this segment due to our co-pack business, which we used to cover overhead on available lines of equipment.

This co-pack business tends to be breakeven at best, which is why our operating income tends to be very steady, despite changes in top-line sales. Selling, general and administrative operating expenses finished at $174 million or 11% of net sales, compared to $81.4 million or 10.2% of net sales last year.

The increase in total spending was due to the much larger size of the combined TreeHouse, while the increase in spending as a percentage of sales is due primarily to higher incentive compensation accruals recorded this year as last year had significant reductions in those accruals.

Our tax rate in the quarter was unusually low at 29.3%, due to an entry to adjust a purchase accounting accrual and related tax indemnity matter, the adjustment was effectively a reclassification on the income statement. We reduced tax expense by $2.2 million, but recorded the offset to other expense.

Although this had no effect on reported earnings, it did change the effective tax rate from about 32.2% to 29.3%. Our overall liquidity remains very good. During the quarter, our debt levels stayed steady, which is par for the course in the third quarter and our leverage ratio finished at 3.8 times.

If you recall Q3 is when we make seasonal purchases of a variety of fruits and vegetables based on their harvest time. In addition, we are building stocks of cold weather and holiday-related products, in anticipation of the winter selling season. So, most of our cash flow in the third quarter is going towards working capital.

However, Q4 is our seasonal high point in cash receipts, so we should see debt reduction in excess of a $150 million next quarter.

One final note on operations, we announced this morning the planned closing of our griddle plant in Delta, British Columbia along with our plant to downsize the manufacturing footprint at our Battle Creek, Michigan ready-to-eat cereal plant.

The Delta plant production will be shifted to other plants within our manufacturing network, as will much of the production at our Battle Creek plant. We will keep a portion of our cereal production in Battle Creek as we closed two of our three manufacturing spaces.

We expect savings and efficiencies from these closures both of which were part of our original estimate of future savings when we purchased the Private Brands business earlier this year. In regard to the outlook, as I said earlier, we are disappointed with the third quarter results and expect those to weigh on the remaining three months of 2016.

We see a lot of positives coming out of the reorganization we will be rolling out next year. As I demonstrated with the condiments example, these benefits are a bit delayed, but they are real and they will materialize.

For the fourth quarter, we expect our adjusted earnings per fully diluted share to be in the range of $1.07 to $1.12, resulting in full-year adjusted earnings per fully diluted share to be in the range of $2.80 to $2.85.

While our expectation for 2016 will not be met, we are as confident as ever that our long-term plans for the business that we laid out earlier this year are intact, including our original expectations for accretion in 2017 and 2018 from the Private Brands acquisition.

And finally, I want to reiterate the same message I had for everyone when I first announced last August my plan to retire, but only after a very worthy successor had been found. I'm fully committed to the success of TreeHouse Foods, whether as an outgoing CFO, an Interim President or a Senior Advisor.

Just as I've done in my current capacity, I'll be fully committed to the job at hand, while the search for a successor is found. We have a deep and talented team at TreeHouse, and a well-established succession planning function, and importantly, a highly engaged and collaborative team when it comes to strategy and execution.

I'm confident that our teams will continue to make excellent progress on our many internal initiatives, and we will very quickly be back on pace to deliver the shareholder value, our investors, which includes many layers of our management team want and expect. I'll now turn it back to Sam for his closing comments..

Thank you, Dennis. I will conclude our prepared remarks with the strategic overview of our TreeHouse prospects over the course for the next two years. We have thoroughly reviewed our original acquisition model, preliminary operating plans for 2017 and three-year strategic plans.

Our conclusion is that, while top line recovery of Private Brands' volume will come in later increments. Growth in profitability and free cash flow during 2017 and 2018 will be on track to meet our original expectations.

After nine months in the traces pulling together, our legacy TreeHouse, Ralcorp, ConAgra teams have found truly transformative opportunity in our private label marketplace, product portfolio, supply chain and management infrastructure.

Of these four, management infrastructure will serve as an enabler of organic growth, margin expansion, and competitive advantage. The new year will herald in a new decade of five product category based divisions, incorporating dedicated sales, marketing and innovation teams within their individual sectors.

Each division will be tactically self-sufficient, drawing upon shared support services, companywide go-to market insights and centralized strategic oversight.

They will leverage our product portfolio strategy, as we refine our products and services to meet ever changing customer and consumer needs, while also maintaining, remaining actively engaged in the M&A marketplace.

As early progress in condiments indicates, this realignment will infuse a renewed capability in pursuit of customer growth and category profitability throughout all rooms of our TreeHouse. And summing up the news, our TreeHouse will continue its transformation not without tactical difficulty, but with strategic certainty and undaunted courage.

Ebony, you may open the phone lines for Q&A..

Thank you. And we'll take our first question from Farha Aslam with Stephens, Inc. Please go ahead..

Hi, good morning..

Good morning..

Sam, you had mentioned you reviewed your three-year plan.

Are you still confident about kind of year-two accretion which the guidance was $0.55 to $0.70 and year-three accretion was $1.50 to $1.65?.

Good morning, Farha. Yes, we are. Let me comment on couple of matters and then ask Dennis to speak specifically to those exact numbers.

We have poured over not only that three-year plan, but also the buildup of the annual operating plans and over the last month or so, and when I look at the totality of operating company profits and the totality of free cash flow, I can see that those critical measures that will drive earnings as well as our leverage are in very fine shape and equal to our original acquisition model.

