PARSIPPANY, N.J. — Recent innovation from Pinnacle Foods targets millennials and smaller households. The Parsippany-based parent company of Birds Eye and Duncan Hines brands, which reported higher sales and earnings for the recent quarter, is introducing products with trendy flavors, downsized portions and popular ingredients.
|Bob Gamgort, c.e.o. of Pinnacle Foods.|
“As you know the food industry remains growth-challenged,” said Bob Gamgort, chief executive officer, during a July 30 earnings call with financial analysts. “Our model targets sales growth to be in line with our categories, but we continue to over-deliver on that front through solid retail execution and on-trend innovation.”
For the second quarter ended June 28, Pinnacle Foods had net earnings of $43,679,000, equal to 38c per share on the common stock, up 23% from $35,584,000, or 31c per share, for the prior-year period. Net sales advanced 2.3% to $631,746,000 from $617,800,000 the year before. Results benefitted from the addition of the Gardein brand of plant-based meat alternatives, which Pinnacle Foods acquired last November.
During the quarter, the Birds Eye Frozen segment posted a 9% increase in net sales of $289.9 million for the quarter, driven by a benefit from the Gardein acquisition, increased volume/mix and higher net price realization that partially offset the unfavorable impact of a shift in the timing of Easter. Earnings before interest and tax (EBIT) for the segment increased 2.5% to $38 million. Excluding items affecting comparability, EBIT declined 1.5% to $36.5 million, reflecting an increase in new product introductory costs, higher consumer marketing investment and input cost inflation that more than offset net sales growth and productivity savings.
“As you know, Birds Eye is our single largest brand, with over $1 billion in retail sales,” Mr. Gamgort said. “The franchise is anchored in plant-based nutrition, which is growing in popularity. To capitalize on this favorable trend, we continue leverage Birds Eye’s health and wellness credentials with innovative new products that satisfy changing consumer needs.”
During the quarter, Pinnacle Foods introduced a pair of platforms under the Birds Eye banner. Birds Eye Flavor Full combines vegetables with such popular flavors as buffalo, wasabi and barbecue; and Birds Eye Protein Blends is a line of side dishes featuring vegetables, legumes and whole grains.
“While still early, both platforms have been met with strong acceptance by retailers, and early consumer results are equally encouraging,” Mr. Gamgort said. “In fact our data indicate that both platforms are highly incremental, bringing new users, including millennials, to both the category and Birds Eye.”
Net sales for the Duncan Hines Grocery segment fell 4% to $278 million for the quarter, due to lower volume/mix and unfavorable foreign currency translation that more than offset higher net price realization. EBIT for the segment advanced 10% to $51 million. Excluding items affecting comparability, EBIT was 3% higher at $50.1 million, as productivity savings and lower consumer marketing due to the timing of product launches partially offset input cost inflation and the impact of the lower sales.
“Our total grocery segment’s share declined slightly, which draw our market share growth in pickles, syrups, and pie fillings, offset by softness in baking, candy and dressings,” Mr. Gamgort said. “Instead of battling strictly on price, which tends to drive the category down, we continue to innovate to address some of the category's structural issues and capitalize on opportunities resulting from changing consumer preferences.”
For example, the company is introducing Duncan Hines Perfect Size, a line of baking kits featuring a cake mix, frosting mix and disposable six-inch baking pan. The platform was developed to address the decline in household size and the effect on consumers’ desire to bake a full-size cake, Mr. Gamgort said.
The Specialty Foods segment reported 4% growth in net sales to $84.9 million, largely reflecting the growth of private label canned meat. EBIT increased nearly 20% to $7.6 million. Excluding items affecting comparability, EBIT increased 15% to $7.3 million, reflecting the growth in net sales and productivity savings that were partially offset by input cost inflation.
Net earnings for the six months increased 12% to $85,215,000, or 73c per share, which compared with $76,332,000 for the same period of the previous year. Net sales were $340,826,000, up 3.6% from $328,878,000.For the fiscal year, executives expect adjusted diluted earnings per share in the range of $1.89 to $1.91, up from its previous guidance of $1.86 to $1.91.