Snack innovation on tap for Diamond Foods

by Keith Nunes
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SAN FRANCISCO — Diamond Foods is focusing on innovation in its snack segment. The company said it will be testing two new products from its Kettle Foods brand during the second half of its fiscal year, including “real sliced” potato chips and ready-to-eat popcorn.

“We are planning to launch and to test Kettle brand ready-to-eat popcorn in four varieties: white cheddar, sea salt, maple bacon, and salt and fresh ground pepper, bringing Kettle’s natural flavor credentials to this rapidly growing category segment,” said Brian Driscoll, president and chief executive officer, during a conference call to discuss the company’s fiscal 2013 second-quarter results.

Mr. Driscoll added that the R.-T.-E. popcorn segment is growing significantly. He estimated the category is up 25% year-to-date and 30% in the last four weeks.

“We think that the category will continue to grow at a rapid pace,” he said. “The segment of the ready-to-eat category that's growing the fastest is the all-natural products. I think we will be bringing into the category, in our opinion, the most credentialed all-natural snack.

“Kettle has, as you know, a 60 share in natural channels on our potato chip line and we believe those credentials will be meaningful to consumers. We think it’ll bring new buyers to the category and therefore, we think it’ll be meaningful to retailers. We think we have a very important role to play that can actually add a lot of value to the category.”

The real sliced potato chip line will be available in five varieties, including sea salt, sea salt and vinegar, hickory honey barbecue, cheddar and roasted tomato, and olive oil.

During the first quarter of the fiscal year, Diamond Foods also introduced Emerald Yogurt Bites, which are nuts with such yogurt flavored coatings as strawberry vanilla and mixed berry.

While management says it sees positive signs on the horizon, Diamond Foods, Inc. continues to struggle financially. During the second quarter, ended Jan. 31, the company recorded a loss of $15,060,000. The results compared unfavorably to the same period during the previous year when the company earned $10,141,000, equal to 46c per share on the common stock.

Sales during the second quarter were flat at $220,577,000 compared with sales of $220,844,000 during the second quarter of fiscal 2012.

Mr. Driscoll was asked during the call if Diamond Foods would ever “jettison” its snack business to pay down debt.

“No,” he said. “First of all, we love our portfolio. We think that there is plenty of room for continued organic expansion within this existing portfolio. We also like the growth profile. As you think about the qualities of this portfolio, we have a place in protein. We have a place in gluten-free. We have a place in all natural and non-G.M.O. We really have a very attractive and complementary portfolio as it is, so we have no plans to jettison.”
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