Dennis, would you care to amplify beyond that..

Yeah. I don't think there is much more, Sam. We are on track, Farha, that's our belief. And we view this as, I don't want to use the term, just speed bump, but it we think this is a Q3, Q4 matter that will quickly write itself next year..

And then in terms of righting itself, underneath that new structure you had highlighted that the first quarter you saw a hit and then sales accelerated over time.

If we experience this new structure in the first quarter of 2017, when do you see the sales recovery in that Private Brands business?.

Well, what I was just trying to say is, I think the fourth quarter is where we'll continue to have the challenge and that is part of the reason for the change in earnings for Q4, relative to what our expectations were, but I think Q1 will put us back on track and so, we should see a quick turnaround.

We're obviously going to be moving quickly through the fourth quarter to get the organization solidified and in place and often running right away. And so, the goal is to get Q1 back on track and back into our expectations, which was originally to write the ship, level out the sales decline.

And our two-year plan was also – and we had announced this earlier, was that the earnings projections we had were based on relatively flat sales for the years 2017 and 2018.

So, I would certainly hope we have upside to that, based on what we're doing with the sales organizations, but I am not going to jump that far ahead yet and say, we'll realize those, but we do believe the numbers we said originally in terms of accretion were able to be accomplished and it's primarily because of our confidence that we should see better sales execution..

Okay. Thank you..

And we'll take our next question from David Driscoll with Citi..

Hey. Thank you, good morning..

Good morning, David..

(31:21). This is a tough one, this is the hardest call I've heard from you guys.

So first one, I've got a bunch of little things I'd like to ask, is there a connection here between the Private Brands issues and the departure of Chris?.

David, this is Sam. I'd say they are coincident of course. And the plan that we'll implement over the next remainder of this year was one that our entire team developed and Chris was a major part of that and we all set out.

As I had indicated in my words, this was a miscalculation about the combined burden, not just of the integration, but the combined burden of the TSA, IT, other administrative matters that we put on this group. They displayed extraordinary energy at the very beginning, almost a sense of relief.

But then when we got into the particulars, it was the accumulative factor of all of those matters. And again, that was our decision as a team..

Can I ask about – so back on early September, you guys presented at a conference and it seemed to be pretty positive and optimistic, and then today, we have such a different outcome.

Was it that you just don't have the SAP systems in place to have known where the Private Brands sales trends were? Or did September get particularly worse and the failure to have the right promotions did it really hit the September month?.

We started – David, it's true that September did not materialize when we thought it would.

And as we enter into the fourth quarter now which is close to a third of their annual sales take place in the fourth quarter for Private Brands, it's so back-end loaded naturally due to the holiday season and their products that it didn't become as evident that we would have the challenge until really the September results became clear.

And as you know, even though we tracked day-to-day, you don't really get a good handle on how the month is going to go till the very end of the month, and that's what really caused us to change our mind. So when we all met at the end of August and September, it wasn't evident at that time..

Okay and then, for me just one big question here on this guidance that you talked about with Farha, can you just talk about some of the cushion in the projections? When this thing was announced there was the expectation that flat sales was a conservative projection. That doesn't feel true anymore.

All the financing costs were more expensive than what we originally thought back on the November announcement.

And just when you say you guys reiterate this stuff, I can hear the questions coming from investors now is what's your confidence here, what's the cushion in these projections as you move out that you can handle other things that go wrong to actually get to the $1.50, $1.65?.

Well, I think the first is the example we talked about with condiments. I think that's a clear indication of what can happen when we put the teams together and we act in a unified way and with a single focus.

I think the second thing is taking to heart that we've got two quarters in a row of the rest of the legacy business, which frankly people look at pickles and non-dairy creamer and all the other products and go how are you going to grow this business? We've got two quarters in a row of north of 4%, and I would challenge any packaged food business to show numbers even close to that.

So, the thesis is there, and our view is that thesis applies just as well to the Private Brands business once we fix the execution. And that should provide in our minds, and I said it earlier, the opportunity for the cushion that we talked about.

And I think the second piece is we talked about the 80 basis points of improvement again in the underlying legacy business, and we talked about things like the Food Away From Home in the legacy business being up 240 basis points in margin.

We're working hard and getting these operational savings as well, and we see great opportunity, not just me and Sam, but the teams. The teams in Private Brands see a great opportunity for operational efficiency as well. So I would certainly hope that we can add to that sales top line, and I would certainly hope that we can add to the margin.

And that's the cushion, if you will, that you're talking about, that's the upside. And it's probably a little tough right now to swallow that given what we just did and said about Q3 and Q4, but that's what we see as our opportunity..

Okay. I'll pass it along. Thank you..

And we'll take our next question from Andrew Lazar with Barclays..

Good morning, everybody..

Good morning, Andrew..

Sam, I wanted to start off a little bit, and this may be tough to get at, but is there a way to get a sense of how much dilution from the Private Brands deal is likely to be in 2016 relative to that initial expectation of I think $0.20 to $0.35? And the reason I ask is I'm, again, trying to get a better read on sort of what the legacy business is delivering with respect to kind of the earnings side of equation?.

Andrew, let me just take that one real quickly. And it's difficult, I would say that for the most part, we're tracking to our original expectations in terms of where the business was. It's probably a little bit short. But the problem is as we combined systems, we no longer have that same model and we talked about this early in the year.

