CHARLOTTE, N.C. — Snyder’s-Lance, Inc. has initiated renovation plans for Pop Secret, which it acquired as part of its Diamond Foods transaction earlier this year. Challenged by category headwinds and competitive activity, the microwave popcorn brand remains a weak spot in the Diamond portfolio, said Carl E. Lee Jr., president and chief executive officer, during an Aug. 9 earnings call with financial analysts.
Net income attributable to Snyder’s-Lance in the second quarter ended July 2 was $19,681,000, equal to 21c per share on the common stock, up from $17,329,000, or 25c per share, in the year-ago period. Net revenue advanced 41% to $609,500,000 from $431,428,000, including the contribution of Diamond Foods. Excluding Diamond, Snyder’s-Lance net revenue declined 1.3%, due to the planned exits of some lower-margin contract manufacturing business during the quarter.
|Carl E. Lee Jr., president and c.e.o. of Snyder’s-Lance|
“Diamond contributed an incremental $184 million, keeping in mind this reflects some weakness in Diamond brand performance that we are addressing quickly,” Mr. Lee said. “The new Diamond portfolio of brands extends our consumer reach, our channel penetration and our growth potential. Therefore, we remain excited about the power of this important transaction.”
Snyder’s-Lance recently has seen success from renovation efforts put in place for Snyder’s of Hanover pretzels, Lance sandwich crackers and Cape Cod snacks. Now, the company is turning its attention to Pop Secret.
“Those renovation plans are being finalized with early execution, and we remain excited about the potential of this brand and the marketing efforts that we have under way,” Mr. Lee said. “Early retail response to our plans has been very positive, allowing us to roll out impactful new promotions and consumer events.”
Additionally, the company is expanding its partnership with Disney to reach more consumers and drive purchase frequency of Pop Secret products, and a new marketing program is being launched over the coming months to support the brand.
“While our plans are under way and we know this turnaround will take some time, we remain very excited about the early wins we’re seeing and we’re very encouraged by the ongoing retailer support,” Mr. Lee said.
While competitors in the microwave popcorn category are “leaning a little bit more into price versus quality and premiumization,” Snyder’s-Lance plans to play up Pop Secret’s quality and taste, Mr. Lee said.
“And then we will leverage some of the weapons we’ve got in our arsenal, so to speak, to continue to reinvigorate the category but also very importantly excite people about our brand again,” he added. “So it’s just good to take a little bit of time. No surprises there, and our comfort level is high. We just have to roll up our sleeves and go to work.”
While the ready-to-eat popcorn segment has seen significant growth in recent years, Mr. Lee said he believes there are still good growth opportunities for microwave popcorn.
“I think the ready-to-eat popcorn category has done quite well,” he said. “I think we’re seeing, though, on the microwave popcorn, I think overall the poundage and the volume there has been pretty constant. It’s been more pricing fluctuations and others as that category has gone a little bit more focused on value than I think really focused on being premium.
“So we will deal with those over time. We do have our Cape Cod (ready-to-eat) popcorn here that has done well for us. I think we could support it more and spend some more time on it to make sure we are taking advantage of both the microwave opportunity that we know is there and the ready-to-eat opportunity that we see that is there.”
For the six months ended July 2, Snyder’s-Lance had a loss of $5,750,000, which compared with net income of $27,965,000, or 40c per share, in the same period of the prior year. Net revenue for the period increased to $1,072,265,000 from $833,769,000.The company has raised the lower end of its full-year guidance range for diluted e.p.s. and now projects to earn $1.22 to $1.30, up from its previous target of $1.20 to $1.30. The company continues to expect net revenue for the full year in the range of $2,290 million to $2,330 million, an increase of approximately 39% to 41% over fiscal 2015. Excluding the contribution from Diamond Foods, net revenue growth is expected to be flat to up 2%.