TreeHouse Foods, Inc. (THS) Earnings Call Transcript & Summary

Good morning everyone. Welcome to the TreeHouse Foods 2023 Investor Day. We are so delighted to have you here with us in person, both those of you here in the room as well as those of you on the webcast. Before we get started, just a little bit of housekeeping, we'd like to advise you that all forward-looking statements made during today's webcast are intended to fall within the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections and involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Information concerning those risks is contained in the company's filings with the SEC. We've got a great agenda here with you. Our entire leadership team has joined us here today. So we're excited that you get to spend some time with them. We also have a great morning planned for you. We plan to give you a deeper understanding of TreeHouse, the exciting opportunities that we have ahead, how we'll continue executing on our strategy to drive growth and create shareholder value. Also, we have plenty of products here for you to sample. Hopefully, you have the opportunity to try some of our coffee at the coffee bar this morning as well as our oatmeal cups. So before I turn it over to Steve and to set the stage for the day, I'd like to start by sharing a video. [Presentation]

Good morning, everybody. I'm Steve Oakland. I think many of you in the room know me, and I know a number of us on the webcast know me, and I want to thank you all for being here today. It's great to see the familiar faces in the room, and I hope we get a chance to see all the folks on the webcast soon. I'm excited to be here today because we're going to take you through an Investor Day that's dramatically different than the ones we've done before, at least since I've been with the company. This will be the fourth Investor Day since I joined TreeHouse, right? We obviously took a pause. I've been with TreeHouse a little over 5 years. The first 3 years, we rolled through these. In the last 2 years, we haven't been together. So there's a lot of change in the company, we're excited to share it with you. The exciting thing I think about today's investor meeting is what we're not going to talk about, more than what we're going to talk about, right? This is not about a transformation that has to happen to unleash the value of the company, right? We've already done that. The transaction we did in October where we sold the Meal Prep assets, created the business that you're going to see today has all this opportunity. So the heavy lifting is behind TreeHouse. This meeting will be about helping you understand how we leverage that transaction, how we leverage our position today to drive shareholder value and to really achieve everything that we think it's capable of. So obviously, you got to start with the key takeaway slide, right? If there's only one thing you take away from this meeting, okay? If there's one single thing, right? The transaction we did in October created a higher growth, higher-margin TreeHouse, okay? But importantly, that company is positioned purposefully at the intersection of 2 incredibly powerful consumer trends, long-term growth trends. Private label groceries in North America and the consumer shift towards snacking. So that in itself drives everything we're trying to accomplish and drives the opportunity. Now we're going to show you we're a much more focused portfolio, which allows us to have an operating model, right, that can leverage our scale, and we understand what scale means now, right? We leverage it within the category and drive improved execution. And you'll see passion around execution as you go forward today, okay? We have a clear strategy on how to take advantage of those category trends and leverage that for long-term growth, both on the top and the bottom line. And Pat will take you through financials, and I know you've probably seen the press release already, we have an update on our guidance today. But we think this business is going to drive a tremendous amount of free cash flow. And we've got a clear line of sight to how to deploy that capital in a disciplined way to drive the returns that we'll talk about later. So, much of what we talk about today is going to be talked about all the things we are doing, right? It's not what we have to do is what we're doing. But I thought I would open with 2 slides on how we do things at TreeHouse, right? I think if you think about what the pandemic has taught us, what the fight for talent today has taught us is if you're going to have the best talent and you're going to hire retain that next-generation leader, you've got to be a business that connects with them. You got to mean something, right? It's more than a paycheck or a hybrid schedule or all those things you read about today, right? And so when we started to talk about the new company, right, we were a large pasta manufacturer, salad dressing manufacturing. We were a center of the plate. We're now much more experiential, right? And you'll see the products as you go through here, it's cookies. It's single-serve coffee pods. I mean a number of you have a cup of coffee in front of you. What's more emotional than that connection with their cup of coffee in the morning. So when I first wrote this statement, I wrote it differently than this. I actually wrote engage and delight the consumer one customer at a time, okay? And that, to me, resonated. It's about engagement. It's about delight. It's about -- snacks and beverages are much more connected to your -- much more connected emotionally. It's about innovation. It's all those things we had to become as a new company. And when I shared it with my team, they made it really clear to me, we've got to engage and delight more than the consumer. We've got to engage and delight the customer. We've got to engage delight to shareholder. -- right? That's a great start today, right? We've got to engage and delight all of our constituents. And so that's what's implied there. And engage and delight quite frankly, are high bars, and we hold ourselves to those. And so this statement has resonated across our team and has made the team feel really motivated and they understand what we do and it connects to our strategy. Now you've got to do that with a strong set of values, right? And I think a strong set of values is important because we can all go to bed tonight and know that the TreeHouse team does the right thing, right? You don't have to worry about us doing the wrong thing, but it's more than that. And I think the people in this room should think more than that. There's all kinds of data that values-driven organizations simply return better results, okay? So it's not just a must-do. It's a great to have. So let's talk a little bit about the journey we are on. For those of you who know us well, you'll know that the company, over 20 years ago, our founder, Sam Reed, he had a really great vision, that private label, the opportunity had never been really realized in North America, right? It had been in the rest of the world. And if you looked at the industry, it was incredibly fragmented. It was underscaled. It was under-invested in. It was unsophisticated. So he felt like if you could aggregate these businesses together and create a large scale business, you could help the retailer achieve what the retailer wanted to do. And that was successful for a number of years, and he did a number of M&A transactions. But those that follow the company then in the '15, '16, '17, '18, it became very difficult to run. I think this business outgrew its ability to execute, right? If you remember when I arrived, I talked about 119 different ship points. I talked about 13 different ERP systems. I talked about 5 division managers, quite frankly, our division presidents that carry different business cards. So it was an incredibly cumbersome place to manage. So when I arrived, we quickly pivoted to a couple of just very key strategic goals, right, operational excellence and commercial excellence. We got to get the supply chain right and we got to get close to the customer, right? And we did that. And it was interesting. What we started to see is we started to see our service improve, our customer relationship improve, and we saw our profits improve. And if you remember those, those that follow the company at that time, we were making the profit number on a pretty regular basis, and we were missing the top line number, okay? The top line was incredibly volatile, but the bottom line, we got it right, okay? And our equity story wasn't working, right? Without the top line growth, it was not an attractive public stock. So it became obvious to a number of us here and to me personally, that we had to change that. And we had 2 really unique businesses inside TreeHouse. We had a group of categories that threw off a lot of cash, but we're declining to flat at best categories, right? And then we had a group of really good categories that were growing 3% to 5% in units, right? And -- but every quarter, I couldn't unlock that, right? And so we brought this proposal to our Board pre-COVID. If you remember, we resegmented right before COVID to put to set this thing up. So this has been some time in the making, but we were convinced that there was -- there were 2 businesses, and we were becoming a much better operator. And so in the simplest of terms, I looked at this and I said, look, if we're going to be a great operator and we've got average categories, the best will ever be as an average business. If we're going to be a great operator and we have great categories, we have the chance to be a great business, right? So I'm going to take you through why I think we're in great categories, and you'll see the passion around operational excellence as the team goes through it. So what does the business look like today? Best place to look is at the end of last year. At the end of the year, we finished at $3.45 billion. We've obviously guided well above that this year. The first quarter was 16%, above its last year's number. So we'll be bigger than that this year. We have 26 manufacturing sites down from 40, right? And that's a big number from a complexity standpoint. Now that does not include the Farmer Brothers transaction. Obviously, that has yet to close. We're in 17 categories, we've got about 7,500 team members. And then we have a clear strategy, and I love this page. The one thing I've learned over the years, if you can't put your strategy on one page, you can't communicate it across the organization, right? If you got to take a strategy deck out, how do you explain that to a factory line leader. How do you explain that on the floor? How do you explain it in a room like this, right? So our strategy is incredibly clear and crisp to everybody who works at TreeHouse. It starts with platform leadership and consumer trending categories. I'll talk about categories in a minute why that's so important. To be successful in private label, you need depth in those categories. depth, and Tim will talk about this in the next presentation more than I will, but depth is much more than quality price and service. You've got to have the capabilities to help the customer grow. The products you'll see as your -- those that are in the room, the products you'll see today are great examples of that, and we'll show you a couple of them in the work that we'll do. And hopefully, we'll be able to do that over the years as we do these meetings in the future. So you've got to have platform depth. You got to support that with a world-class supply chain. We are a supply chain business. We're a manufacturing business, that's where our focus is. We are not marketers, okay? We're the customer supply chain. So we will focus on that, and I think you'll see more passion around that than you've ever seen from TreeHouse today. And then you've got to apply those against the right customers, right? You'll see -- and when I talk about customers, there's a lot of private label in North America. Some customers are growing faster than others. So we've got to have the right customer mix. If you've got great assets in great categories, you put them right against the right customer is a key. And you do it with talent. So I'll talk a lot about talent and Kristy will get into a much deeper discussion about what it means and what it means to be a talented employee at TreeHouse. So many of you know me, I have done this for a long time, and I've had a chance to know a lot of people on both on the webcast in the room. A number of you have gotten to know Pat recently in his role as CFO. I welcome Pat in that role. He's doing a great job. But you're going to get to see Kristy, Steve Landry. We always use Landry's last name, right? Because there's 2 Steves in the room, so we don't get confused. Sean, Amit and Tim, they'll all present today. But what I'd like you to understand about this team is built for purpose, okay? When I put my team together, I look for 3 very, very simple things, right? I need functional experts, okay? They got to be functional experts, right? Then I need people that have an enterprise mindset, right? And that's what I didn't think existed here when I got here. Everybody wanted to do their thing right. We want to do TreeHouse right. It's not about this manufacturing win. It's about this TreeHouse win. It's not about the sales win. It's about the TreeHouse win. So that team works together. And what we do and where we prioritize and if one of them has to make a sacrifice for the whole, we do it. There's no question. And then what I need them to be is collaborative, but I take a different spin on this. I want them to be incredibly collaborative internally, and I want them to be incredibly competitive externally. We're not here to lose. We're here to win, right? And that's the hardest thing to find. You can find lots of competitive people, but they can't turn it off and be collaborative together. They're climate over top of each other. I would tell you, I've got a great group of people that are experts. They're incredibly smart. They're focused on the enterprise, and they know how to compete externally. So I show these pictures because a couple of things. I know a number of you know P.I. She's obviously here today. But there's a deep bench below that. It can't be just my direct reports, and we're building a tremendous amount of talent through the company. We're investing in that. A number of the people on this page will be referenced today, but they're great leaders and they share those things. They've got strong values. They're purpose-driven, and they're here to win. So -- and committed to our strategy, clearly. All right. So I've got the right people. We talked about the categories. Well, you want the categories, obviously, to have lots of opportunity, right? So this is IRI, total U.S., right? So snacking and beverage in the United States, that's not a news flash, right? It's enormous, right? $270 billion or more. And it's growing, okay? So you want it to be growing. There's a much more important number on this page. That's the fact that private brands is growing faster than the category. We don't have to convince the customer or the consumer what we're trying to accomplish, okay? There's no trial and awareness dollars. There's not all those things that are so difficult to do. We've got to help the customer feed that demand, okay? So that's why we pick the categories we're in, clearly, right? Now I talk about the consumer, the consumer being with us, right? Who's the most difficult consumer to figure out, right, the next-gen consumer, the Gen Z, the millennial consumer. We've broken the millennial consumer down in the younger and older because we know that they're very, very different purchasing patterns. That's not the case in private label, right? It's growing and it's substantial. It's at category average or above and growing in the next-gen consumer. When we ask them, what are they doing and what's their purchase pattern, almost half of them are saying they're buying more private label, right? So we've got the right consumers. Private label dollars, total private label, this is not just us, they have been incredibly successful for years, right? We saw the trend change, when the only thing that could disrupt us was a global pandemic and $1 trillion in government stimulus, okay? When that ended, we jumped right back to the trend, okay? So that's -- but I think it's more important that we look at our categories. And I think it's more important that we look at units across those categories because there's a lot of noise, as we all know, in the dollar number. Same thing happened in '21 when we -- the government was able to buy their [ reflection ]. But I would tell you that the thing that's most encouraging for us is unit share today is above what it was pre-pandemic, and continues to grow, right? And these are lagging numbers. You'll see we've made a step change in service. We're getting better. I think we have an opportunity to feed more of that demand because we haven't set at all during this period. Do we have the right customers? You saw a couple of them on the video. We obviously have the largest customers. I'll talk a little more in detail about a couple of these brands in a second. The super regionals, right? We have e-com. We have hard discount, right? And we have natural and organic. And they serve very, very different customers, right, and very different opportunities, but to every 1 of those private label is incredibly important. You can't hear 1 of their CEOs talk on their earnings call without talking about private label, okay? What brand has 73% of the consumers in the United States that purchase the product, okay? Great value. It's a value proposition. Let's be clear. It's well positioned, okay? So you've got a value proposition with incredible household penetration. Then you've got Kirkland Signature, right? High income, super premium, growing like crazy, okay? The largest natural and organic brand in the country in food is Simple Truth. It's a Kroger private label brand. So we got the largest natural food brand access to it. And then the newcomer in the group, right? Target's Good & Gather brand is off to a great start and ties right to the young millennial family, Target sweet spot, right? So we've got great categories, and we've got the customer's interest. Actually, we don't have the customer's interest. That consumer trend I showed you has a customer interested, right? That's the truth about it. Now Tim will talk more about this, but how do you attack this? You attack it by bringing really strong expertise. So we have segmented our businesses into growth platforms. And those platforms typically have either a common technology, a common consumer or common opportunity on them. But what it allows us to do is when we have our business organized this way, we have platform experts on operations, and sourcing and procurement, and engineering, right, as well as sales and insights, all of those things. So when we go to the retailer, we're able to help them with what refrigerated waffles is really doing. And we're able to make them right. We're able to leverage all of those things. I mean I think everybody knows the pickles and baking crackers are 2 totally different businesses. So we've been able to take our complexity, build it into growth platforms and leverage against those different things. So I think we're bringing the customer a great level of expertise. Before I hand it over to Tim, I'm going to give you a couple of examples of our strategy in action. Those of us that are in the room at TreeHouse, we see our strategy alive and well in little ways in large ways every day. There aren't that many that are public. So I thought I'd talk about the seasoned pretzels acquisition and the Farmer Brothers transaction. Seasoned pretzels, it's interesting the salty snacks have been such a seasoned or such a flavor-driven business for so long, and pretzels were sort of left out of that whole thing, right? So the idea that that's the flavor and salty snacks can come together and pretzels were left behind, right? Well, that phenomenon has been growing and growing. We have the same insight and data that anybody has on this, we've been watching that happen. So I think this is -- we'll talk about it in later presentations as depth. I actually think it's an opportunity for you to understand how we think about innovation, okay? You've heard CPG's CEOs talk about their innovation pipeline and how important that is to them. Innovation is about what's next for the consumer. But it's also about a lot of cost and a high risk. There's a lot of failure in innovation. It's not the case in our business. Innovation in private label is fast to follow. So we've watched the seasoned pretzels category for a number of years. It's big enough to get in and get in quickly, right? We had the equipment on order. We had an opportunity to speed that up by buying an asset or 2 from a small vendor. And we've scaled that quickly. For those in the room, you'll get a chance to try that later today. There's a number of great flavors here. For those that aren't, I can tell you this is so hot, you'll find it in your retailer this fall, right? There'll be lots of it available this fall. So that's an example of how we use innovation and how innovation pipelines work in our business. The Farmer Brothers acquisition, I think, is radically different. I think the Farmer Brothers acquisition is a reflection of our goal to be world-class manufacturers. The facility we bought was built in 2017, it's state-of-the-art. I think it may be of its size, the newest coffee plant in North America. And we had an opportunity to incredible value to take ourselves way up the value chain in coffee. So those are just 2 looks at what we do and how our strategy drives our action. Now both of these are going to return well in advance of their -- advance of their cost of capital. We're excited about both of them. And you'll hear more about them, and we'll talk more about coffee, obviously, after that closes. So I've got 1 more slide before I hand it to Tim. I mentioned that this is not about what we're going to do, it's what we're doing, okay? We're early, early in the journey. So but I thought to give you a couple of metrics on what's happening. Our first quarter net sales. This is the first real quarter of the company was plus 16%. We were making great progress in our supply chain every quarter, picking up service. We've made a step change in our supply chain, right? Steve will talk about why that's happening. And the thing I'm most proud of is we're making all those things happening, but we're turning it into income, right? We're able to leverage it in dollars, right? And so Pat will talk more about that opportunity as we go forward. Now I talk about profit dollars, and you'll see this slide a in a couple of other presentations, Supply chain to us is planning what we're going to do, buying the materials, manufacturing the goods and delivering them to the customer, okay? We've identified $250 million of gross savings in that supply chain. We've got clear plans to deliver it. And why this is important. Steve will talk about how we do that. But why this is so important is to grow is all within our four walls, right? It doesn't depend on us raising price. We don't have to have our products burdened with more price with less competitiveness. It will be more competitive when we drive this stuff out. So we have clear line of sight on how to do it and it's inside the building. So I feel -- and you'll see the passion around what we're doing to execute that today. So I feel really good about that. I think the categories are going to grow. They have great historic growth rates that will help us drive it. We'll have some noise as we go through the COVID period, and we may get a little more tailwind to us. We'll see based on what happens economically. But the long-term trends for our business are clear, we're positioned in the right categories, and we've got a clear line of sight to what we have to do. That gives me confidence in our long-term growth algorithm, 3% to 5% revenue, driven by units over time, right? We'll leverage that into 8% to 10% EBITDA. And we'll invest heavily in our business and still generate $200 million of cash. So with that, I'll turn to Tim. I'll come back to a quick closing at the end and then we'll do Q&A. Pat or Tim?