We don't allocate debt, we don't allocate share counts, we don't allocate tax savings. So I think from an operational standpoint, it's little bit behind from some of this SG&A, it's little bit ahead and so, we're not that far off – we're little bit off but not that far off the original view of accretion dilution..

Right. And then if we think about the 3% volume decline in the Private Brands business in the third quarter, I guess what I find interesting about that, I guess at least to me, it doesn't sound like so much dramatically worse than maybe we all would have been thinking at this stage in the recovery.

And yet, obviously, the performance overall in the quarter was quite a bit worse and clearly numbers have to come down for the whole back half.

I guess maybe what were you expecting in terms of Private Brands volume in the quarter? Were you expecting it to be flattish already and it was still down 3% and what do you think that business does from a volume standpoint in 4Q?.

Hi, this is Sam. Our view had been, especially after the first quarter, it's a tough quarter, we expected that there would be a steady improvement and that sometime in the back half of the year, that we would pass over from negative numbers to positive.

That's particularly important here Andrew in that the Private Brands business is far more greatly weighted to the fourth quarter than the legacy business and due to their seasonal programs in the refrigerated dough and other big categories.

A lot of that fourth quarter volume is decided early in the third quarter with regard to orders, particularly in the most seasonal businesses. And while we've seen pickup there in the legacy categories, we have not seen the same responsiveness. So that's why we've brought the entire forecast back.

We are now a month into the quarter, and we're seeing signs that our projections should pan out and may perhaps be a little bit better. And we think that it is possible in the fourth quarter that later than originally expected the totality of Private Brands volume will turn positive..

Okay.

And then lastly would just be I know when you first made the announcement of the Private Brands acquisition, there was a lot of discussion around how much margins have come down at that business over the last two years of ownership at ConAgra and that you were only looking for really to gain back very little of that, maybe 100, 200 basis points of it or so over time to try and be prudent and conservative about it.

I guess is there anything that's changed that thought process as you think out over the next two or three years? Are you still expecting to get a few hundred basis points of margin expansion on that business, or is there something now that, frankly, you see as more structural in that historic levels, or maybe not quite historic levels of margin there just aren't really appropriate for that business?.

I'll offer you that we still think that those goals are intact, but let me separate it into two factors. The shortfall of revenues to the extent that we've had, those have a dramatic effect on their profitability of the business. And that's the sole matter that we've identified as being different.

And that includes the pricing pressure that lower commodities have brought. With regard to the inherent profitability of the business, what we see is that the supply chain is in far better shape than one would have expected due to really large-scale investments in technologies, in categories where we see substantial growth.

In part that's allowed us to undertake some of these plant closures, but the capabilities of these plants and the people to run in a highly efficient and effective way is after I've been around to a number of plants, I see that as a positive factor on the outlook.

And somewhere in the condiments numbers is the fact that there were a total of five plants closed there as Ralcorp ConAgra proceeded to put things together.

Under our management, they've been melded quite quickly, and with SAP visibility, we've seen not only the growth that Dennis marked year-over-year in revenues, but we've also seen a steady progression in margins in a business like condiments. So I would give you the answer in those two separate pieces..

Great. Thanks for that. See you in two weeks..

Thanks..

And we'll take our next question from Rob Moskow with Credit Suisse. Please go ahead..

Hi, thank you. Sam, you mentioned that one of the things you weren't able to do was conduct as much merchandising or maybe even promotion as you would have liked in the quarter for the Private Brands business. But how much influence do you really have with retailers to pull that lever? The promotion that normally goes on is heavily branded.

It would seem like the brands are doing more of that and maybe taking up more of the attention of the retailer.

Do you have specific plans in the back half of this year or next year that will accelerate promotional activity so that these branded products can be more prominent?.

Hi, Rob. It's Rachel. I'll speak to this first. So regarding the changes that we have seen in merchandising, I think we do typically see a percentage of retailer displays dedicated to private label products and in particular, in the back half of the year.

Things like broth and in-store bakery are very common to see stack-up programs that would really support a seasonal play.

As we've looked at what we have planned for Q4, we feel pretty good about what we've gotten into the market for retail bakery, refrigerated dough, some of those categories, but it does come down to a real ongoing discussion and dialog with those customers about their strategy, how they're thinking about the balance of what private label products they've put on display and what branded products we've put on display, and since it is such a long and ongoing discussion, it's important for us to have our customer teams really focused on maintaining that dialog, because the branded competitors are doing that.

And when we start to add more complex processes behind the scenes to help bring those organizations together and provide a unified front to the customers, that's really where we stumbled a little bit and some of the dialog, some of the consistency was lost there.

And so bringing together the teams in 2017 and even as we've started to really focus on holiday and going forward, we're seeing that come together and feel pretty good about the potential for next year..

Okay. And just a follow-up on the numbers for Dennis just to make sure I understand the accretion estimates. We're still using the 2015 base for that accretion, I assume, and therefore what your internal expectations are for 2017 and 2018, despite the problems in 2016, there's really no change in your estimates for 2017 and 2018.

Is that correct?.

I don't want to go there, Rob. I don't want to affirm or deny or either way. I want to just talk about the accretion from the deal. Every year we provide our guidance in February for the ongoing business, and I'd rather hold off on that. We're in the middle of putting our 2017 plans together.

