BOULDER, COLO. — Steve Hughes, chairman and chief executive officer of Boulder Brands, Inc., said he expects products with non-bioengineered ingredients to transition into mainstream grocery, although he will wait before claiming success in the non-bioengineered positioning of the company’s Smart Balance spreads.
Consumer product goods companies trying to stop statewide labeling initiatives for food products with bioengineered ingredients, also known as genetically modified organisms (G.M.O.s), might cause consumers to wonder what is in their food, he said.
“If these large C.P.G. companies are partnering with Monsanto and DuPont to keep stuff off the label that they know I (the consumer) want to have on the label, that doesn’t build a lot of trust in those legacy brands,” Mr. Hughes said in an Aug. 7 call to discuss second-quarter results.
Larger retailers will not have many large C.P.G. companies to partner with if they want to increase their number of non-bioengineered products, he said.
“If you are a large cap, legacy-branded company, you’re on the wrong side of history,” Mr. Hughes said.
Consumers seeking products with non-bioengineered ingredients bodes well for such companies as Boulder Brands, Hain Celestial, Amy’s Kitchen or Annie’s, he said.
“I think it’s going to be really remarkable what happens in the next three years in the transition to mainstream grocery,” he said.
The Smart Balance line of spreads has completed its non-bioengineered transition.
“It will take some time to understand how the non-G.M.O. proposition is resonating with the consumer, and we should have an indication by the end of the third quarter,” he said.
Boulder Brands reported net income of $2,736,000, equal to 5c per share on the common stock, in the second quarter ended June 30, which was down from $3,094,000, or 5c per share, in the second quarter of the previous year. Total reported net sales of $131,348,000 were up from $110,669,000. Adjusted EBITDA was flat at $17.6 million.
High egg white prices and a mix shift to the company’s brands in the Natural segment affected gross margins in the second quarter, Mr. Hughes said.
“On egg whites, which impact our Udi’s bakery items, the team has successfully addressed this unprecedented spike in the commodity costs,” he said. “While not impacting Q2 results, changes were made in Q2 which will begin to positively impact our results in Q3.”
Christine Sacco, chief financial officer for Boulder Brands, said the company’s fourth-quarter guidance for egg white prices was between $9 and $9.50 per lb.
“I think for 2015, it’s too early to call a price on egg whites,” she said. “However, the supply-demand environment appears to be improving, and one commodity resource that we’ve been looking at is projecting dried egg whites to be 25% lower in 2015 than 2014.“
Within the Natural segment of Boulder Brands, second-quarter net sales of $80.1 million compared to $55 million in the previous year’s second quarter. Gluten-free brands Udi’s and Glutino reported net sales growth of 33.7% and 9.3%, respectively. Second-quarter net sales for Evol, a brand the company acquired last year, increased 131% and surpassed $10 million. Natural brands such as Evol and Udi’s may provide a spark to the frozen foods category in U.S. retail, Mr. Hughes said.
“What the retailers have seen is a complete implosion of the legacy brands,” Mr. Hughes said. “Healthy Choice, Weight Watchers, Lean Cuisine are all down systematically and for the last three to four years.”
The Balance segment of Boulder Brands in the second quarter had net sales of $51.3 million, which compared with $55.6 million in the second quarter of the previous year. The licensing of Smart Balance milk had a negative impact. Organic net sales of $51.3 million for the Natural segment in the second quarter compared with $50.6 million in the previous year’s second quarter.
For the six months ended June 30, Boulder Brands companywide had net income of $3,148,000, or 5c per share, which was down from $7,055,000, or 12c per share, in the same time period of the previous year. Six-month net sales of $254,200,000 were up from $217,322,000.
Boulder Brands for the full fiscal year continues to expect net sales in the range of $540 million to $550 million and adjusted EBITDA to be in the range of $89 million to $91 million.