Thank you, Steve. And thank you all for joining us today. I am Tim Smith. I'm the Division President at TreeHouse Foods. My team is responsible for the ongoing strength and growth of our categories. My background is branded CPG. I started my career at General Mills, went to Sara Lee, which formed in the Hillshire. It was acquired by Tyson. I spent a couple of years there. And I spent a couple of years here in New York in Blue Apron. I've been at TreeHouse Foods for 4.5 years. We will deliver the top line growth through focusing on 3 primary areas: First, playing in high appeal categories, again, very purposeful in the categories in which we compete, supported by consumer trends in both snacking and private brand; second, by building winning capabilities in those categories that we choose to compete in, establishing depth; and third, and an area that's relatively new for TreeHouse, ensuring that we have that deep growth pipeline of new ideas, to ensure that we are both growing across our categories, but also to ensure that we are continuing to stay in a leadership position across all of our categories through investment, both internal investment and through M&A. As Steve mentioned, we activate our 17 categories through 6 growth pipelines -- or excuse me, 6 growth platforms. We've grouped them based on consumer, operational, and go-to-market similarities to ensure that we can surround our platforms with functional leadership so we can get deep into our platforms and really understand them so that we have expertise to build pipelines and engage our customers in the right way. On the left side of the page, bake snacking, 1 of our largest platforms and a fantastic growth area for us, includes crackers, pretzels, cookies, bars and candy, coffee and tea, which also includes ready-to-drink, which is a coffee go-to-market capability. Some great news recently on coffee, which is going to enhance our depth there and put us into a leadership position. Aseptic, a fantastic category at TreeHouse, where we have deep technical capability and we compete today in broth, liquid beverage and cheese and pudding. We see nice growth in a way through the ability to leverage our deep capability in some new spaces. I'll talk about it in just a minute. Dry blends. We have significant scale in dry blend, both blend and pack as well as spray dry, a highly technical capability that enables us to support our nondairy creamer, our powder beverage and our hot cereal businesses. Pickles, a very focused category where we have both depth and are seeing the tailwind of consumer trends, we have a 3-plant network. We're in a leadership position there. And frozen and refrigerated, which is the combination of a breakfast-centric set of categories in refrigerated dough and griddle as well as our ISB cookie business. And that takes advantage of our frozen and refrigerated network. We are excited about these categories and platforms because they are high potential based on TAM, total addressable market, they are sizable places. There is plenty of room for us to grow across these platforms and categories as large as $38 billion and $37 billion in bake snacking and coffee and tea. And pickles at $4 billion, still plenty of room for us to grow within that space. Additionally, they're all growing, again, supported by consumer trends. Growth is our tailwind. We love to play high growth categories, especially those where private brand is as relevant as we're seeing across our categories and where private brand is growing. And you'll see that across the bottom of the page. When we're in a category, we are focused on building winning capability, depth. We do that through great focus on 4 areas: First is category-specific capabilities. Do we have the right assets to compete within a space. That might be capacity, that might be capabilities. We've talked about seasoned pretzels, that was a space we weren't participating in. There was a lot of growth there. We took the opportunity to step into it. Second, off of our assets, do we have the right portfolio of offerings that could be good, better, best? Are we playing in better-for-you spaces across our categories? It could be packaging. We have made investment over the last couple of years to ensure that we have snack pack capability across cookies, crackers, pretzels and our in-store bakery cookies. Customers are interested in playing in the space in order to really engage and delight them. We see the opportunity to play across the assortment, stepping in the snack pack was a natural extension of our already strong categories. Third, deep category and customer expertise, ensuring that we understand the trends. We have the consumer insights. We deeply understand our competitors, and we understand our customer strategies so that when we're engaging with them, we can bring them growth solutions, we can partner with them to ensure that they are achieving their objectives as we achieve ours. And all of this comes to life in a robust growth pipeline. I will talk about that in just a couple of slides. What's great is we are in an advantaged position today across the vast majority of our categories. You will see that denoted by green squares on the page. In addition to that, we have the right product assortment to provide solutions to our customers across both premium and better-for-you options across our categories. The growth pipeline. We are flexing a new muscle at TreeHouse, building a growth pipeline establishing deep process and discipline, supporting it with resources so that we can ensure that we have ideas in our pipeline that enable us to achieve our targeted growth. Our growth pipeline is really focused on 2 areas: left side of the page, core growth; right side of the page, growth pipeline, new things for TreeHouse. On the core growth side, we spend a lot of time ensuring that we understand category and underlying segment trends. So we're playing in the right spaces. We understand our competitive position, so we can compete in a better way over time, that's cost, quality, service and the full suite of offerings. We see the growth runway. So off of those spaces that we play, are we taking advantage of the white space that exists within the space on those core items, do we have the distribution at our core customers like we would like to have, where we don't, we're going after it. The right side of the page is focused on new things for TreeHouse, how do we complement our existing assets with further investment that might look like growth capacity. In our crackers portfolio, for instance, we are adding capacity. Now we're doing tremendous work within our facilities that Steve Landry is going to talk about in just a minute, to unlock capacity on our existing lines through TMOS. Where we recognize that we don't have the capacity to keep up with demand, we're investing to enhance our capacity, converting lines from slower-moving categories to faster moving categories and investing in new lines. Second piece of growth pipeline is core expansion. How do we leverage assets that we have today to do new things in snack pack. The investment to get into snack pack leveraged our existing lines and incremental investment in pack capability. I'll talk to you about aseptic in just a minute. We think there is an opportunity to really take advantage of our deep capabilities in broth aseptic to step into a new space. And then new capabilities where we identify within a category, a segment that we don't participate in, how do we get into it quickly. Seasoned pretzels is a perfect example of this. I'm going to give you a couple of examples of our categories over the next few slides to really bring this to life. I'm going to start with crackers, which is a gem within the TreeHouse portfolio. Crackers, is significant TAM, plenty of room for growth. The total addressable market is massive. We can grow here. Strong category trends. Consumers and snacking occasions are a tailwind for this category, and incredibly relevant to the retailer. The retail wants to -- the retailer wants to establish their brand in this aisle. It is a high-touch aisle for consumers, significant penetration. Building their brand in this aisle is incredibly important across our retailers. So it's a valuable space. We are a leader here. Winning capabilities, significant depth. We compete in all key cracker segments from value crackers to mainstream crackers to beautiful specialty crackers that you'll bring to life and [indiscernible], to better for you, gluten-free and the like. We're able to do this because we have an advantaged internal capability, a 3-plant network. We have a facility in Kentucky that does mainstream crackers better than anybody else in the space, providing the best cost, quality and service. We have 2 facilities in Canada that do those beautiful specialty crackers better than anyone else and also do better for you. We are adding on to this category with additional capabilities, what else can we bring to our customers and to consumers, again, fast follow, and we are adding capacity. The demand here warrants additional investment, the returns are sound. We are active in that effort today. Next is pretzels. Pretzels is a fantastic category within the TreeHouse portfolio, 1 that has grown for us over time and is very sound across the P&L. Sizable TAM, plenty of room for us to grow, strong category trends recently driven by season pretzels, and I'll come to that in a minute. We have historically played in traditional and filled pretzels, 2 very nice businesses for us. We've watched the season space for a bit, as Steve mentioned. As it began to mature, we built our internal plan and made an investment in internal capacity. As we were doing that, we identified an external co-manufacturer that had some assets that were complementary to our internal investment and took the opportunity to step into it more quickly as we had a number of customers ask again to get into this space. Our ability to move quickly here is going to enable us to step into it this year. We've got a number of deep conversations across customers on items that they're excited for us to bring to them. This is a perfect example of identifying new places for us to play in existing categories so that we can really delight our customer base through a full assortment. The other thing that's fantastic here is we have a lot of traditional pretzel capacity. This enables us to mix that capacity into a higher-value segment with seasoned pretzels. We're excited about the seasoned pretzels space, and hope you enjoy them during the snack break. Coffee. A lot of heart for coffee within the TreeHouse portfolio. We have a very nice business within single-serve coffee pods. That is -- that plays in a great space, significant TAM, high growth, you'll see across the bottom of the page. Private brand is winning, gaining share within single-serve coffee pods. Playing only in single-serve coffee pods while a nice business for TreeHouse didn't really enable us to fully take advantage of both the customer relationship and capturing value through the vertical. The Farmer Brothers acquisition overnight gives us a leadership position in the space that enhances our ability through green coffee purchasing, through formula development, we can now create custom formulas for our strategic partners, through roasting and grinding, flavoring and a fuller pack assortment. This investment takes us from a slight disadvantaged position in coffee to now being an advantaged player in this space, couldn't be more excited about what this brings to the TreeHouse portfolio while a bolt-on for TreeHouse, this is really a step change for our coffee business. My last example is the one that I think really showcases what depth means for TreeHouse. We have played in the aseptic space through our broth and cheese and pudding categories for a long time. As we've transformed and refocused our organization around growth platforms, we've started to see new opportunity. The same assets that enable us to produce broth will enable us to produce plant-based beverages, a high-growth space, nice TAM, capacity-constrained at the moment. We are actively making investments in our 2-plant network so we can play in that space in a bigger way. We have a couple of items today, but we will unlock additional capability with these investments and enable us to really take advantage of our aseptic network. So I will leave you with I am confident in our ability to achieve our top line growth. We play in the right categories, high appeal, significant growth runway. We have or are building winning capabilities and we have a healthy pipeline that will both allow us to achieve our growth but also keep us in that leadership position. So thank you for the time. With that, I'm going to turn it over to Sean Lewis. He's going to talk to you about our customer strategies.