So I think it's just not the right time for us, never has been the right time for us to talk about the total business base. But I will say that Sam and I, Rachel and the team are still confident with the incremental from the acquisition..

Okay. Thank you..

And our next question will come from Amit Sharma with BMO Capital Markets. Please go ahead..

Hi, good morning, everyone..

Hi, Amit..

Good morning..

Dennis, just to be clear, when you reiterate the synergy estimates from the deal, are we still assuming that sales for Private Brands, stabilize or are we now modeling for perhaps it doesn't get to historical levels?.

We've modeled almost flat in all of our models for 2017 and 2018 compared to what 2015 was. So basically our view was we were mostly going to be focused on operational. As I mentioned earlier with David, I think that's our upside, if you will, but we're not ready to put that in, but basically flat sales in 2017 and 2018..

And all of that compared to the performance, what we will see in this back half is contingent on this change in strategy of having a unified team.

That is a key difference between what it is happening now and what would happen in 2017?.

I think that's very fair to say. We've seen the success and we've seen the challenges that you have trying to effectively sell 26 product categories. And getting it down to a handful not only gives you better expertise, but frankly puts you more in line with our private label competitors who tend to sell one or two product categories only.

So we think this is absolutely the way to energize our sales and hopefully get back to a growth mode and surpass our expectations..

And then the last one for me. You talked about commodity being a drag on sales, but can you talk about how it impacted margins, because it looks like margins are seen as a bright point at this time. Just want to make sure that it is not some transitory margin impact from lower commodity..

No, I don't think that's the case. I think we're on top of it.

What I wanted to point out was that we have an average price reduction of about 1.5% in the quarter and that is as a result of lower commodity cost, but the reality is, based on all of our sessions, and we meet every week to go through our list of commodities, commodity costs are starting to rise.

And I don't think we'll see price reductions as we go into 2017. I think the commodity world is turning back and it's not that it's in bad shape, it's just that it was just unbelievably good this year due to the great growing season we had in the Midwest, so that's all that note was meant to relay..

And we shouldn't expect a margin impact from higher commodity prices in 2017?.

I don't think so. I think our teams are doing a real good job of staying on top of that and unlike back in 2011 I think when we had a problem, we've got a really good handle on commodity cost and pricing. So again that was an FYI, not something to worry about..

All right. Thank you very much..

And our next question will come from Akshay Jagdale with Jefferies..

Good morning..

Good morning..

I just wanted to get a little more clarification regarding the sales execution issue. Obviously one good thing about food business is, they're relatively simple and private label is inherently a relationship business.

So everything you've said, I'm not clear on if the sales weakness resulted in share losses to private label competitors or if you're losing share to branded. And it would be really useful for me if you could give us like a real-life example of what's going on with a sales person.

It looks like they spent a lot of time planning when they should have been spending that time selling.

Is that essentially what happened and who did they lose share to? Are you losing share to branded or to your other private label counterparts?.

So, Akshay, it's Rachel. Let me just go through that. Sounds like there's a couple of different questions around the share shift, the sales team distractions, and the organizational structure associated with that. Regarding the share, we haven't lost major customers in categories.

It has been purely losing promotional programs potentially to branded customers. So that's where we are seeing the challenges.

And if I look at a sales person and how they are working today, when we brought the businesses together, a single sales person now has more systems that they need to pull information from in order to bring the right facts and information to the customer.

And in effect what happened is they spent more time in front of their screen getting all the pieces of information together and a little bit less time with their customer. And so, I think the relationships are solid. They're still getting into meetings. They're still having the conversations.

It's just the throughput isn't quite as high as it would and this is a business where a couple percentage points, a meeting here and there make a big difference. And so that's really where the challenge has come in. With respect to the organizational shift, we just over a year ago moved to having our business organized across four divisions.

And so what this is, is really an evolution of that. In that, the current structure that we have today, we have our four divisions plus Private Brands and a customer team that covers across those.

And what this does is it allows those sales people to focus on a subset of our businesses and really understand the capacity in the plants, where we have opportunities, where we have capabilities, and be able to bring a much more specific story to a customer.

And so I would view this not so much as a strategic organizational shift, but really just an evolution of the sales team and a way to better enable them. And as we put this together, it was with great input from both the Private Brands team and our legacy Bay Valley and Flagstone businesses.

And across the board, we feel pretty strongly that this is the right way to get the sales team focused against what they need to do, and helping customers drive their business, both with the promotional programs and merchandising as well as bringing new innovation to market..

That's helpful. And as a follow-up, the condiment example, things got worse before they got better.

So with this transition happening, with your new structure in 1Q, is that in your estimates now? You said Private Brands was down 3 or 4 percentage points volume wise this quarter? As we're going through this transition, shouldn't we expect things to get worse like they did with condiments before they get better and is that in your plan?.

Yeah. I don't think we'll see that case. I think in the condiments we had a factory conversion going on in addition to all of that.

So we have a large plant in Kentucky that went through a changeover at the same time, and I think we probably had just a little bit of (54:11) shift in terms of getting production out the door in June before the cutover, Akshay. So I don't think that was a sales execution.

And if you notice the month right after, it was right back to where the run rate was. And then the improvement started in the month after. And so I think that's a bit more of an anomaly compared to where the other businesses will be at..

