Dive Brief:
- Post Holdings will divert some second-quarter profits to "overhaul" its planning process in an effort to improve the mix of products in its sales and minimize costs, according to CEO Rob Vitale on the company's recent earnings call.
- The funds will go toward consulting services to bring in more sophisticated demand planning. The company will begin to reap the benefits in 2020, but they will grow over time, Vitale said.
- Though several of Post's product lines require similar ingredients, supply chains for these related brands are still somewhat separate, explained Vitale, which led to an EBITDA miss of $5 million for the quarter. "These costs are not systemic, but require tighter execution, particularly around our refrigerated supply chain," said Vitale.
Dive Insight:
Post Holdings has largely grown its expansive portfolio of brands beyond its traditional cereal focus through acquisitions and this shift to focus on demand planning is the next step in reaping the full benefits of those deals. As Vitale described it, several brands within the company's portfolio share common supply chain components — like sourcing and processing — but have yet to be integrated.
Bob Evans frozen foods, for example, was built on a "made to order" model before Post acquired the brand in 2017 — having begun literally in a sausage shop. Modern demand planning will allow for the integration of Bob Evans production with the rest of Post's refrigerated portfolio, which includes Better'n Eggs, Pineland Farms and more, Vitale said.
"We've made the decision to invest in — mostly in IT, so that we can move the Bob Evans process to more of a made-to-forecast model," Vitale said.
Post's core offering of ready to eat cereals will see similar supply chain integration, the CEO said starting with former rival MOM foods (Malt-O-Meal), which Post acquired in 2015. The cost-savings benefits of the acquisition were realized early, but now the company is looking to more sophisticated demand planning to try to reduce costs further — the fundamental principle being savings come from purchasing and then manufacturing exactly what the company will sell and no more.