Thanks, Tim. I'm Sean Lewis. I've been with TreeHouse Foods now for 4 years, been in the industry for 26 years, working with companies such Kraft Foods and Mizkan America prior to joining TreeHouse in September 2019. You heard from Tim about our category leadership and how we're driving depth through our platforms. I'm going to talk to you about our strong customer relationships and how we're driving our overall growth with the customer. We serve some of the biggest and best retailers in North America, as Steve alluded to. We have hundreds of customers, and we also have a very strong food service, co-man and export business to help us drive growth. Our customer relationships are collaborative, and we drive mutual profitable growth with our customers. So what exactly does that mean? It's important to understand that private brands are an increasing component in the grocery industry and that's industry wide. So it's critical to our retailers' success. Because of that importance, we've positioned TreeHouse to be able to deliver on the key things from a customer, which is their growth priorities, which I'll talk to you about here shortly. And then we have a well-defined cut engagement plan that I'll talk to you about how do we drive strategic partnerships to drive that growth with our customers. A little bit more on these topics. Private brands are top priority for our leading retailers. As you can see on the slide, here are some key notes from Walmart, Kroger and Target here recently in our earnings call talking about the importance of private brands. It's pretty consistent from the conversations that I'm having with customers, as customers understand the value of their private brand and whether you're hearing from TreeHouse or you're hearing from the customer, at the end of the day, the consumer is looking for value and they're looking for quality through private brand. And we're -- I think that creates a significant opportunity for both the customer and us to drive significant growth. This slide, if you start to think about growth, store growth, and especially with the emphasis on some of these retailers that have a very, very strong private brand emphasis, I'll kind of point you to Costco. If you think about Costco and that Kirkland Signature brand, it's a well-defined brand that they have positioned to drive household penetration. You saw it in Steve's slide. I mean it's a big brand, and they're doing a well -- a great job driving that brand forward. And then as you start to think about store growth, think about a retailer like ALDI, all if you've ever been in ALDI, about 90% to 95% of that store is private brand. They've grown 1,100 stores over the last 10 years. So significant growth, and I don't see that stopping for them as well. And then Trader Joe's, if there's any Trader Joe's shoppers in here, it's an experience. Even through the pandemic, I was asking them, is it -- are you going to look to e-commerce? And the biggest thing with them is about that in-store experience, which has driven a lot of consumer loyalty to that brand. You walk a store, it's about the treasure hunt, it's about innovation. It's about seasonality. It really creates an experience. And in some cases, a lot of consumers that are shopping the store doesn't even realize that they're buying private brands because the brand is just that strong. So what are our growth priorities for our retailers. And historically, what we've seen with retailers is they're looking for a new supplier. Historically, they've looked at the breadth of the portfolio. However, in June of 2022, we commissioned a leading sales and marketing organization to kind of help us dive a little bit deeper into their business priorities. What we found is that they are truly, truly focused on 4 key things. You still see portfolio breadth on there, but as is tiered, it's not as high of an attribute as some of the other ones. Before I'll call to your attention, I think Steve alluded to, and I think Tim alluded to as well, what we call table stakes the top 3. So think about quality, quality, service levels, end-to-end cost competitiveness. Those are what we like to call the table stakes. That's the entry with these retailers. But the fourth thing that you'll see from retailers that they're looking for from us is driving their overall category growth. And that's been 1 of the things that I can tell you through my conversations with retailers, our conversations has tremendously shifted all about how do we help them drive that category growth. You heard in the video as well as they all talked about the opportunity and that they're going to be investing. I think even recently, FMI put out something might have been last week I think it was the power of private brands for 2023. And talk about 8 out of 10 industry experts said that they're investing into their private. So that growth is there. They see the opportunity, which I can say, creates a significant opportunity for TreeHouse. Well, how do we do that? I talked about how do we engage our customers and what we like to call super strategic partners. Steve alluded to that we're choiceful with who we engage with. And this is the road map of how we do that. 3 key components. The first one, fundamental excellence. I talked about those table stakes. This is what really mastered those fundamentals with the customer. And when we talk about service levels. The one thing that we always have good conversations with customers on are is that collaborative forecast. The sharing of their information with our information and insights helps us make sure that we're in servicing them at the level that they're looking for and that we're looking forward to deliver to them. And then commodities, and then what I would say end-to-end cost efficiencies. Us partnering with them on how do we find efficiencies through our conversation on our 2 networks to drive and make sure that we're mastering those fundamentals. You get to the growth component, you see that have strategic growth activation. We do this through what we call joint business plans. Joint business plans are basically us sitting at the table, and this is something we're doing differently with our retailers. You sit at the table and you kind of define what are our business goals? What are their growth goals? What's their strategy? How do we mirror the 2 together? And then coming out of those conversations, we develop what we call a North Star. What is that -- where do we want to invest in our end, where do they want to invest in there in to make sure that we're getting to those defined business goals to drive the business forward. I will tell you through a lot of these conversations as we talked about how do we get deeper in categories and our capabilities. I think Tim talked about it. Seasoned pretzels came up several times with our customers. And I'm excited as we sit across from customers now that we have that capability. And to Steve's point, you'll see those items come to the store shelves here in the fall. And then another 1 is leadership engagement. You can't do this without having senior level executive commitment on both ends. We are meeting with our retail partners from my level to a -- that's cross-functional from the supply chain team is meeting together. Our GM teams are meeting. So it's a cross-functional senior-level engagement to make sure that we're holding each other accountable to the growth targets that we've set. Understanding this, right, helps us make sure that we're engaging and delighting our customers. So I want to give you a couple of examples of exactly how we've done that. As Tim alluded to, we were actually doing. This is not -- but what we're going to do. This is how we're actually doing it. This is a good example from a national retailer in our snack -- big snack category. So if you look to the far left, where we were with the relationship, call it, 2018, we're pretty much within that back and forth from a bid standpoint. You win some business, you lose some business. We engaged in 2019. It shifted to strategy. We sat down and start and talk about what I just talked about, how do we engage at a different level. Coming out of those conversations, this retailer talked about, they want to build a world-class cookie and cracker program. Through our breadth of our portfolio, we were able to do exactly that. And now where we are today, we're investing in growth. We're bringing them innovation from a premium, better-for-you category standpoint, and you look at the CAGR, 37% CAGR over this time frame. So it goes back to where we started from the transactional all the way to this strategic partnership. And through that partnership, we have a multiyear agreement with this customer, and we're their sole supplier on this cooking and cracker program. Here's another example. This 1 is from a regional retailer and it's on coffee. I know we talked about how excited we are with coffee, but it's the same thing here. You go back to 2018, it was truly about the core as we're trying to get the right core and shelf. We're really driving with customers like how do we get consumer adoption. So during this time frame, it was around promotions and demos, relationship continues to evolve. When we got to 2020, we started talking about portfolio expansion. And I will tell you some of the products that we were able to bring to life through customization and working with this retailer, whether it's customization, holiday products, pack size, it really, really drove that customer penetration goals, right? They have really aggressive penetration growth from private brand, we were able to deliver for the pack sizes that we're able to do. And now we're in this premium expansion and strategic partnership. We're now we're looking at on-trend segment expansion. And the same thing here, what I talked about in the last example, we are the sole supplier, and we have a multiyear contract with this customer as well. You start to think about ESG. How do we bring ESG together? So I talked about those strategic conversations [indiscernible] had with our customers. ESG is a huge component not only for TreeHouse but for our customers as well. In this example, we've heard from our retailers that a lot of them are looking for 100% recyclable packaging by 2025. We took the opportunity with this retailer to say, look, right now, our powdered soft drinks business is in a canister, moving that to a carton will save tremendous amount of -- from an ESG standpoint. It's going to limit it 100 metric tons. We're going to have single-use plastics and 1,300 metrics eliminate it. We are investing in our assets, and it's helping us not only meet the customer goals, but also deliver on TreeHouse ESG priorities as well. So what I want you to take them away from this is private brands is important to our retailers and growing. It is critical to their success. Delivering on those 4 key, as I call table stakes, the 3 plus driving their category growth is a huge component for us. And we're engaging with our customers through these strategic business planning and engagement that we're doing with customers and it's driving that over growth. We're having some really, really robust conversations in regards to what does the future look like and how do we grow -- drive growth together. So with that, I'm in turn over to Kristy Waterman, who is going to walk you through our talent initiatives.

