Pretzel growth softening for J&J Snack

by Monica Watrous
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Pretzel products are showing slower growth in food service sales for J&J Snack Foods Corp., the maker of SuperPretzel.

PENNSAUKEN, N.J. — Have pretzels peaked? Recently a top trend on restaurant menus, pretzel products are showing slower growth in food service sales for J&J Snack Foods Corp., the maker of SuperPretzel, Philly Swirl and ICEE.

For the third quarter ended June 27, J&J Snack Foods had net earnings of $24,462,000, equal to $1.31 per share on the common stock, up 3% from $23,678,000, or $1.27 per share, for the prior-year period. The company realized a loss of $1.4 million in the quarter as it reduced its holdings of mutual funds.

Net sales for the quarter increased 8% to $278,724,000 from $257,113,000 the year before.

J&J Snack reported a 4% increase in soft pretzel sales in food service for the quarter, reflecting solid sales to convenience stores and schools and flat sales to restaurant chains, said Gerald Shreiber, president and chief executive officer, during a July 28 earnings call. In previous quarters, the company posted double-digit growth for the business, supported by sales of pretzel sticks and soft pretzel buns and rolls to casual dining restaurants.

Gerald Shreiber, president and c.e.o. of J&J Snack Foods.

“As you well know, our food service soft pretzel business had been growing significantly the last couple of years, as that business was influenced by more soft pretzels on menus everywhere, and… we had a couple of special promotions on our major brands, including SuperPretzel,” Mr. Shreiber said. “We benefited from the increase of it. Hopefully… we’ll be able to repeat this in the future, but there’s obviously no guarantee that we’re going to (see) double-digit increases in the grocery end of the business.”

The launch of a Bavarian-style pretzel in retail isn’t meeting the company’s expectations, he added.

“So, that’s even more significant that our major brand, SuperPretzel, in the frozen section has done so well without having a particular headwind from the other bread product,” Mr. Shreiber said.

Overall, food service sales for the quarter increased 6%, driven by mid-single digit growth in pretzels and Italian ice and frozen juice bars, flat sales of handheld products, and a decline in churro sales, due to the loss of Taco Bell as a customer last August.

J&J’s sales to retail supermarkets and grocery stores advanced 18% for the quarter, reflecting modest growth in soft pretzels, strong growth in Italian ice and frozen juice bars and ICEE and frozen beverages, which was offset by a decline in sales of handheld products.

Meanwhile, the company continues searching for potential acquisition opportunities after acquiring New York Pretzel and Philly Swirl in the past year.

“All I can tell you is that we continue to seek out and search, and there has been ongoing discussions and some of it for a long time,” Mr. Shreiber said. “Last year we made two acquisitions, both of them kind of small, both of them tuck-in kind of things, one in the pretzel, one in ices, and their benefit is probably going to be more than what meets the eye in the long term, and we continue to look at things.

“We’re looking at things that are somewhat bigger, some of them significantly bigger, but we’re not going to make an acquisition just for an acquisition’s sake, and the only thing worse than not making an acquisition would be to make a bad one.”
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