PARSIPPANY, N.J. — In 2009 Pinnacle Foods had one brand it considered a part of the health and wellness category — Vlasic pickles. Today, with such businesses as Birds Eye, Gardein and the recently acquired Boulder Brands, the company has made a significant investment in health and wellness. Central to the company’s strategy are plants and plant-based protein.
|Mark Schiller, president of North American Retail for Pinnacle Foods|
“We actually think we are at a tipping point in terms of people starting to look at plants as an alternative to animal protein for three primary reasons,” said Mark Schiller, president of North American Retail for Pinnacle Foods on March 24 during a presentation before the Consumer Analyst Group of New York. “One, a lot of people just believe it’s healthier, and there’s actually a lot of scientists and doctors who will tell you that eating plants is a healthier diet than eating animals. So you see the emergence of things like meatless Mondays, and we know, in talking with consumers, a significant percentage of the population is actually trying to cut down on animal proteins.”
Consumer interest in sustainability also will drive more consumers to consider plant-based products over those derived from animals, Mr. Schiller said. In addition, as more consumers around the world enter the middle class and demand animal-based proteins, it will drive up the cost and make plant-based products a more affordable option, he said.
“And, most importantly, we have the government on our side, saying, look, this is the right thing to do,” he said. “No matter how you slice it the science will say, plants are good for you and better for the planet than an animal-based diet.”
To drive growth, the company is seeking to grow margins through innovation. Take the Birds Eye business, for example. Noting that 9 out of 10 consumers are not eating enough vegetables, he called the category “incredibly expandable.”
“ … A lot of people don’t like the taste of vegetables so we paired popular vegetables with popular flavors like Buffalo (sauce) in cauliflower in our Flavor Full line,” he said. “A lot of people are looking to get more protein in their diet but don’t necessarily want to do it through an animal protein so we launched a line of side dishes that have legumes and whole grains and vegetables called Protein Blends. And then we also launched Disney-themed sides to help mom with that tug of war she has with her kids to get them to eat their vegetables.
“We gained about 75% of this space for all of these items … and, importantly, the sales of these items were very incremental to the franchise. We actually grew the base business while launching three big platforms simultaneously.”
This year the company is adding innovation to the platforms. In the Flavor Full platform, consumers will begin seeing products featuring vegetables like Brussels sprouts or green beans paired with new flavors.
“In the Protein line we’re introducing fruit with pineapple in some of the offerings, and in the case of the Disney-themed offerings we are going after more male-oriented properties and some that skew a little bit older to tweens versus the original lineups that were more toward girls and a little bit younger,” Mr. Schiller said.
“Premium” innovation also will be coming to the Gardein brand, Mr. Schiller said. This year the company will be introducing skillet meals under the brand.
“… That’s a good example of how we are leveraging the capabilities of core Pinnacle with acquisitions because we have that skillet meal technology on Birds Eye,” he said. “We know how to do it efficiently and make a delicious product. We are now bringing that to the Gardein business to help accelerate the growth rate there.”
With the integration of Boulder Brands under way, Pinnacle’s management team is in the process of identifying synergies and targets for product innovation.
“… There’s actually three places where we think it expands our capabilities,” Mr. Schiller said. “One is in refrigeration. Having a go-to-market refrigeration system is a great opportunity for Pinnacle. We have several brands that can play very nicely in refrigerated, but we needed a go-to-market system to do that.
“It gives us a much bigger presence in natural and organic, and because only 60% of their business is self-manufactured, we think there’s a lot of productivity opportunity within that business as well.”
For the fiscal year ended Dec. 27, 2015, Pinnacle Foods had net earnings of $212,508,000, equal to $1.83 per share on the common stock, down 14% from $248,418,000, or $2.15 per share, the year before. Net sales were $2,655,792,000, up 2.5% from year-ago sales of $2,591,183,000. The performance reflected strong results in the company’s Birds Eye and Gardein businesses that offset declines in Duncan Hines baking products and Wish-Bone salad dressings.
One thing that stands out about the company’s leading brands and its performance is the retail freezer case.
“I felt like we were the only voice out there at some point, saying there’s nothing wrong with frozen,” said Craig Steeneck, chief financial officer, during the CAGNY presentation. “It’s a great preservation method and it plays to the convenience needs of the consumer.
“What’s wrong is within the freezer case and as I pointed out — go to Whole Foods, go to Trader Joe’s — look how much freezer capacity there is. Why when you look at new channels like drug and convenience, why are they adding freezer capacity? The problem is within there.
“I think frozen has now become — dare I say — too popular. We wish some people had given up their frozen businesses faster. When they were all saying bad things about it, I wish they had sold or spun them off at that point in time.”