Thank you, Sean. Good morning. My name is Kristy Waterman, and I serve as the General Counsel and lead the HR organization at TreeHouse. I began my career -- spent the first 10 years as a private practice M&A and securities attorney. Before going in-house is the Deputy GC and the GC at Dean Foods Company. I spent some time after that with the Dairy Brands division of Dairy Farmers of America before joining TreeHouse, I've been with TreeHouse for 2 years now. Talent. So talent is the base of the tree. It's the heart of what we do and really key to our success. I mean it takes the collective parts of 7,500 team members to make the high-quality food and beverage products that hopefully many of you in the room will enjoy today. With the completion of the sale transaction last year, Steve talked about launching our new purpose, engage and delight one customer at a time. We rolled this out to say every single people leader in TreeHouse, your customers, the employees so to win and have the right talent, you need to engage and delight your employees every single day. Purpose sets out the why. Values really set out the how. And I think through Steve's tenure, we've endeavor to be a values-led culture. In fact, it was at 1 of these investor days in 2019 where we rolled out the values, own it, commit to excellence, be agile, speak up, better together. And as values, these core principles have served us really well through the pandemic, through transactions, through inflation, supply chain challenges. And -- but with the new purpose and a new strategy and really launching new TreeHouse, we wanted to take some time and say, what are the principles, what are the behaviors that we want to hire to. What do we expect from our teams, what's going to enable our successful execution of this strategy and really enable growth. And so we engage with our team -- and we -- what you see on the slide today is the outcome of that engagement. We have slightly the behaviors to address some of what we really see being the guiding principles going forward. So to highlight a few of what's different here. Own it. We're going to do the right thing. That's not different. I think that really we're asking everyone to show up fully engaged, to be accountable, to be proactive. But at the heart of what we do, it is very important that everyone operates with the utmost integrity. Commit to excellence. We're rewarded. We're here to win. Winning is a real key concept. We have a competitive group. And harnessing that, we support customer brands, and to have that trust of retailers, we really have to continue to operate at a high standard, deliver exceptional results, and that's going to enable us to win. Be agile. So CPG inherently complex. We're asking the teams you got on ways to simplify what we do, really look for ways to move faster and embrace change throughout our operations. Speak up. So we'll talk about this a little bit more as we talk through our new operating model. But as you move from a holding company through growth through acquisitions to being an operator and now to a focused category leader, we really have to design processes so that we can break down some of the functional silos that existed. And so as a core value, we want everyone to be engaged. And engagement means you have to listen. You have to be heard. And encouraging healthy debate, sharing of information all those things that allow us to operate more efficiently together. And last better together, it's everyone's favorite. Food brings people together. We make food in facilities that require the presence of people we are together to do so. And we really and are enforcing this concept of we win as 1 TreeHouse. There are not functions. It is just 1 TreeHouse. So as we look at -- with these values and really enabling this transformation, we started with the simplification. We have to get our operating model to meet the needs of our strategy. And so what we have done really is to move to being organized around platforms or business units. And what our goal is to allow better focus. So I think Tim mentioned, we've organized our 17 categories into a number of platforms. We took those platforms and put into 4 business units. In each of those business units, they share a similar set of capabilities. So for example, in bake snacking, you have cookies, crackers, pretzels. And then we assigned a general manager to each of the business unit, who brings the teams together around that set of capabilities, and it allows them to generate a team to have a team with the right level of expertise and knowledge, but working cross functionally. And then to connect to the business, you have both the business connected to the supply chain and the customer teams, we introduced this concept of tables. So who literally needs to be around either the virtual or the actual table. And the idea was to introduce a new way of working, where we integrated business units that are -- with connection points at each of the tables, as opposed to operating in silos and based on functions. So how did we roll this out? How do you actually activate this? We started at the beginning of this year, holding a series of leading our transformation events. So we brought people together, but we put them around tables. And we help these immersive exercises to say we want first to make sure you understand the strategy, where are we going? And in doing so, we used learning maps to walk through strategy, but really ask people to engage, and say, how does your day-to-day work tie to what we're doing. We also had an interactive tools and guided conversations around the operating model, defining each of the roles and what the job description is, how that plays as it relates to what were element -- which element you set at on the table. And kind of walk through this new way of working. We followed up these lot of events with a series of ways of working. So deep, deep dives on how we work together. And these lot of events have now -- we've hosted for, and every salaried employee in the organization, and will by the end of Q3, roll this out to every employee. So all the frontline workers at every facility within our organization. The other thing appreciating that change is really hard and leading a transformation is hard. We've provided some individualized coaching for our people leaders, giving them personality assessments, team, resiliency and leadership training and then specialized coaches that focus on individual skill sets around leading transformation. And overall, I think the outcome has been good. So we have a higher percentage of our employees saying they feel confident in our success. They understand our strategy. And so that you don't just have to take my word for it and you can hear directly from our employees. [Presentation]

So we're excited about the momentum that we're making on our transformation. But we're also still focused on some of the basics as it relates to being a talent leader. We know that there is a direct correlation between how employees are treated and how valued they feel and productivity. And a key part of that, probably the most critical in creating the employee value proposition is having caring in effective leaders. Post-pandemic, people want to have an experience and want to feel like they are treated as humans, as valued members of the team. And so in addition to the leadership in coaching that we've been doing at the senior levels, we've been really intentional in rolling out and developing training that our frontline workers need and what they've told us they need to be successful. And then we've also -- you'll hear in the supply chain talking about TMOS with the next generation of TMOS, the TreeHouse Management Operating System, that we utilize throughout our supply chain is really focused entirely on engaging employees and looking at that employee experience. What else on the fundamentals. So there's 4 things if you engage, has it -- they move around in order, but it generally saves these 4. You got to have competitive pay. You have to pay people and market. They want more than a paycheck, but it's important that we have competitive both salary and benefits. We've invested a lot over the past year to make sure our rates are in line in all of the markets in which we operate. We've taken a comprehensive look at our benefits packages to make sure we're not only competitive, but that we also offer the benefits that people need. Two, work life balance. This applies against -- across all and all of our employee base. And one of the areas where we've looked at is in the plants, how do you have more flexible scheduling, so asking people what is it the schedule that works and giving some options there as well as eliminating mandatory overtime and focusing on the work conditions. And three, opportunities for growth. So a lot of the operating model work that we did gave us the opportunity to look through and say, what are the roles and develop career map, so we can have transparency to an employee on how they can grow and develop throughout the organization. And then culture. Culture is really important. And having a diverse and inclusive environment, it is essential to attracting and retaining great people, and our workforce is incredibly diverse. We think that it enables us to better meet our customers' needs by having a breadth of background experiences and perspectives. And in line with those values, in order for us to celebrate and win as 1 TreeHouse, a lot of our initiatives remain focused on recruiting, training, having job opportunities, all, all in line with supporting an inclusive and diverse workforce. And our goal is always to look like the communities in which we operate. One of the ways that we've been effective in creating some of the culture and communities through our employee resource groups. They play a key role in supporting and building our culture, do a number of things in addition to just creating a sense of community. Our ERGs host circle -- coaching circles, book clubs, community events, a lot of opportunities to get more engaged both in -- at the workplace, but in the communities where we operate. And ESG, you probably have heard ESG throughout. It really sets not just in one function but throughout our entire business. And we see the commitments that we're making on our ESG goals as an extension of our purpose to engage and delight. Our customers have their own ESG goals. And most of those based on consumer demand. They desire to have sustainable packaging options to do business with vendors who are making commitments and progress on reducing waste and greenhouse gas and really partnering with businesses that are focused on the social and governance aspects. And so we see our scale and operating model as uniquely positioning us to support our customers in meeting those goals. And really, as we set our ESG goals, which are being refined based on our new perimeter and you'll see those come out this year. In the people space, they're really focused on the things that are already important to us, which is having a safe environment, an inclusive environment and that we're looking at the employees well-being. So I'll conclude with saying we've seen some really good success. We feel great about what we're seeing, both in hiring and retaining great people, but also just in the morale and productivity improvements that we've seen. So I will turn it over to Amit and Steve to talk about our supply chain, which is where the vast majority of our great talent sits.

Thank you, Kristy. It is exciting to see a company that's actually investing in people. I'm Steve Landry. Many of you can call me Landry, which the leadership team does, given the fact that we have 2 Steves on the leadership team. I started my career with Procter & Gamble, spent 15 years at P&G. The most notable role that I had within P&NG is I actually led IWS for the entire European region as a member of the global IWS steering team. I actually have that -- in that experience, I actually was able to implement P&G's best operating system across all 16 plants. I ended up being acquired as part of the Crisco and Jif acquisition and joined the Smucker Company. And in that role, I was able to grow as the Smucker Company grew. I ended up leading every single part of the food and beverage operations in my career with Smucker as well as I actually led operational excellence program within the Smucker Company. So I feel very confident that my past experience with both P&G and Smucker now joining TreeHouse 15 months ago, I'm going to explain the plan that we have put together to actually build a world-class supply chain. Now I'm going to turn it over to Amit.

Good morning, everyone. It was great to reconnect with a number of you this morning. My name is Amit Philip. I'm the Chief Strategy and Growth Officer at TreeHouse. And I've been here for almost 4 years. Prior to TreeHouse, I was with Hershey Company for about 8 years. And before that, I was a management consultant. And in my role today at TreeHouse, in addition to leading strategy, M&A and technology, I also partner with Steve on the supply chain, specifically on logistics, procurement and planning. Now as Steve and I take you through the next section here. There are 4 key themes we hope you'll come away with. Number one, we are building a world-class supply chain by investing in both proven work systems and state-of-the-art technology to master the complexity that is inherent to private label; number two, our scale is a real differentiator for us. We're able to because of that scale, invest in these technologies and really engage and delight our customers, unlike any other competitor in private label; number three, we are building category depth and capabilities in lockstep with Tim and the rest of the general managers based on the priorities that they have set out; and number four, we will deliver almost $250 million in gross savings over the next 3 years, all by really focusing on the highest returning categories and capabilities as we build this world-class supply chain. Diving a click deeper. You will see that our supply chain is unlike any other in private label. The winning formula for us is really about the combination of driving depth and winning capabilities in those categories, but also combining with that, with the scale with proven work systems with state-of-the-art technology that we can apply across that supply chain. Let me bring that to [ like to life ] for you a little bit. So at the top of this page, in our categories, we have a number of manufacturing plants that make the same product. That is important because we can go to retailers, and we can talk to them about not having the dual suppliers, right? Also in these categories like bake snacking, for an example, we have 200, 300 foot industrial ovens in our cookie plants, in our cracker plants, in our pretzel plants. And because we are applying common work systems across all these plants, across these technologies, we can more efficiently run and maintain these over the long term. Moving to the bottom of this page. Within procurement, we have purchasing power. We have real purchasing power. That enables us to have strategic relationships with suppliers. But not only that, in a lot of these critical categories, we can actually have dual supply relationships that not a lot of smaller players can actually have. And that gives us the ability to, again, assure that surety of supply to our customers. Moving up 1, the logistics network we have is huge, and that makes us really relevant to our major carriers. Today, because of our multi-category capability, we can very efficiently send full truckloads to customers by consolidating these categories at our major mixing centers. And this is not something that the supply -- other competitors in private label can really do. Now bringing this all together, the power is really in being able to integrate the various parts of the supply chain very efficiently. And that's why we are investing in world-class technology to leverage the scale of our network while mastering the complexity in private label. We believe that with these investments that we are making and capabilities that we're already deployed, we can provide better end-to-end cost competitiveness, better service and better quality to as we look to engage and delight our customers over the long term. Now we are today building a new TreeHouse. We're investing in a new TreeHouse. Many of you know that TreeHouse was put together by a number of different acquisitions, that led to a highly integrated decentralized system. And we've made a lot of progress over the last few years in really consolidating 13 ERP systems and driving common KPIs across our manufacturing plants. But really, the next frontier for us is about accelerating the power, the scale of a centralized and highly integrated supply chain. For example, today, on the plant front, we have -- we are in the second phase of deploying an integrated planning system that is both cloud-based and combines all our planning technologies together. Our AI forecasting algorithms, we've deployed AI forecasting algorithms almost 12 months ago that are giving us significant new capabilities. On the sourcing front, we have increased our savings goal because we have invested in talent and capabilities, and we're working very strategically with suppliers to drive higher savings in the supply chain. On the manufacturing front, Steve will talk to you more about this. But the differentiator versus the last few years is really the investments that we are putting in our categories and our manufacturing plants to drive depth, to drive growth and really to be that world-class supply chain. Steve will take you in some detail through these well-proven work systems that we are currently deploying through the manufacturing system. And on the delivery side, on the logistics side, because TreeHouse was put together by acquisition, our delivery network came to be optimized for 1 to 3 plant single category networks. Today, we are -- because we are a multi-category, we are optimizing to a much more efficient logistics network with bigger, fewer DCs that are much closer to the customer that helps us service them better. Some of the best investments we can make as a company are in our supply chain. Tim talked about the depth we build in categories. We always look at build-versus-buy options. And in the supply chain, we are really focused on the build option. So in categories where we don't have enough capacity, where there's unmet demand, we're making the right investments to drive line efficiencies or increase capacity. In high-growth categories where there's new innovation, we are supporting that by building the manufacturing capability, the seasoning equipment to be able to bring that in-house. And then the TMOS efforts that Steve will talk to you about, we're really deploying those to the highest priority to the highest in lines first so that we can gain the maximum throughput as quickly as possible. We're also investing in this customer-centric DC network so that we can get closer to the customer and supply them much better. I'll now hand it over to Steve to talk to you about the returns that these investments will give us.

