‘Power Brands’ are favored by Utz Brands.
The company reiterated its forecast for net sales growth of 3% to 5% and increased its adjusted EBITDA estimate for fiscal 2023 to growth of 8% to 11% (previously 7% to 10% growth), estimating that lower delivery costs and corporate strategy will offset cost inflation.
“We anticipate our total sales volume momentum to build each quarter as we move through the second half of the year, through a combination of distribution gains, new product innovation, increased marketing spending, and lapping prior-year SKU rationalization,” Mr. Friedman stated. From the standpoint of consumption, our Power Brand momentum grew by 10% during the quarter, building on the 18% rise we saw in the previous year. This was our seventh consecutive quarter of double-digit growth, which resulted in share increases for Boulder Canyon, Zapp’s, and On The Boundary.”
The total net sales of Utz Brands for the second quarter, which concluded on July 2, were $362.9 million, a 3.8% rise over the same period the previous year. When compared to the previous year, organic net sales climbed 4.3%, and adjusted EBITDA jumped 7% to $45.2 million from $42.2 million.
Mr. Friedman expressed his satisfaction with the launch of Utz Mike’s Hot Honey chips. “Sales of our Utz Mike’s Hot Honey chips have already surpassed our previous best Utz limited time offer by four times, and hot and spicy is currently the most popular flavor in salty snacks, growing at a rate almost twice as fast as the category as a whole.”
According to Mr. Friedman, while the category of salty snacks grew 12% year over year, retail sales increased by just 9%. In the second quarter, Zapp’s kettle chip brand experienced a 35% gain and On The Border tortilla chips witnessed a growth of over 40% in the retail grocery channel.
“Moving to our healthier segment of salty snacks, our natural channel and consumption grew by nearly 20% in the second quarter, greatly exceeding the 10% growth of the category,” Mr. Friedman stated. “We maintain the No. 3 ranking in the salty snack category as measured by Spins (a wellness-focused data technology company), growing 28% in the quarter, which was triple the category growth rate. Our primary better-for-you Brand in the natural channel is Boulder Canyon.”
Retail sales increased by barely 9%, according to Mr. Friedman, despite the category of salty snacks growing by 12% annually. Zapp’s kettle chip brand saw a 35% increase in the second quarter, while On The Border tortilla chips saw a growth of more than 40% in the retail grocery channel.
“Moving to our healthier segment of salty snacks, our natural channel and consumption grew by nearly 20% in the second quarter, greatly exceeding the 10% growth of the category,” said Friedman. “We grew 28% in the quarter, which was quadruple the category growth rate, and we continue to hold the No. 3 position in the salty snack category according to Spins, a wellness-focused data analytics business. Boulder Canyon is our main better-for-you brand in the natural channel.”
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“Our volumes are heading upward from a tailwind perspective, and we demonstrate these trends in the retail data. Furthermore, as we move through the SKU rationalization effort, our margin mix is getting better. That has been happening and will carry over into the second part. Also, our productivity program has accelerated significantly. We are nearly 4 percent of COGS. Our new baseline is that. Additionally, the way we optimize our networks and get output from co-manufacturers when we have capacity is driving expenses out of our plants and transportation network.
Looking back on his first nine months as CEO, Mr. Friedman discussed his plans for Utz Brands, which include expanding the company’s well-known brand.
“I think we can build on the foundation that was established in the previous century of growth in a few areas that I continue to look at and observe,” the speaker stated. “The first is carefully raising our marketing budget. And that is mainly because of where I sit, which is in brand creation, both in terms of where customers want to shop (retail media) and where they want to get the message (mostly digital and performance-based).
Because we’re not presenting the brand or attempting to increase brand recognition, the core is where our marketing and innovation should have the biggest impact. Our ultimate goal is to stimulate consumer interest. Thus, when we proceed to When we invest in the brands, we anticipate that our Power Brands, which are our core brands, will naturally rise even higher than they would in our expanding regions.