Dive Brief:
- Snyder's-Lance's earnings for its second fiscal quarter of 2017 exceeded Wall Street expectations, with net income hitting $4.3 million, according to a company release.
- The Charlotte, North Carolina-based snack maker posted revenue of $579.6 million for the period, and maintains its expectation of net revenue between $2.2 billion and $2.25 billion for the full fiscal year.
- "I am pleased that we were able to deliver strong top line performance and modest profitability improvement in the second quarter, while stabilizing a very weak start to the year," Brian J. Driscoll, president and CEO of Snyder's-Lance, said in the release. "While we are encouraged by our branded sales momentum, we are not satisfied with our aggregate financial performance and have finalized a broad-based performance transformation plan to sharply expand margins and unlock substantial value for our shareholders."
Dive Insight:
These healthy Q2 earnings seem to indicate that Snyder's-Lance has recovered from former CEO Carl Lee Jr.'s unexpected retirement in April, after serving almost 12 years with the company. Following his exit, company shares dropped 15%.
Looking forward, Snyder's-Lance believes that the strategic initiatives within its performance transformation plan will bolster the company's margin profile and deliver sustainable, long-term value to shareholders. These initiatives include manufacturing and supply chain productivity, product and portfolio optimization, price realization and marketing investment optimization.
"Snyder's-Lance is well-positioned with an attractive portfolio of brands and a strong track record of revenue growth. That said, we have not delivered on expectations for profitability and value creation," Driscoll said in the company release. "To address this shortfall, we have designed a comprehensive transformation program we believe will unlock operating profit improvement of approximately $175 million over the next 3+ years. As we announced two weeks ago, we have officially launched this effort, and we expect to achieve the full benefits of the plan in fiscal 2020."
The snack maker outlined its growth plans at the Deutsche Bank Global Consumer Conference in June, emphasizing national distribution, an increased focus on millennials and the possibility of future M&A. Snyder's 2016 acquisition of Diamond Foods, maker of Kettle brand potato chips, helped rejuvenate organic growth within the company. Kettle Chips saw a slight decline this quarter, but core brand revenue still got a boost thanks to strong performances from better-for-you brands including Late July, Snack Factory and Pretzel Crisps.
Snyder's also recently announced a $7.8 million expansion of its Baptista's Bakery facility, which will create 125 jobs and include building, machinery and equipment updates. Snyder's acquired the independent bakery in 2014 as another boon to its health halo — Baptista's Bakery focuses on baked and better-for-you snack foods. This investment should push the company in the right direction, even as competition heats up in the snack category thanks to emerging, health-focused brands specializing in snacks like granola, trail mix, yogurt chips and protein bars.
At the same time, the company is closing other plants. This summer, Snyder's-Lance announced it was shuttering a chips plant in Perry, Florida, cutting about 250 jobs. The closure, part of what the company called a "multi-year transformation plan," will be completed next month.
Still, though Snyder's has gained a solid foothold in trending snack categories, it's leadership has struggled to maintain stability. Just this week, the departure of Chief Marketing Officer Rodrigo F. Troni Pena was reported, following executive reshuffling. Troni had been with the company since late 2013, and had come to Snyder's-Lance via Birds Eye, where he served as senior vice president for three years. It will be interesting to see if other executive changes are planned, and what this means for the company's long-term strategy.