So a very important number is that $250 million of gross savings. That's going to be integral for us to achieve our EBITDA growth targets of 8% to 10% over the next 3 years. So I'm going to talk to you a little bit about the breakdown. So as you can see, we are making strategic changes in planning, sourcing, delivering. And I'm going to talk to you about our operational footprint or how we actually manufacture. You can see the breakdown of how we think that the $250 million is going to be distributed over the next 3 years. What's different? Well, we are going to be shifting from cost cutting to capability building. So think about what you just learned about us building talent leaders. We are going to teach every employee how to run their lines better. By running our existing assets more, we will not only make more product, we will make it more cost effectively. The second significant mind shift is we brought the concept of stretch goals. We are trying to achieve much higher goals than we have ever thought we could ever achieve before. This is forcing us to think differently. We can't do the same thing over and over and expect different results. So we are using stretch targets to actually change the mindset of every single leader within the facility to build plans to run better. So what does that look like? Well, first of all, it starts with leadership. All results is all about how well do you train and develop your leadership team. Kristy went through some amazing work that we're doing for every single salaried leader within the site, they now understand why we need to do something different. They understand our strategy. So that's pretty exciting. Part of our next-gen TMOS is we are now teaching them the methodologies that other CPG companies has had on how to get to root cause and actually build systems to sustain the results. This leadership capability is a differentiator from what we've had in the past. The second part that's also probably even more powerful as we are actively working with every single hourly employee. We're asking people to not just push a red and green button. They're actually going to learn basic maintenance skills. They are going -- we are teaching problem-solving skills. So when they come in and they operate that equipment every single day, and they hear something new, they feel something different. They can actually act upon it, and actually run and make a difference every single day. You want to keep employees, make it so, that when you come to work, you love coming and doing something different every single day. That's what we're doing that's different. It's how it -- feeds our talent acquisition, employee value proposition, how we're bringing it to lives for every single hour in person. I actually call that the Power of 100. So TMOS is not new to TreeHouse, TMOS, which is TreeHouse Management Operating System, was actually implemented in 2019. I think some of you may have heard of us talk about it. The foundation is very solid, but it's a very traditional continuous improvement program. What is it that you're looking at on that slide? Those columns are natural areas within an organization of where you work, obviously, plant leadership, the leadership team. The initiative management system is where our engineering team sits. Process improvements or your traditional CI team. Every single has as little boxes are actually systems or tools and capability that we implement in all of our plants. So as you can see, it's not a comprehensive across the entire plant. It also only activated in about 5% to 10% of the employees in the plant. We're ever working on trying to drive out loss. Today, we have built capability in every single function that supports our plants. We are reapplying known best practices to create the capability that everybody every day comes in and runs our lines better. It's like eating an elephant, 1 small bite at a time. So today, we are -- we have already seen 2.5x better results than we did with our previous program. Let me go into depth a little bit deeper. Autonomous maintenance. It has the most amount of systems and capability that we're implementing. That's the 1 area in which we're touching our hourly employees. So we are going through and teaching our hourly employees how to do routine maintenance, how to problem solve their equipment, how to lubricate their equipment how to be a safety functional leader on their team. By doing that, these -- our operators are becoming technicians. They will be compensated over time. We talked about our employee value proposition about having career pass. How better to create a career path for an hourly employee then to actually contribute and run our lines better. As you can see, this is a pretty exciting comprehensive program. So we're early in our journey, I've been here 15 months. We now have implemented this full program in 40 of about of our 200 lines. By the end of this year, we will have implemented this program in 85. We are very, very focused on making sure that we're focusing on the lines and in the plant that are category constrained. A significant part of our service improvement is because we now are running our category constrained lines significantly better. Obviously, fish where the fish are, right? So you have better idea of catching your allotment for the day. So our TMOS program is not only helping our bottom line savings, it's also been helping our top line growth. Here's an example. The best-in-class operational excellence programs, you always start out with lead plants and you have lead lines. You can't do everything all at one time, right? So -- where did we start? We started with our 3 biggest plants, and we picked 1 line in every plant. In Princeton, Kentucky is where we make crackers. The sea line that you see the results here is actually where we make saltine crackers. So by implementing autonomous maintenance on this line, that facility, now we have passed AM Step 2. Through this effort, we have improved our overall equipment effectiveness by 13%. We've reduced our scrap by 8%, pretty impressive. What's even more important is we have documented the system, so we can now reapply across our network. And we've built our own internal team such that we know how to do this versus just reading a book about operational excellence. So bottom line, we have reapplied these systems in Princeton. We're now on 3 lines, in Princeton, to date, we have increased our capacity by 8 million pounds of production. We've increased service by 500 basis points and reduced our scrap by $2 million. This alone gets you pretty excited about what difference that you're making every single day. And it clearly validates that we know how to implement the best-in-class operational excellence capability, and it builds confidence in our entire team that what we're doing in now in an execution mode is spot on. So next -- 1 more slide. We talked about our new TreeHouse in which we have a lot more capital allocation available to us. You saw in the very beginning video, some very simple automation. In the past, we were using a lot of our capital to pay down debt. Now we have dedicated capital for the next 3 years to help automate. Very simple, very proven methodologies, feeding our sugar frosted cookies into tray packers. You saw a lot of robotics, whether or not you're picking up pretzel jar and putting it into a case or you're picking a case and putting on a pallet. We have automatic guided vehicles. To date, we have moved shifted 178 roles from pretty manual type work, those roles have now shifted to value-added. So it helps us from a recruiting standpoint when you don't have to hire that 180 extra people, right? The last piece that we're also entering is we're building a lot of standards. We have a lot of inspection standards to help maintain this equipment. It would be nice if all of this was automated as opposed to having Excel spreadsheets, typing all of this into your computer to have it all automated on an iPad or some connected device. So we are testing this year a connected worker platforms in our plant, and we expect that to be rolled out next year as part of our digitation of how we help our employees maintain the gains as we go forward.

Really is truly incredible to see the impact that when you roll out TMOS and a line in a factory as to what impact it has on the employees, but as Steve and the operations teams are driving significant improvement in the plants, we need to make sure that the rest of the supply chain does not become a bottleneck, and so on the procurement side, that means surety of supply. If he's running lines faster, that means I have to get materials in fast. And so we are working through that. The procurement organization is -- will drive over $100 million in gross savings over the next few years. But in addition to that, we're also step changing our capabilities. And leading that change is Jim O'Rourke our Chief -- new Chief Procurement Officer, who is building not only a talent pipeline, but bolstering core procurement capabilities in the areas of strategic category management and commodity risk mitigation. Our savings goal has actually increased because we now have a rolling 18-month pipeline of savings that are enabled by 2 levers. Number 1 is strategic partnerships with suppliers. So our suppliers have year-over-year productivity goals that is enabling them to come to us proactively with savings ideas to put into the pipeline. And then number two, this pipeline is cross-functionally being deployed with the plant teams and the BU teams so that we have a holistic view of the savings that we can gain across the network. Jill Truitt, Vice President of co-manufacturing and Logistics is leading our evolution to a more customer-centric DC network. By the end of that evolution, our logistics cost will be down by over 10%. By the end of that 2- to 3-year evolution, we would have optimized our finished goods warehouses by about 50%. We're reducing our carbon footprint by reducing miles driven and getting closer to the customer. And we are today in the phase of our Midwestern DC consolidation that will consolidate 4 DCs into 1. We're in the third phase of these moves, and we're already seeing better truck utilization and better on-time delivery to customers. And so we're excited about the future that this provides as we expand this across the network. Now our planning organization is mission control for our supply chain, and we're step-changing our capabilities with our talent, with our technology and with core processes that we are improving. Our planning groups connect the dots across our supply chain. They work with the customer teams to understand demand. They work in our AI forecast models to build the demand plans. They then translate those to production plans in the plants, and then they also order the right materials from a procurement perspective. This set of activities is obviously extremely complex when you talk about 11,000 different materials, 8,000 SKUs, 26 facilities and hundreds of customer delivery locates. And in order to master this complexity, we have invested in and are now in the second phase of deployment of a state-of-the-art cloud-based integrated end-to-end planning system. This is important, but because we are now integrating planning that was happening in multiple systems, and we're already seeing better service levels and reduced waste in the system as a result. We're proud that we've been able to drive up service levels about 3 points versus last year, but there's more to go. Our forecasting algorithms, our new AI casting algorithms are actually performing about 20 points better than the legacy algorithms that we used to have. I'm extremely confident in the upside opportunity we have here because of our tech savvy planning leader Erik Hjerpe, but also enabling our broader supply chain technology and manufacturing automation efforts is Robin Keller, our new who was most recently the supply chain CIO at Cummins after a long career at GE. She's also building our go-forward ERP strategy and identifying a particularly significant opportunity we have to move our legacy infrastructure into the cloud over the next few years. So we're really proud of the efforts of our supply chain. We are seeing the benefits of all the capabilities and new processes we have put in place. Most of our service level metrics are at or above pre-COVID levels today. What we're more excited about, though, is the upside opportunity we have, particularly in the plants. We've only deployed to 40 lines so we think the -- our OEEs across the network will increase significantly over the next few years. And so in conclusion, I hope you've seen that we are, in fact, building a world-class supply chain. It is differentiated because of the combination of depth we are building in the categories to be winners in those categories, but also leveraging our scale across the supply chain to that $250 million in savings. With that, I will hand it back to P.I.

The moment you all have been waiting for the break. We're going to take a 20-minute break. It's about 10:33. Right now, we'd like to take 20 minutes and restart the webcast when we restarted it. It gives people to get back time to get back to their seats. So we invite you to stand up, stretch and we'll go to a break. [Break]

