Frozen pizza business boosts Annie’s earnings
BERKELEY, CALIF. — The roll-out of frozen rising crust pizza products continued to gain momentum at Annie’s, Inc., helping to drive earnings in the second quarter of fiscal 2013. Net income attributable to common stockholders in the period ended Sept. 30 totaled $3,785,000, equal to 22c per share on the common stock, up sharply from $107,000 in the same period a year ago. Adjusted net income in the second quarter of fiscal 2013 rose 16% to $4,204,000, up from $3,636,000 in the same period a year ago.
Net sales increased 20% to $46,686,000, up from $38,872,000.
“We continue to see positive consumption trends, as more and more consumers seek natural and organic foods their families will love, and that moms feel better about feeding their families,” said John Foraker, chief executive officer of Annie’s. “We made solid progress during our second quarter against our four strategic growth drivers: expanding mainstream distribution, improving in-store placement, building Annie’s brand awareness, and driving meaningful innovations our consumers love. Annie’s ‘back-to-school’ programs achieved strong merchandising and retailer support, which translated into excellent consumption trends in the quarter.”
As solid as the quarter was, Mr. Foraker in an Oct. 30 conference call with analysts said the company experienced a shortage of some top-selling items — mainly in macaroni and cheese — during the last three weeks of the second quarter, costing Annie’s about $1 million in net sales.
“This had nothing to do with either availability of ingredients, aggregate production capacity at our manufacturing facilities or our ERP implementation,” Mr. Foraker said. “Simply put, our forecasting and production planning processes underestimated demand in the quarter and we were slow to adjust and catch up. We’ve taken a number of corrective measures to improve the process going forward, and our customers have been very supportive.”
Mr. Foraker said Annie’s continues to make progress in its frozen category initiative. The company began shipping made-with-organic rising crust pizza into more than 2,500 grocery points of distribution in the second quarter, about a quarter ahead of expectations.
“Our goal with the initial placements is to build a strong track record of success with each account, such that we are well positioned to expand our distribution footprint with these retailers as we go into our fiscal 2014,” he said. “In addition, we’ve begun selling these items to independent natural foods retailers with great success, and we expect to have a large distribution footprint in the natural channel by the end of our fiscal year.”
Beyond the frozen category, Annie’s is moving ahead on several innovation efforts in its snacks business that are scheduled to hit the market in January 2013.
The first expansion will be in the company’s grahams category and includes two certified organic stock-keeping units of conventional-style flat graham crackers.
“We have a great opportunity to position a cleaner, healthier, certified-organic alternative to the mainstream conventional brand,” Mr. Foraker said. “This expansion will be incremental, and gives us the opportunity to expand our graham share in all channels.”
The second expansion will be in the company’s cracker business, where Annie’s will introduce a line of certified-organic and made with organic cheddar squares.
“This familiar form represents more than 30% of the $1.2 billion snack cracker category in U.S. grocery,” Mr. Foraker said. “Our new cheddar squares will age us up into more all-family usage occasions, particularly with teens and millennial consumers. Again, we have a nice opportunity here to position a cleaner, healthier alternative to the mainstream brand leader.”
Net income attributable to common stockholders in the first half ended Sept. 30 was $5,916,000, or 35c per share, up from $161,000 in the same period a year ago. Adjusted net income in the first half was $6,347,000, up from $6,298,000. Net sales totaled $80,979,000, up 20% from $67,482,000.