Okay. And just one last one, just on the turnover that we've seen in management, right. Obviously you're retiring Dennis and then Chris is also leaving. It seems to be coincidental, but obviously people always wonder when these things happen at this time.

Can you give us just a broad view on overall where your turnover levels are? If this is just a coincidental thing at a higher level and I just want to make sure that that's case and you're not seeing like anything structural going on.

You seem to have in a way taken the fun out of selling for a little while and I'm wondering if you've seen similar departures at lower levels in your firm or if it's just these two that we need to be concerned with? Thank you..

This is Sam. I think you cannot control the timing of events. You can set in place plans and move directionally correct and in the right way, and there are times when you are accelerated and there are times when you fall behind and this is an instance where it's been the latter.

With regard to the state of the organization, as Dennis indicated, we've gotten a strong executive succession planning in place. The organization, as we're filling those out, we have found that in the new structure that we've got a very fine legacy team that can fill this.

The Private Brands' talent is I think generally above what the market might have expected given their last couple years' history, and that as we have over the years as people have retired, we've always been able to find the next generation that have even greater talents, and we will see that here as well.

I think that the discussions in the last several days among our officer group have indicated to me that the uniform view is that there are changes. We have to get through that and that we'll be stronger on the other side of that.

Akshay, if I could, I'd like to give you one concrete example with regard to a question that's come back several times here about the effect on the private label sales.

One category that I know extraordinarily well from history is cookies and crackers, and we have seen here in one instance on the cracker side, great new technology coming in that will once we harness that will provide us with a real growth engine here.

On the cookie side, let me tell you why small preoccupation with administrative matters can have big effects in the marketplace. Private Brands leads the industry in private label cookies, got extraordinary presence. 60% of that category, brands and private label, sell on some type of promotion.

If that promotion only reflects a minor price increase online in the aisle compared to that same price increase with a promoted display, the change in volume is fivefold when you get that display up on an end aisle or a freestanding display. In order to do that, it requires months of prior planning with your customers.

It's a joint business planning exercise. You got to line up not only production capacity and logistics assets, but also within the stores, move the private label programs that are competing for those displays up to a higher priority.

And minor distractions here, it's like cracking a whip, your wrist moves just a little bit, but the tip of that whip can move a great deal with. That's an example of what we've had – are going through and correcting with regard to the effect of all of this on the sales..

Thank you. I'll pass it on..

And we'll take our next question from John Baumgartner with Wells Fargo. Please go ahead..

Good morning. Thanks for the question. Rachel, I'd like to ask, in terms of losing promotion to branded customers, does that imply that your categories are seeing maybe greater promotional intensity from branded competitors where retailers are just prioritizing promo dollars right now over pushing private label.

How should we think about the balance even on a short-term basis?.

So, I think we haven't seen a big change in price gaps or promotional activity per se. It's more about the merchandising execution on those displays. So while there may be some trade dollars associated with the displays, it's really more about getting the incremental sales associated with incremental placements.

So, broths for us, the aseptic cartons of broth are a great example. If you walk into any store right now, as they pulled off Halloween, they're setting up palettes of broths around the store.

And in some cases, some of the stores I go into are really pushing private label, and they'll have those displays all around the perimeter, and in other cases they're pushing the brand. And so it's obviously a priority for our team to make sure that as much as possible we've got the private label out there and that they are supporting it.

The customers do make more money on a per item basis on those private label items unless there is a lot of extra trade dollars at play. And in some cases you see that but, by and large, it's that kind of promotion. So you wouldn't see that in the IRI data on how the promotional dollars were spent. It's more in displays..

Okay.

And then just a follow up, in light of the sales force integration, how should we think about incremental costs there? I guess given that you're moving more specialized and is there a head count increase if you're narrowing the number of categories per sales person responsibility?.

No, we should not see that. We're not changing and adding to that head count. We're just reallocating and redistributing. So rather than everybody being an account executive, we're going to have people be category executives, if you will.

And obviously there will be training and other things that will be more intensified, but it's not something that you should see affecting the bottom line at all..

Okay. And then, Dennis, just to be clear, your projection for flatter sales in the base case, the Private Brands business, even legacy business, there's a big skew towards national brand equivalent price points, and that's clearly weak as consumers trade up and they trade down.

So what are your assumptions about performance at NBE going forward? Are you thinking that regaining lost Private Brands business offsets the base decline? How fast can you move that Private Brands SKU more towards premium or OPP?.

Well it's a great point. We do see continuing challenged trends in the national brand equivalent. We've seen that for the last couple of years.

And our emphasis with the Private Brands is the same emphasis we've had with our legacy business, which is to get more unique and special formulas to reinvigorate the organic, natural, and especially for Private Brands where some of their products are wheat-based is getting into more of the gluten-frees, and we've increased our emphasis on that as well.

So clean label and organic are really the way to go, and our emphasis is very strong on that in the Private Brands categories now..

Okay. Thanks for your time..

And our next question will come from Jonathan Feeney with Consumer Edge Research. Please go ahead..

Good morning. Thanks very much, guys. I have couple questions. I want to start back on this guidance point. You also have some guidance in force, Dennis, for dilution of $0.20 to $0.35 for the current year.

You think about that and you think about – I'm trying to compare that with what appears to be significant volume growth in the base business and apparently this quarter anyway some significant margin expansion in the base business, at least in the food at home segment.