Thanks, everyone. Good morning. I'm Pat O'Donnell, CFO. We appreciate your interest in TreeHouse Foods. I joined TreeHouse about 6 years ago, and I've had the privilege of leading various parts of our finance function over the last 6 years. Prior to that, I spent about 15 years at PWC. Hopefully, after listening to some of the presentations already this morning and getting a chance to sample some of our snacking and beverage products, you're starting to get a better sense of the opportunity that sits before us and some of the ways that we're looking to capture that opportunity. I wanted to highlight why we're really bullish about what we're doing here today. Steve said earlier, we have a great opportunity in front of us because we sit at the intersection of 2 very important macro trends. The first is the growth of private label, which we saw the long-term growth trend earlier in the slides. The second is the growth of snacking and beverage. And so we have the 2 of those, and we think that provides a very unique and compelling investment opportunity and a long runway for growth given the history of growth in both of those macro trends. The other thing that I think is important to understand is we are operating differently today than we have in the past. We're a less complex business with higher growth, higher margin categories. We have a clear strategy, and we're executing against that strategy. We're going to focus on those categories. We're well positioned with our customers, and we're building a world-class supply chain and continuing to invest. And we have the backing of our customers who see the importance of private label within their value proposition and their growth. And lastly, we have a much different financial profile today than we've had in the past, which is what allows us to deliver that. And we can see how a very disciplined capital allocation approach will help us drive the growth that we expect in our business over the long term. I'll start with guidance. So you likely saw our press release already this morning, where we're reaffirming our Q2 guidance, and we're raising and narrowing our full year adjusted EBITDA guidance. Let me give you a little context on our thinking here. We were really pleased with our Q1 performance. So if you heard the story, we were able to improve service, particularly towards the end of the quarter, much more quickly than we anticipated. That allowed us to fill some customer orders in Q1 that we probably would have otherwise shipped in Q2. And as we sit here today, we continue to see that trend continue, where our service levels have stabilized. I think we saw that on the earlier slide. Vendor fill rates continue to be very positive. And this is really to date, the second quarter is playing out as we had expected. Our first half volumes are about where we thought that they would be given some of that timing change that we talked about from Q1. And the supply chain continues to be good. As it relates to sort of the macro consumer trends, those are playing out about what we thought that they would as well. So the activity in the broader macro continues to be very favorable to private brands. And we've seen market share growth in 71 straight weeks at this point. So as a result, we see -- we feel very confident raising -- reaffirming our guidance, $810 million to $840 million on top line, and $65 million to $80 million from an EBITDA perspective. Now as we think about the full year results, we continue to expect revenue to grow 6% to 8%. Obviously, we will start to lap the significant pricing that we took last year in the second half of the year, which really means that we expect volumes on the full year to be flat, but we will have single-digit growth in volumes in the second half of the year as we move forward. Our original guidance did assume some stabilization of the supply chain as we thought about the full year, and that's playing out as we had expected as we continue to see that stabilize. From a commodity price perspective, they do remain elevated but have moderated somewhat. Our guidance did contemplate sort of mid-single-digit commodity inflation, which I think is what we're seeing from our basket of goods perspective. So that's playing out as expected. The other thing is, as we think about why raise the guidance, we do have really good visibility now into sort of our supply chain savings in the second half of the year. So we feel good about our progress there. And we feel good about the kind of broader macro trends and so we see the profit over delivery from the first quarter flowing through to the full year, which will result in a -- revising our range to $355 million to $370 million from a EBITDA perspective. As I think about what TreeHouse has been through the past few years and how we've purposely transformed the company, I wanted to just pause to show you some of our EBITDA progress over this time. So as a reminder, as we begin in the slide, the 2020 reflects some of the pain show loading, early days of the pandemic, which drove positive results for us. That was quickly followed by the years of supply chain disruption, macro inflation and the like. And so we're really pleased with our ability to go stabilize the supply chain and drive through pricing to recover our cost in that time frame. And so we're exiting this year with a guide that we feel really positive about. And we think the positive trend that you see here on this slide gives us really good confidence in our ability to deliver on our financial commitments. We've talked a bit about what is normalized EBITDA look like in this business despite some of that macro inflation. So I thought we should give a little bit of an update in terms of our thinking here. As you look at the waterfall chart, we feel like we've been successful in taking pricing to recover the inflationary cost that we've experienced over this time. We think that's evident through the positive PNOC trends that we've seen over the last several quarters as we've reported. We're also pleased with our ability to improve service in that time frame. Some of that service improvement came with some higher cost as we thought about things like increased maintenance over time and the like to deliver that service. And so we're working through some of our supply chain savings to offset that. We expect to make continued investment in our supply chain over time. We're proud of the investments we've made in labor retention and continuous improvement, and that better positions us to execute as we exit the year. And as I mentioned, we have a really strong pipeline of cost savings as we exit the year. And so as we think about this, while we're not at that level in terms of our guidance today, we do think as we exit the year, we're on that run rate to deliver $400 million of EBITDA as we exit out of 2023. So we talked a little bit about the balance sheet, and I want to dive in a little bit deeper here for a second. We continue to maintain a significant amount of liquidity with the availability we have under our revolver and our cash position. Our debt, we have no maturities coming -- majority of our debt does not come due until 2028. And we're fixed with our debt cost out at about 4.4% over the next several years. This leaves us in a really strong position from that standpoint, and we're well within our targeted covenant leverage range of 3 to 3.5x. The other element that I wanted to pause on because I think it's a bit underappreciated within our capital structure is our $427 million seller note. So you may recall, as we completed the Meal Prep divestiture, $500 million of proceeds was cash, and then the other half of that was the $427 million seller note. If you put yourself back into the timing of when we had to complete that deal, all the macro disruption and trends and things that create a great value for us, and we think we've got great value in the transaction were the same things that caused disruption in the financial markets from them to be able to finance the transaction. And so this was a unique and creative way for us to be able to get the transaction completed and maximize value at that point. The note does pay 10% interest. So we're really happy with the return that, that provides and the net interest that, that leaves us with in our income statement. It is fully monetizable by us, so we can transfer that at any point in time, and it's prepayable without penalty, so the seller can refinance as they see the fit. Given our capital structure and our liquidity position today, we're not in a hurry. The note pays a nice return so that the monetization of it is not an immediate concern for us. But we're really pleased with that. As we think about the progress we've made from a capital structure, we talked a bit before, we've used free cash flow dollars in the past to pay down debt, and we're really pleased with the progress that we've made in that area. Obviously, the $500 million we received as a part of the Meal Prep divestiture was a culminating moment as we further reduced debt in 2022. And I do think, as you think about that seller note I just referenced, if you further -- we would think of that as cash or a further reduction in debt at some point in time. So if you further take that into account, is a reduction in leverage or is our net debt position. That further strengthens that profile. The other item that I thought is a bit underappreciated from an investment community standpoint, is the ongoing claim we have for proceeding against Keurig. This has been mentioned in our 10-K and our various filings over the last several years. Why I mentioned here at this point, we continue to invest to pursue a favorable outcome in this case. Discovery has concluded. And there are several motions pending on this case. And should those not work in our favor, we look forward to bringing that to trial and to pursue a favorable outcome at this point, which we hope is scheduled shortly. So now that brings me to our annual growth targets. We remain confident in our ability to deliver on our long-term algorithm from 2024 to 2027. We are in growing less volatile categories today and we are executing better than the company did in the past. We see a clear pathway to achieve 3% to 5% revenue growth, adjusted EBITDA growth of 8% to 10% and at least $200 million of cash flow annually. Let me dive into the revenue just to give you a little bit of context and some of you may try to get your rulers out here to measure this, but we're trying to give you a rough sense of magnitude from that perspective. So first, we see the majority of our growth coming from our core where we are strategically growing with our growing customers. Private brands are important to our customers, and they're growing. The long-term private label growth is a fact, and we are strategically partnering to drive results with our customers. We're also going to leverage our category depth and leadership. We operate -- we saw earlier in very large and very high appeal categories with strong growth trends. I think you saw in all our categories, it was sort of mid-single-digit growth across all the categories. We're advantaged in many of our categories, and so that allows us to win more than we lose. In addition, we have lots of white space opportunity to either help our retailers expand their core set and thinking about sort of the full assortment of products that can be offered on theirself and thinking about expanding into new categories. The other area to think about is, given the supply chain constraints and some of the category demand that we see, there is opportunity to further expand revenue through capacity. Some of that will come naturally as our service levels improve and we lap some of the lesser service we've experienced. Well we also saw in a great example earlier of the benefits that TMOS can provide in one particular plant in Princeton, in terms of the incremental capacity that, that delivered for us and what is a capacity-constrained category, and we were looking to add more. We think the benefits of some of our investments in automation also create more capacity for us when you look at some of the automations. And then our investments and debt are also going to help us here as we think about categories like crackers, where there's positive growth trends in areas for us to add more capacity. And then last but certainly not least, we've developed and will continue to develop a robust pipeline for revenue growth. We will leverage our existing platforms, things like aseptic. So we said broth is a very seasonal business for us today. We can leverage those assets and to grow into nondairy milks and creamers. We also invest in debt like areas like season pretzels, where there is a market -- an element of the market that's growing faster than others, and we can harness some of the growth of that particular segment. We'll also look at our packaging formats. I think this is an area where we can leverage scale as a TreeHouse. We can leverage into different snack pack sizes. We can also help our customers meet their sustainability goals and thinking through that part of it. Now as we think about the drivers of our 8% to 10% EBITDA growth, clearly, some of the volume will help us drive improved EBITDA performance. We just talked about our volume growth. We also feel that there's a chance for us to optimize mix as we continue to go forward and to leverage into higher growth, higher margin parts of our portfolio. And while we'll have opportunities to build procurement capabilities, we really see PNOC as being flat over this time horizon. And so we expect to be able to drive productivity to offset inflation. So the profit growth is not really -- is not coming from pricing in our view. We've shown the ability to price where there's inflation-justified pricing. And to the extent that there's deflation, we'll obviously give that back as our cost decrease. So net-net, this algorithm assumes net-zero PNOC. We do believe the biggest driver for EBITDA performance for us will be within our supply chain. And so we're targeting $250 million of gross savings. About half of that will come from our continuous improvement efforts in TMOS and the other parts of that will come from our procurement activities as well as our network optimization. And we see great opportunity to continue to drive those improvements through some of the digitization and automation activities that we talked about earlier. Finally, I want to make sure I highlight the importance of some of the investments that we've made in our people and talent as well. I think that leaves us in a spot where we have teams now who are mutually incented to go deliver the performance and the strategy that we're doing. So we think the combination of the revenue growth and the profit growth will drive healthy free cash flow for us. And so as you anticipate, at least $200 million of free cash flow annually, that will result in $800 million over this time frame. We expect the majority of this free cash flow to be driven by increased cash earnings. But we will make prudent -- we will manage our working capital prudently. And some of the investments that we talked about earlier today, like our planning system, an example, while that may help us reduce costs to be more efficient, there is an opportunity to better manage working capital as we continue to invest in those planning system, and we'll continue to look at opportunities to manage our cash efficiently. The free cash flow will then allow us to manage the business better on a day-to-day basis and make investments where we deem them to be appropriate. And we really consider capital allocation to be a key priority in terms of driving shareholder value. We anticipate being very disciplined in our approach here. Our first priority continues to be investing in the business. We are highly focused on executing our strategy. And our investments will be aligned with that strategy. We will be disciplined as we think about our driving organic growth and building capabilities. And so you see things like our increase in CapEx over the last year and our investments in coffee and pretzels as good examples of how we'll think about building capabilities within this business. With regard to debt reduction, we will continue to target a covenant leverage ratio of 3 to 3.5x. And so our growth in the space isn't looking to drive further leverage and we want to maintain that target leverage ratio. And finally, we do have $267 million available under our share repurchase authorization. We'll look to be opportunistic here to return capital to shareholders as that makes sense to you in the construct of capital allocation. I want to dive a little bit in the CapEx, just to give you a sense of how are we spending some of those dollars and what to look for in terms of the algorithm period. So we expect to spend 3% to 3.5% of revenue on CapEx annually. We're probably at the high end of that range this year as we anticipate $130 million of CapEx. And that split is roughly 50-50 between what I would consider to be growth investments. So think about things like new equipment capacity expansion and the like. And then also growth investments within our supply chain, which helps drive some of the automation and digitization, continuous improvement activities that help us grow the company. And then with the other 50% of that this share is being spent on infrastructure. As you think about where we've been over the last several years in the COVID-disruptive environment, we have some literal deferred maintenance to think about. And so we will continue to invest back into our plants. We couldn't get OEM manufacturers into our plants during some of those time periods. So we're catching up on some of that as we move forward. I'd expect that we would have that 50-50 infrastructure and growth split for the next year or two while we catch up on some of the maintenance. And then I would expect to shift more of that CapEx into growth over the later part of the algorithm. I wanted to spend a little bit of time here just to think about what are the criteria that we envision when we want to go build capabilities and what's the rigor that we apply. So any time that we think about adding a capability, we step through sort of a buy, make, borrow or rent sort of analysis. And so when we want to do that, we want to consider both our strategic sort of fit from that perspective as well as our financial perspective. And so some of the criteria that we think about from a strategic is it within a category that we operate in today and does it allow us to get deeper within that category? Is it the right fit with the customer? And is there demand with the customer for that capability as we think about it? And then what's the growth potential of that capability. And so as we think about pretzels as an example, that trips all -- or coffee trips all those strategic criteria. We also want to be disciplined financially. So we will consider what is -- we would expect any capability build to be margin enhancing. It will probably be very synergistic from an opportunity standpoint. And then we are not looking to lever up, so we'll maintain our leverage ratio as we do that from an investment standpoint. And then we also want to think about the size of revenue and the growth that, that provides us. So as you think about some of the recent acquisitions that we did in pretzels and within coffee, we sort of trip all these criteria, and we went through a very detailed analysis. Okay. And now moving on, I will spend a couple of minutes just thinking about our coffee facility. We understood for some time for us, the depth in coffee meant having the capability to roast, grind, flavor and blend coffee. We don't do that today. We have a great single-serve coffee business and a great ready-to-drink coffee business. However, we don't -- we weren't part of the other elements of the supply chain. And so we saw a great opportunity for that. So we've been thinking through a buy versus build analysis here over some time frame. And when the opportunity to acquire the Northlake, Texas facility arose, it was pretty readily apparent to us that this was a great opportunity for us to add the capability and what we consider to be a great value. So the $100 million purchase price also reflects the expectation of about $30 million in inventory. So net $70 million when you think about the facility. As we think about having to build that capability internally for ourselves, we think it would have cost us at least twice that to get the facility and likely would have taken several years longer to get to that capability. So you have now an opportunity for us to step into a capability that we think is strategic for us and helps us get depth into coffee, add a great value and in a much quicker pace than we would have otherwise had to do that. We'll be able to add the state-of-the-art facility. It's about 500,000 square feet. It has plant space, warehouse space and some office space. The deal has a really attractive internal rate of return of at least 30% and is highly synergistic as you think about the opportunity to drive vertical integration, the opportunity for us to further optimize our network. And then the opportunity to add that to our scale from a procurement perspective to go drive efficiencies within our supply chain. Overall, we're really pleased with the transaction, and we look forward to closing in the next 30 to 60 days. As I start to wrap up to a couple of slides that I have prepared today, I wanted to just point out that we believe that the revenue growth and adjusted EBITDA growth that we plan to deliver should deliver at least 10% shareholder returns over that time frame annually. And then we see upside opportunity to the extent from a capital allocation perspective, we can find the right investments and growth and capabilities and the opportunistic share repurchase. Beyond that, we think we're well positioned to continue this momentum as we go forward. I want to reiterate our commitment to shareholder value creation. We are well positioned at 2 macro trends that provide great tailwinds for us. The intersection of private label growth and snacking and beverage growth provides a very unique run rate for TreeHouse. We are operating differently today than we have in the past to deliver that opportunity. And we have a much stronger financial profile that allows us to invest in the business in a different way to deliver those returns. So with that, hopefully, you've gained a better understanding of how we're thinking about driving our strategy going forward. And I think we have a brief video to show you while we get the stage set up for Q&A, and then we'd be happy to take your questions after that. Thank you. [Presentation]

