Dive Brief:
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Pinnacle Foods reported a first-quarter net sales of $778.8 million versus $776.1 million in the same period a year ago. This topped analysts' consensus, according to MarketWatch. Sales in its frozen foods segment, the company's largest, rose 7.5%, with strong results in its Birds Eye brand. Net income was $56.9 million compared to $23.1 million a year ago.
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Sales in the company's grocery segment, which includes Vlasic pickles and Duncan Hines baking products, increased 0.6% to $261.0 million in the first quarter of 2018, compared to $259.4 million in the year-ago period. This performance reflected favorable volume/mix of 0.6% and the earlier timing of Easter.
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"The exceptionally strong retail consumption and market share performance that we have experienced over the past several quarters has continued into 2018," Mark Clouse, Pinnacle's CEO, said in a release.
Dive Insight:
Pinnacle continues to feel some pain from cutting its Aunt Jemima frozen products, although its plant-based brands — Gardein and Earth Balance — along with its grocery segment, helped to perk up sales during the first quarter. The company has been appealing to younger consumers with its better-for-you product lineup sold in both traditional retail stores as well as natural and organic outlets.
Similar to other CPG companies, Pinnacle has experienced cost inflation, particularly higher transportation expenses, which have dragged down profits in recent quarters.
One bright spot lately has been in frozen foods where Pinnacle said its Birds Eye franchise is seeing double-digit growth. Innovative products such as Veggie Made broccoli and cauliflower fries and tots and new Veggie Made pasta products are contributing to growth in this space.
Despite the positive news, Pinnacle has challenges going forward. The Jana Partners hedge fund, which recently took a 9.1% stake in the company, said it plans to talk to the board about creating more value and potentially selling the company.
Activist investors have recently been successful in pressuring other manufacturing and retail firms — Whole Foods, Nestle and Hain Celestial are examples — to make changes in their operations and/or sell off underperforming segments. Jana is said to have a successful track record in such efforts.
No doubt Jana was attracted at least in part by Pinnacle's strong profile in frozen foods, and these latest numbers are likely to bolster the company's relative position — and possibly the hedge fund's sales push — to an even stronger level.
Pinnacle has been viewed as an attractive acquisition target for some time and came close to being bought by Hillshire Brands in 2014. Last year, Conagra was rumored to be interested. It remains to be seen whether other large CPG firms also will come around, but with an activist investor nipping at its heels, Pinnacle may have to decide on a sale sooner rather than later.