Is that still right that this deal is $0.35 dilutive or less?.

As I said, it's really hard, Jon, for us to look at that. I haven't gone to the macro basis because when we put that original guidance together, we could look at the TreeHouse legacy on a discrete basis. But as we've entered into the year, our condiments business has been combined.

Cash flows are not tracked by business, so as I look at debt pay down, I can't attribute it for one business versus the other. And when you take share count on a quarterly basis, again, we are trying to reset the share count to what it was for the old business.

So even internally for our board of directors, we don't show a separate accretion/dilution by the business. It's just very difficult to do that. So I have to look at it in the macro sense and we are a bit behind.

And so, I guess, possibly you can say that could be done due to Private Brands, but we also have some different areas in different businesses that are plus and minus.

So, again, it's a little tough for me to eat that out, other than I would say that our shortfall in sales, the expectations are not going to be met for Q4 and they we were missed on Q3 and that was more due to Private Brands than it was our expectations of the legacy business..

Got you, Dennis. And just on a nine-month to nine-month basis, hay you already have in the barn here, I mean, it just was in that Food At Home segment, you've been very clear with us about what legacy performance was versus Private Brands' contribution.

Just in terms of direct operating income the legacy is very clearly up, right, on a nine-month basis, am I reading that right?.

On the volume side, yes..

But profits as well, because you give us the margin mix between the two, right, you said how much different contributions were?.

Yeah, that's right, our margins are up. Our spending is up in the category. So it's not just a margin play, but as we've increased our....

Yeah..

...our bench strength. But, yes, the base business is performing pretty well to our original expectations..

Cool. And, now cookies and crackers and cereal, I know historically have been two of the highest margin businesses both in terms of growth and contribution margin for Private Brands.

A lot changed under ConAgra but is negative profit mix with the shortfalls in those two business a big part of the problem here?.

It's a bit of the problem. Cereals are good margin, the cookies not so much, that's not the – or at least in the last couple years has not been a high margins and mainly because there's been a lack of the differentiated products that we're going to be working on.

So that wasn't quite there, we have a good cracker business and that's a positive for us and still remains a very good business..

Great, and thanks. Just one last one, just kind of on like strategy, and I guess historical perspective here.

I mean it sounds like from the different things I'd heard over the years coming out of ConAgra, a lack of category level control and specifically alignment between category level sales and category level operations like you referenced selling one or two categories.

I mean the business to be consists of not really relationships so much as it consist of understanding, how cheaply your competitors could make a particular product and pricing the products attractively as much as I guess to speak crudely, as unattractively as possible to maximize the value you can extract from that business, I mean, it seems to me like that and that requires coordination.

And I think some of the things Rachel even mentioned or talking about going to this new alignment. So, that seems a lot like having heard – it seems a lot like the criticisms internally and whatever that came out of the way ConAgra handled this business.

So I guess, I'm sort of wondering like what made you want to go to the old alignment in the first place? Why wouldn't you want to keep the decision making close to the category, and what do you give up by going to this new alignment? Is it just an extra cost or an extra hiring new salespeople? What were you hoping for, and what do you now give up by going back to what seems to have been the only your sales alignment that's really worked historically for these businesses, what it was before ConAgra bought it? Thanks..

This is Rachel. Jonathan, the structure that we have today is what ConAgra had when they sold the business to us. So we did not change the go-to-market structure of the Private Brands business..

I see..

We wanted to do that in timing with this integration.

So, as we got into it and talked to the team, we heard what you're saying, which was the legacy Ralcorp folks said, what really worked for us was having customer teams dedicated to the division so that they understood the business and could really focus on getting to the right cost relative to competition.

And so what this is, is simply us taking a step to get, in some ways back to what really worked and also on our side, it's more of an evolution from where we were, where we had a smaller business and teams with a broader bag and they're also moving to this singular structure.

So this is not so much us making a two-step change, it's us perhaps waiting a bit longer than we should have to do it, but we're very confident it's the right thing to do, and we will roll it out as we do the changes in 2017..

Great. That's really helpful. Thank you..

And we'll take our next question from Joshua Levine with JPMorgan. Please go ahead..

Hey. Good morning..

Hi, Josh..

You said just I guess that the integration of plants and teams was going well, but obviously you took your eye off the ball I guess on sales a bit.

And as we think about the business the next few quarters, I mean, is there a risk that maybe you would think about slowing down the integration part of the business, so you could then better focus on sales and get that fixed? I mean, ordinarily, I guess I would think of you, you might be able to do both, but just trying to get a sense of how you know how to strike the right balance.

And do you think that you might need to think about bringing in outside help, consultants, et cetera? Thanks..

Josh, this is Rachel. It's a great question and we've had conversations here about should we slow down the integration. What we've seen is that, really the challenges on the sales front are where we perhaps took it too slow. So our approach coming into it on the sales team was to first do no harm.

And so, our goal was to make sure that we didn't lose customers as part of this transition, and we're very pleased that in fact, the customers have been quite positive about the program, the execution and on the system side, the transitions of the plants to TreeHouse SAP has been transparent to them.

We have not heard a single comment from the ones we've done thus far and, touch wood, we expect it to continue that way. The thing that we didn't do is we didn't start driving the sales team towards the growth that was there.