Great. Well, before we start Q&A, I'd really like to thank everyone again for being with us today. I know we have the capability to do them both the questions live in the room, and I think we can capture them off of the webcast as well. So we've got a team of people supporting us there. So we look forward to those questions. I do want to thank all the people that went to make this all possible, right? You -- it takes a lot of effort on the team's part, on our organization's part. And a lot of effort on your part to be here and be with us today. So thank you again. So with that, we will turn it over to questions. And I will ask PI to help us manage that process.

You state your name and firm so that it's captured by the webcast before you ask your question, that would be great. And I've got mics on either side of the room, Andrew Lazar.

Steve, first off, I know it could be a little sensitive, obviously, to talk about specific customers, but I was hoping you could maybe put some context around market share trends within private label by TreeHouse. Maybe it's percent of sales where you're now gaining market share versus what that was a couple of years ago or percent of customers where you're gaining share -- some way to contextualize how that share trend has maybe changed with some of the changes you've made? And then I've just got a follow-up for Pat.

Sure. Thank you, Andrew. We'll try to bring that -- I've heard that question a couple of times. We'll try to bring that to life in future presentations. But what I would say, let me talk customer first, and Sean, you can help me here if I don't get it right. But I think we really recognize those customers where private label is key to their strategy. And I think the focus that we've put on those customers, the attention we've done with innovation and R&D and all those other resources we applied against them have helped us gain share in specific customers. That's really hard to see in any kind of syndicated data. I would say when you ask us, how are we doing category-wise, I would say we're winning more bids than we lose, okay? We're much more selective about where we bid than maybe we were before because capacity is finite. And I think we've got a couple of categories where we talk about being advantaged. I think those are the places where we are really winning, right? And so maybe in a future presentation, we'll talk a little bit more in depth. Advantaged means we have the right assets, we have the right capabilities and we have the right breadth in our supply chain. In those categories, we're doing really, really well. There's a couple of places. I would say the coffee acquisition will -- should turbocharge that category, quite frankly, right? We have a nice pods business. Shame on us, we didn't invest in that category. We were a first mover there, probably didn't invest early enough in that category. We have been disciplined. We've looked at a lot of assets, right? We've looked at building. And I think now we found the right one. So we'll help you understand that as we go forward.

And then, Pat, just a quick one on the growth algorithm we laid out. I think you mentioned that in a normal environment, you wouldn't expect price to be much of a lever on the top line. In the 8% to 10% EBITDA you talked about PNOC being neutral. So to the extent that there is still, whatever a normal level of cost inflation, does that mean there is some price just to offset that inflation? Or I'm trying to just put those two together.

I think the way to think about it is we've got great procurement capability that we're building, and we talked about what we think we can deliver from a procurement in the overall supply chain. So I would anticipate, on an ongoing basis if we see sort of the normalized level of inflation we're going to look to take -- use some of our productivity and procurement activities to go do that. Now to the extent that there's extraordinary inflation like we've seen in the last few years, we will continue to have the very fact-based conversations that we've had with our customer's to date around here's our basket of goods and here's what we're doing and show them inflation that we've experienced.

I would just add one more statement to that. In my comments, I talked about how the $250 million in savings is within our control. The beauty of that is that our products don't have to bear the burden of that in price. And in our price gap, we don't have to bear that burden. So we don't want to do anything to disrupt the momentum in our categories. And the fact that we don't have to rely on PNOC to do that, I think, makes us a much closer partner with the retailer, right? And also, number one, we control it. But number two, we don't inhibit the growth of the products to the retail chain channel.

Robert Moscow. I'd like to know, like in the past, you've talked a lot about savings, Steve. And now it looks like a lot of that's going to drop to the bottom line more than it has in the past. What -- maybe I can tell on the bars, what percent of the savings do you expect to drop versus having to reinvest. And are there -- what percent of your portfolio or categories where you feel like you have a right to those savings for your own margin rather than having to compete in a way. Another way of asking you talked about strategically, competitively advantaged categories that you're in, you talked about pretzels and coffee. Like how many of your categories do you really have those advantages to keep it?

Maybe I'll start, and I'll ask Pat to talk about what we took a pull through. I think let me start with the competitive advantage categories. I think probably 2/3 of our categories, we think we're competitively advantaged. In the other 1/3, we have a clear line of sight of what we have to do to get there. And coffee was one of those, right? We knew we had to have depth in the full supply chain of coffee. So I think that's true. I think as we look at those places where we have opportunity to not pass savings through. I think today, and remember, we are in categories that are growing. Our capacity is under demand, right? That's very different than where we were before. And when you talk about why is this company built the way the company is built. It goes back to our fundamental strategy. You operate -- you'd be a great operator in great categories, right? When categories are declining, capacity increases every year in the industry, and you're fighting for that cycle. When you're in growing categories, capacity gets smaller every year. Now people will invest and we'll invest and so there'll be bumps in that. But I think the fundamental difference today and why we think we'll hold on to more of that is because the capacity is so much more in demand, right? And look, I can look to the customer in the eye and say, listen, I'm investing in our supply chain and higher wages and shift schedules and in capabilities to make it the product better, to deliver on time. And I'm not doing it at your expense. I'm not asking you to pay for it. So I don't -- and by the way, I've been in the last couple of weeks -- Sean and I have been to half of our strategic customers. And that's the conversation we're having because they're all wondering when will price come back, right? And so we'll pass commodities back, but I think the investments we make, we may choose to grab a piece of business once in a while. To invest some of that back, but I don't know that we'll be forced to. I don't know, Pat, if you want to talk about what you think will flow through.

Yes. I think if the question is, why do you feel good about delivering off of the gross supply chain savings. I think we are operating differently today than we have in the past, right? And so we put a structure in place. I think when you look at if TMOS is delivering a lot of the gross cost savings and you're looking at what that takes. That's a much more comprehensive program than we've done in the past in order to go deliver those cost savings. So we're seeing much more structure in terms of what we're doing and operating differently from a team perspective. We've invested in the talent to go deliver those cost savings and we have the people in place to be able to go do that. So I think we're in a different place than we are historically in terms of also just being in a businesses that are less volatile than one we've experienced before, where you saw margin movement and things probably erode some of the cost savings that we were delivering.

And I'm going to go back to quickly and we'll jump to another. Thank you, Rob, for that. Steve Landry in his presentation made one quick comment that I don't know if everybody really caught how meaningful it is. We have always cut costs. okay? Our earlier problems were to consolidate a warehouse or cut cost. We're building capability to lower our cost. That's very different. We're investing in capabilities in people, plants and equipment and work system to lower our cost of operation to run our equipment better versus close something. You get a onetime hit when you do that. If you lower your cost, you become more competitive, every box that we sell becomes leverageable. So it makes us more aggressive when it comes to the customer, it makes it a better place to work and proves our retention rate, our plants. I mean, the battle for plant labor is real. You all have seen that over the last couple of years. And so the shift in mindset to investing in our people to drive out waste and drive out loss and drive out cost, is fundamentally different than where we were before. We were -- we had to get cost quick before. It was a totally different business, right? And our free cash flow dollars -- when the company was formed, if you go back to that chart when I talked about when Sam built the company, when I arrived where we are now, in the early days, cash flow dollars all went to M&A, okay? I worked for a while and it got us over levered and overextended. When I got here, free cash flow dollars went to pay down debt. We did the deleveraging, right? I mean we did some other things. Now free cash flow dollars -- I mean, with our fixed debt structure, our debt is really competitive. And when you net it out with the loan with [indiscernible] we have very little interest burden on the business. so we can invest free cash flow dollar and capability and invest in our company, right? So it is really a different, and that's what the strategy was designed to do. That's what the execution of the deal in October was designed to do. And that's why I think it's just a -- it's a very different place than what happened before. Now we got to show you that over multiple quarters, okay? First quarter is a great look. We obviously wouldn't have guided where we guided if we didn't feel like that momentum was reasonable. But we know we have to show it over multiple quarters.

Jon Andersen, William Blair. I'm wondering if the pandemic and the disruptions that, that caused has changed the nature of the relationship between private label manufacturer and strategic customer. And I'm thinking of examples perhaps in terms of the stickiness of the relationships, the way the bidding processes work and given the premium place not being able to kind of supply and keep core customers get in stock. Are you seeing that? Do you anticipate that? Presumably, that's a lot of what you're trying to accomplish with the investments that you talked about here today.

I again can -- I'll comment, and if Sean wants to add something we can. Yes, there's no question. I mean I think the value of your vendor relationship and those vendors who delivered and those who didn't, there's a big delta there. I think we were blessed we -- now you might argue, we invested too much. We invested in delivering to the customer. If we didn't have the entire truck, we shipped the truck short, right? If we didn't have every item we shipped it, right? So we did everything we could do, and I think our customers recognize that as we went through the pandemic. It cost us some earnings. There's no question during the period. We could have managed the company differently, but I think we'd have a different relationship with the customer right now. So I think we're in a really good place when you come to that. Now competition is a great thing, right? It will make us better. We don't kid ourselves that we can rest on the laurels that we were a great vendor and now we've got a longer-term agreement. We have to earn that right to be that customer's vendor every day. And the day we get completion will be the day that, that changes. And so that -- I think, John, everything you said is in fact the case, but we can't run the company that way. We have to go win. We have to be that externally competitive group who gets better every day. That's why I talk about -- I like when price goes down because it makes the private label more competitive. It gives us more tailwind, right? So I think it's a really good thing that we have control over our own destiny from what we're doing from an earnings standpoint. We may have those stronger relationships, but we're going to treat them like we have to earn them every day.

There are still a couple of businesses, I would argue in the portfolio that it may not fit precisely a snacking and beverage focus if it comes to mind. You also have multiple temperature states that you operate in today, shelf-stable primarily, but also refrigerated and frozen. Are there other portfolio optimization moves that you think maybe on the radar as you move forward? Or has that largely been completed?

I would say it's largely completed. I would say that we're not doing good service to your capital if we don't obviously have a good hygiene to scrub everything on a regular basis, right? And so I think some level of portfolio optimization is always important for good. Well-run companies are always scrubbing what they have -- is everything we own at the highest value under our ownership. We feel very good about what we have. there's a lot of snacking and pickles go on, right? There's single-served pickles out now. There's a lot of innovation going on in pickles, right? And the consumer likes it. But I think we'll continue to scrub that, but I wouldn't think it would be material, right? Changes from now on, I think would not be material.

Just one more. And if I have the numbers correct, and I may be a little bit off here, but based on the new algorithm, it looks like by 2027, the EBITDA margin of the company would be in a 12% kind of range, $500 million plus of EBITDA. I covered the company long enough to have seen EBITDA margins a couple of hundred basis points above that. Not to put you on the spot, but kind of have put you on the spot. Is that -- given the new mix of the portfolio that you think there's opportunity to drive that margin growth out even further over time or by 2027? Or is that a pretty good landing spot kind of a 12% EBITDA margin rate?

