Trading Down With Treehouse

The “trade-down thesis” has been a mainstay on Mad Money lately. The premise is simple: People pinch pennies during a recession. So they’ll reach for private-label foods over brand names when shopping almost all of the time. That’s the main reason Cramer’s been so bullish on Treehouse Foods .

CEO Sam Reed told Mad Money on Wednesday that many private-label products are “enjoying accelerated growth,” and he said Treehouse was at the forefront of that trend. The company’s portfolio is full of the fastest-growing items, such as salad dressings, salsa and soups, and cooperation with customers like Kroger is increasing business. Treehouse is Kroger’s leading supplier, actually, and the relationship accounted for low double-digit growth in Kroger stores in 2008, Reed said.

The decline in raw costs has also been a positive trend. Reed said those costs were down “substantially” this year, and the aggregate expenses of commodities, energy and packaging should be “relatively flat” in 2009. Reed expects to “enjoy the benefits of those lower costs, primarily in the second half of the year.”

Treehouse is big in the M&A markets as well, and Reed said his firm was “quite ready to expand again in a large-scale way.” The balance sheet is strong as the company paid down $145 million in debt in 2008, so Reed is open to another acquisition as long as market conditions are right.

“Something tells me,” Cramer said, that there’s “opportunity” in THS. But “be careful. If people think a big cyclical recovery’s coming, they won’t buy it.”

“I think they should,” he said.

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