And so, that was where we lost some of the opportunities or left things on the table that we could have picked up, and this transition allows us to do that. So, as far as integration tasks remaining, the big piece of it is really the TSA and continuing to carve out each of those plants that we've acquired and bring them onto our systems.

And that will continue at the pace and on track that we have just because it's going quite well, we haven't had impact to customers or to the operational teams. And we need to get it done by the end of January in order to comply with the TSA that we have with ConAgra.

So that part will continue, and I think the rest of it in bringing the teams together, in every case where we have unified the customer service organization or the condiments team, as we get things together and provide certainty to the teams, we see better performance. And so this allows us to continue that..

Got it. And then, I mean, I know SAP, I guess, is sometimes jokingly known as "stop all production." And you talked about positively of the integrations, but then certainly talked about condiments business obviously having kind of a step down and then normalization through 3Q.

I guess was there a little bit of that on the condiments side? And then as we think about some of the larger plant integrations over the next I guess sort of six months or so, should we expect some of that?.

So we've done three plants thus far. We have not seen – we track each of the metrics. So our fill rates, the service levels, et cetera, we track those regularly with each transition and have a full team on site to do that.

In many cases, we are working with the same teams that ConAgra worked with a few years to go through the same transition, and without exception, they've all been incredibly complementary of this.

To be perfectly honest, we had a lot of nervousness from our legacy Private Brands team about this transition because they had been through some really rough transitions, and as you say, SAP is not always heralded with a lot of enthusiasm.

But I would say at TreeHouse, we know what we're doing, we've done this before, and we've been able to do it without impact to customer or to operations. And we fully are committed to having a team that continues to do that. And so we've got folks in our next plant today, getting ready for the transition at the end of this month.

Teams are trained and customers are notified and we're taking orders right now in the new system. So we feel good about it. Every single one of these is different, which is why the team enjoys what they do and is incredibly engaged on making sure that this works for customers..

Thanks. And If I could just sort of sneak in one last one. When we think about the 2017-2018 guidance, I know you've reiterated obviously just sort of the accretion piece on Private Brands without commenting on the base business.

But as we think about the next couple years and sort of just the milestones that we should be thinking about, as you go through those years.

I guess, what do you see as the biggest risk points to the guidance, right? Is it simply just sort of the return of sales trajectory, are there certain cost buckets that you think are more important than others? If you could just sort of help us with if there are certain things we can watch for, that'd be very helpful. Thanks..

Hey, Josh. This is Sam. It's all about top-line volume and establishing not just simply shipments, but programs on an ongoing basis with several dozen of the largest customers who account for a disproportionate share of our growth opportunities and our profitability.

And those programs will first lead to better promotional and merchandising opportunities. But then they will go beyond that to joint business planning, to innovation, as you've seen in coffee, as you've seen in the aseptic broth programs. And so that is the issue.

I would point out, as Dennis mentioned, that syndicated channels now, particularly in categories like snacks, are not the definitive data source – their data does not define the totality of the market. And so, we will continue to see growth outside of those channels and in particular on the premium and the better-for-you products.

But, in a nutshell, that's it..

Thanks very much..

And we'll move next to Jon Andersen with William Blair. Please go ahead..

Good morning, everybody..

Good morning..

I wanted to ask about on the Private Brands, maybe Dennis, can you talk a little bit more about your sales expectations for Private Brands for the full year in 2016? And then when you talked about flat sales for Private Brands in 2017 and 2018 within the guidance that you provided, is that flat relative to the 2016 year, or is that flat relative to where we were in 2015, the base year that your accretion guidance is based on? That would be helpful..

Yeah. I thought we would start the year with a negative year-over-year volume trends in Private Brands, which we did, and by the fourth quarter we would be leveled out. I think we're going to finish just slightly lower that being leveled out. And in 2017 and 2018 we're based on our projection for 2016 as a base.

So basically that this was going to be a relatively flat year, we may be down slightly in 2016. So that's where a bit of the miss is, but that would be the new base is, being down just slightly.

It's not that big a miss, Jon, in terms of exactly how we add because we're progressing better in the margin, so from an operating income standpoint, we weren't that far off.

We mentioned in the first few quarters how we had, I think, eight straight months of year-over-year improvement in margin despite the sales shortfall, but we didn't quite get to the sales number we were hoping for. And at this point, I think, we'll be down slightly as opposed to flat to our expectations..

Okay. And you talked about some pricing pressure that's commodity related in the legacy business. I think, you said 1.5%.

Can you talk about, kind of the pricing environment or dynamic you're experiencing within Private Brands? Is it similar to that? Is it worse than that? Is it better than that? And what your expectations are there?.

Yeah, I don't have as good a data on that, but I would it was probably slightly more intensified in the Private Brands because it got so much wheat and durum based products, and that those commodities were pretty favorable for a good part of this year.

So, I think that – their pricing has been a little bit more competitive, I think, you'll see the same dynamic, we'll be on top of those price changes as we go into next year, and I don't expect it to be an issue, it's just an observation in terms of what's happening on price mix..

Okay. Just a couple more quick ones.

I just wanted to reaffirm that on – $0.50 to – $0.55 to $0.70 of accretion in 2017 from Private Brands that is relative to the 2015 earnings base, correct, as we originally communicated in 2015?.

That's right..

Okay. Last one from me.

