The acquisition, which also includes Farmer Bros’ Texas roasting facility, is expected to generate will enable the coffee roaster and distributor to focus on its direct store delivery model and generate efficiency savings
Farmer Bros said the move will increase internal efficiency and decrease operational costs | Photo credit: Farmer Bros
US coffee roaster and distributor Farmer Bros has agreed to sell its direct shipping business, including its Texas coffee roasting facility, to TreeHouse Foods for approximately $100m.
Farmer Bros said offloading its direct shipping business, which transports coffee and other products to a retailer’s warehouse or distribution centre, will enable it to focus on the more profitable direct store delivery (DSD) channel, which it credited as its ‘highest growth potential business’.
Through its DSD business, Farmer Bros sells coffee, tea, spices and breakfast products through a network of 80 independent branches, five distribution centres and nearly 240 routes, reaching 45,000 delivery points annually.
The coffee roaster and distributor, which previously supplied ground coffee to TreeHouse Foods for its single-serve pods and ready-to-drink beverages, added that the move will increase internal efficiency and decrease operational costs.
Farmer Bros forecasts annual revenues will reach $350m post-acquisition. Third quarter net sales grew 4% year-on-year to $124.2m in the three months ended 31 March 2023.
“Exiting the direct ship space will allow us to focus almost exclusively on DSD, which is our most profitable and highest growth potential business, while also assuring our valued direct ship customers are well-served by a national leader. With a sole focus on DSD, we will be able to realise even greater internal efficiencies and cost savings, while also better serving our largest, most profitable customer base,” said Farmer Bros CEO Deverl Maserang.
The acquisition, which is expected to close by August 2023, will see Farmer Bros transition the entirety of its DSD production operations to its Oregon roasting and production facility. However, its corporate headquarters will remain in Northlake, Texas.
Private label food and beverage manufacturer TreeHouse Foods said the acquisition will add coffee roasting, grinding, flavouring and blending capabilities to its existing coffee portfolio.
“The state-of-the-art Northlake facility strengthens TreeHouse Foods' category depth in coffee as a focused, private label leader and is consistent with our strategy to pursue opportunities that drive category growth and deliver attractive financial returns. As we continue to execute our long-term growth initiatives, we're pleased to add new capabilities, particularly in roasting and grinding, which make us a more vertically integrated coffee manufacturer able to further penetrate this high growth, high margin category,” said Steve Oakland, CEO, TreeHouse Foods.
Headquartered in Illinois, TreeHouse Foods produces and distributes private label food and beverages for retail grocery, foodservice and contract packaging customers. In addition to coffee, TreeHouse Foods produces non-dairy creamers, baby foods, marinades, dips, soups, sauces and cereals.