I may I'll let Pat comment too, but I think that is a great landing spot, right? And I think the -- what we have to do is deliver it consistently, it can't be volatile. I think there have been moments in our history when it was there when it was volatile. It was also very early in the single-serve coffee pod business. I think when our margins peaked. And there was a lot of margins in single-serve coffee pods in those days. So I think we have to just again be cognizant that we have to deliver great service, great quality and great value to our customer. If we can do that more effectively and we can generate more returns on that internally, that's great. We're not going to do that on the back of the customer. But I think where you mentioned, I think, are great long-term numbers. But I don't know, Pat, if you have any thoughts on that.

Yes, I think that's right. I think that's a good landing spot. And I think if you can think about potential upside to where we are, I think it's going to be those investments and capability where we can remix the business a little bit, where is there upside opportunity if we find the right investments there. This isn't one that's going to move the needle on a consolidated basis. But if you use the season pretzel as an example, we have a great traditional -- traditional pretzel business. We're not seasoning those. That has a different margin profile associated with it. So if there's opportunities like that on a broader scale or a bigger scale that we can use over time to make those investments. I think those would be the opportunities to do that, but I think your way you're thinking about it is right.

I'd also go back and say that some of those years when we had peak margins, we should have gone back and invested in our business, right? And the volatility you saw after that. In hindsight, by the way, hindsight is really good, right? It's easy to have hindsight and look at this thing backwards, okay? But we should have invested in our business, right? And so we owe that to you all, we owe that to a continuous investment stream. So our earnings are more consistent, right?

Matt Smith at Stifel. Steve and Pat, I wanted to ask a question about the 2023 guidance change. You reaffirmed the second quarter and slightly raised the midpoint in EBITDA in the second half of the year. Could you talk about some of the factors? It sounds like it's more on the cost side supporting the guidance change?

I can start there. So I do. I think as we were in Q1 and sort of what's new in terms of our thinking or information that made us feel better, I think it's -- I think supply chain is certainly one of them, right? I mean that's the we're supply chain company, and that was the most volatile element of sort of what was happening over the last year. So we've seen our ability to stabilize or to maintain the stabilization of the supply chain. We've done a lot of work on what are our cost savings initiatives into the back half of the year, and we've got 90-ish percent of those cost-saving activities identified and being actioned at this point. We've also seen -- there's probably been a little bit of volatility in consumer behavior. But net-net, that's about what we expected it to be. And so I think as you see the combination of those things, I think that just strengthens the profile of what we thought the second half of the year would look like.

And just as a follow-up to that, should we expect the supply chain and operations piece to become favorable in the second half of the year or just kind of stabilize year-over-year and those cost savings to really be part of the 2024 and 2027 savings that you identified.

Yes. We won't get all of those cost savings, obviously, in this year. So I think you'll see some of that some of the cost savings will flow through to this year. And then obviously, that will leave us, if you can picture the chart on the $400 million of EBITDA run rate. Not all of that flows through this year, right? But that will put us on a run rate as we enter into 2024 of delivering those savings.

Can we go to the side of the room over here for Rob Dickerson.

Great. Rob Dickerson, Jefferies. Steve, a question for you. I guess, just in terms of kind of snacking share right, kind of relative to what we've seen in overall private label for a long time, snacking does seem to be more lowly penetrated, but clearly also growing more quickly kind of overall as a category and then you're outgrowing the growth we're seeing on the branded side, right? So a lot of positives there. I'm just curious, though, kind of very simplistically, why do you think if the category has been so attractive, broadly speaking, cookies, crackers, salty, what have you, that the penetration of private label has been somewhat underrepresented relative to, let's say, other kind of more core products like a milk or sugar or what have you?

Sure. I think that's really easy, actually. It's -- they're incredibly more difficult to make and to make them -- I'm sorry, for the folks on the webcast that didn't get to have churro seasoned pretzels right at the break, right? They're amazing, right? But you've got to deliver that kind of quality. And I've talked about that for a while. Private label, we have a little -- whatever we want to call this recession economic challenge, right? Private label has forced in those windows. That's where you get trial, right? When consumers are managing on tighter budgets, they try private label, right? Well, the assortment and the quality of the offerings today are dramatically different. So I just don't think there were products like that available in prior times of trial. And I just think the assortment is better. The assortment and the product is better. I showed you those next-gen consumer data, I think the retailer recognizes that the consumer is interested in their brand, right, whether that be e-com, whether that be in-store, whether it be a super-regional or the largest retailers in America, so the consumer is interested, the quality is available and the retailer recognizes they have an opportunity. So I think those are the 3 different dynamics that are happening today.

Great. And then I guess just a follow-up then. Is the idea kind of given the investment, like new capability, agility ability, what have you, right? Is the idea, if we look at the season pretzel, an offering that it shells in the fall, but even though these other categories at cookies and crackers are big and they're growing, and no offense. But the innovation of the private -- on the private label side hasn't really been knocked out of the park right? There's a wide divide in terms of premiumization of snacks relative private label. But that's -- I guess, that's the opportunity and what we see in season pretzels. Once we get later this year, we're talking about '24, maybe there's another offering. So it almost premiumization of snacks? Would that be a fair classification or somewhat?

Yes. And I think the absolute scale has grown. I think that's a great point of view. But remember, private label is some 20-ish percent of the category in most categories, right, just a macro level. That is now big enough in those big categories for us to invest in the capabilities to do all the things you talked about. It's also as a retailer, you can walk in to any retailer in North America and look at your phone and know with the lowest price on any branded item is, okay? You don't know that for their custom churro pretzel. So if they're going to connect with that consumer if they're going to make their experiential, snacks and beverages are emotional categories, right, engage in delight, it all lines up. right? That's why the retailer wants those things to be special now. And I think the categories are big enough that there's economics to do it. I just don't know that there was economics to do it before, and that's the consumers there, right? The opportunities are there, we're there. So I think all those things are lining up. So I do think it's different. No question.

Let's go over here to Carla...

Carla Casella at JPMorgan. One follow-up on the $250 million of savings. How much of the 2023 target includes is dependent on savings? EBITDA.

You're asking, so a time line of light year out. No, I mean I think the supply chain savings that we would expect to deliver, that's over that time horizon. We have supply chain savings that we expect to deliver in the current year, and there's stabilization that we're trying to do. So I think we're looking at hope that over the longer time horizon, if that's the question.

Okay, great. And then, with your building capacity or a new facility, how much of that typically committed to? Is there already committed to a retailer program or to certain key customer versus a greenfield and then allocate capacity after the line after.

That -- the question on if you build it, will they come? Our industry is incredibly expensive, right? Because we don't have the margin structure to do that like branded CPG does. So I think we're much closer to that. When we talk about building capacity, it's adding a cracker line, right? We know how much cracker demand we have, we know what we serve and what we don't serve. It's adding capability to that current cracker line, right? It's -- so we're -- ours, I think, is more tactical than what you would see in big CPG just because the -- and I talked about earlier, innovation, we wait til we know exactly what we think the opportunity is, and then we enter. It's fast follow. It's not new to the world. There's typically not trial and awareness dollars on private label. There's a few retailers that do it, but very, very few. And so I think our investments have much more share rates of return. We have much more understanding where they are. We would probably repurpose facilities before we build them. We buy them like what we did in Northlake, Texas. I think we'll be much more careful in that regard. It's just a more discipline. It has to be given our margin structure more disciplined than what it is and branded, right. Having done both.

Brandon Colin, UBS. So we assume your EBITDA growth target assumes about $150 million in growth through '27. And based on the bridge, we estimate about a $90 million and was it the supply chain savings on to the bottom line. Is that correct? And where do you expect to prioritize all those savings.

Yes. So I think directionally, we didn't obviously quantify that on the slide. But I think when you look at the order of magnitude, if you got your ruler out trying to measure it, you're probably in the ballpark of how to think about the relative split there. And sorry, the second part of the question was the...

What do you expect to prioritize?

Yes. So certainly, the majority of the savings we set are coming from our TMOS activities, right? And so if you can picture the various capabilities that we're building from a TMOS perspective and what that's going to take and the time horizon that we talked about. And there, certainly, that's it. But we're not stopping. I mean, we talked about investments in our planning capability, which we think will help drive savings. We're building procurement capability and leveraging our scale in that sense. So there's a lot of those activities within the supply chain that contribute significantly. And we talked about network optimization. And I think that's in Phase 2 or 3, right, of several phases. So we're well underway in a few of those.

Great. And also, you -- I think you said you expect a $400 million EBITDA run rate exiting the year. Is that correct as well?

Yes. So we expect -- we felt like a normalized EBITDA, if you can eliminate some of the sort of macro disruption that we've experienced would be that. And so as we look at the back half of the year, we feel like we'll be exiting out that we're not going to hit that this year, right, but that looks where we'd be exiting the year from a run rate perspective.

One other comment on -- Pat mentioned and Amit mentioned it on the distribution network side, that does 2 things, right? It gets us closer to the customer, which makes us on time and full, which makes us a better partner, which gives us more pickup from the customer. So we were built by dozens of acquisitions. Our distribution network is too close to our plants and too far from our customers. So there's economics in it, but there's also a strategic intent in it, right, to be closer to the customer, makes it a lot easier to meet their needs and to be flexible. And if you can cut the number of piles of inventory in half, you get your forecast accuracy way up. So we make the right stuff. We have less of it and we have better customer service, and it's closer to the customer. So yes, that actually it's great that, that has a return and is a nice return. We would do it even if it didn't have a return. It's the right thing to do.

So I think if there are no further questions, I'll turn it back to Steve to wrap up.

Sure.

Do you have a follow-up?

Okay. So when do you expect to achieve the -- your long-term leverage target of 3 to 3.5x. And do you need to pay down debt to get there? Or is that just based off EBIT growth?

Sorry, I couldn't quite hear the first part.

So when we achieve your long-term leverage ratio of 3 to 3.5x. And to get there, you need to pay down debt? Or is that just through EBITDA growth?

Yes. Sorry, just to be clear, so that's a covenant leverage ratio. And so we're well within that target today. So we don't need to pay any further debt down. So we're quite pleased given that we're largely fixed at 4.5% for us to go out and try to raise capital in this environment is arguably going to be much more expensive than that. And so we're in that target leverage range today.

Scott, we'll go ahead and take...

Berman. So just a follow-up on that question. So if you're already in your sort of leverage range now and we're going to generate $800 million of free cash flow also you've got $400 million plus asset probably going to monetize, so like $1.2 billion of cash available. How do you sort of prioritize that? Is it return to shareholders? Or there other assets like the coffee asset you bought, you are going to internally invest in? .

Sure. I would say today -- and by the way, we're in a fantastic position. If you think about a high-yield offering today would be significantly different from what it is. And I give Pat's team and Mike, Kim, who is here today, our Treasurer, a lot of credit for the capital structure that we have today. There's no question we have a lot of cash coming at us over the next couple of years. And that's where the magic is going to be, right, applying that cash against our business for the highest rate return opportunities. When we don't have those, we'll look at other opportunities to deploy it back to shareholders with. That's why we want to make sure we understand that opportunity. Quite frankly, the investments in our supply chain have such great rates of return. The automation that Steve Landry talked about pays back in 24 months and the plants we bought have over -- I think Pat talked about over 30% IRRs on them. So when we have those kinds of returns, and we think there's a lot of low-hanging fruit across our business, we'll continue to do those. But I look forward to that being our challenge as we go forward, right? Because that's not been the case for TreeHouse going forward. And I can tell you, our Board is about as focused on us doing it right, as you can imagine. So we get a lot of -- we have a disciplined process now, and there's a lot of focus on it across the whole company, okay? I talked at the beginning that I hoped you'd come away with this with a sense that we are, in fact, a company that built itself on purpose, we build ourselves with great categories, a great way to operate them, and those categories are positioned at this intersection of 2 big macro growth trends, private label groceries in North America and the consumer shift towards snacking, okay? Hopefully, I helped you today and the team helped you today understand how we're doing -- what we're doing to take advantage of those trends and the opportunity in front of us. So -- with that, I just want to say thank you to everyone. I appreciate it. I know these are long meetings. Those of you that sat on the screen and watched us. Thank you very much, and we look forward to being with you in person. And having more dialogue as we go. And we'll see or talk to you soon with the second quarter earnings, not that far away. Thank you.