Just on the change around the org structure or go-to-market kind of structure, is this something that, I mean, your customers also have been kind of asking for or pointing you towards, is something that they see as a better way to kind of come to market interact with them, and to what degree is it kind of an internal decision at this point versus something that comes from customer base as well.

Thanks..

This is Sam. I think that it is implied in the customer communications, but it's not been a direct request or demand. And what we see is when you look at the full array of the top several dozen growth related customers and the various categories that we have, we just – we had to create kind of centers of gravity that were located in individual isle.

And so, condiments now has, when you break in – get into it, it's got dozens of product categories that everybody used to sell as a part of the whole thing. And now they have got a dedicated business team and you can offer, not a mayonnaise program, not a mustard program, but in fact a condiments business plan and that will be a big benefit..

Thank you..

And operator at this point we'll take two more calls..

Okay. And we'll take our next question from Karru Martinson with Jefferies. Please go ahead..

Good morning.

When you guys talk about turning volumes positive, kind of late in the quarter potentially, do you feel that is kind of winning back share or just a kind of executing better against your plan?.

I think it's primarily executing better against plan. As I said, I don't – as I look through the list, I'm not seeing lost business to competitors in private label.

What we seem to be seeing is lost business to either branded activity or just plain not getting the same activity we got in the past in terms of what we're trying to accomplish with our particular product on the shelf. And we believe the renewed and more focused sales effort will help drive that incremental sales volume we need to be more effective..

And when you look at the portfolio of private label brands that you acquired, I mean I recognize that it's still early stages here of the integration, but do you still feel comfortable with the mix of categories that you've acquired or are there some that you feel have greater potential and others where you would look to perhaps exit?.

We will look at all of our categories, I think we have always done that. Frankly, we said in the past if you look at the legacy business, the canned soup was not necessarily all that attractive and pickles is a base category that shows little growth.

And I think the Private Brands brought to us a lot of categories, some of which look like pickles or canned soup and others that have the opportunity to look more like a coffee.

And so, each portfolio has its pluses and minuses, and just as we look at plants, as we look at infrastructure, when we look at product categories, we'll evaluate all of those to see what fits best in our portfolio and what might not fit best. But at this point, we don't have any decisions made..

Thank you very much guys. Appreciate it..

We'll take our final question from Evan Morris with Bank of America. Please go ahead..

Thanks for sneaking me in at the end here. Most of my stuff has been asked, but just a couple of quick ones, and sorry if I missed anything. Just in terms of looking and hiring a new President, just a little bit more around that.

You mentioned some internal candidate, external, just what you're looking for? And I guess, the bigger question there is, the new President that comes in, are they going to have to buy into the current strategy that's taking place, or will the new President have the latitude to come in and change things and maybe even change things meaningfully if they think it should be brought in a different direction?.

Well, it's Sam. Let me put this in context, the next President of the company will be the fifth and we have over the last decade had an evolution that as – in every instance, the incoming President has refined and improved our strategies and that includes the one – Chris who just left.

What we would expect in the new President coming in is someone who understands the current strategy, understands the marketplace and then begins to develop and understanding our capability and our organization and finds ways to grow this business and the marketplace that faces us.

And we know that that marketplace has evolved in extraordinary ways from the time we started with pickles and non-dairy creamer powder, and now have a leading position in over 26 product categories, 23 of which we are first and the other three got close second. So, it will be – and someone who can – capable of managing a business of this size.

I think we'll find extraordinary interest, both within the company and without and we will improve in every instance..

Okay. And then if I could just sneak one last one in, it's probably for Rachel.

I know you guys have talked about some of the issues – the sales issues this quarter and maybe in 4Q being self-inflicted, but I guess kind of coming back to a line that was in the release and just kind of capturing the end of it here to help customers merchandise and drive their private label program.

I guess if you look at the shifts taking place among consumers and how they are eating and where they are shopping in the store, are you seeing anything or why shouldn't we be concerned that maybe part of the sales issue or the sales outlook could be tempered by retailers maybe focusing less on their private label programs in some of the categories that you were either in before or acquired as they shift and focus more of their efforts in dollars towards where consumers are shifting to, and again the perimeter of the store, health and wellness, that kind of stuff?.

Yes. So, that's a great question and I could certainly wax poetic about it for a long time, but I will keep my answer brief.

I think it is certainly true that we see our customers periodically shift their approach to private label and how they use it in the store, in some cases as a profit driver and a growth engine and in other cases as a brand price fighter, but what you see, I think especially if you look outside of the typical scan data that you see in Nielsen and IRI, you see a lot of the growth in the retail market right now is in places like Aldi and Trader Joe's that have a disproportionate focus on private label.

And so I think the consumer trends towards private label persist and their willingness to try new products and defined ways to save money in order to be able to spend on other experiences or items will remain.

So we feel pretty good about that and while I think you will continue to see changes in how retailers think about the role of private label in their store, the real underlying growth pattern is really towards those who have used it as a strategic differentiator to fight against both competitors and online retailers.

And I think that will be the core to their success and to ours..

Okay. Great. Thanks..

Thanks, everyone. We would like you to note that our annual Investor Day is scheduled for Monday, November 14. It will coincide with the Private Label Manufacturers trade show in Rosemont, Illinois. Registration closes tomorrow. Contact PI for details if you'd like to attend.

And we hope to see all of you at our new TreeHouse booth on the convention floor that week. Thank you again..

And this concludes today's call. Thank you for your participation. You may now disconnect..