Post implementing ‘meets, beats and best approach’

by Eric Schroeder
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ST. LOUIS — Post Holdings, Inc.’s “meets, beats, and best approach” to expanding the breadth of its portfolio and improving the level of engagement with retail customers is resonating well with consumers, said Terry Block, president and chief operating officer, in a Nov. 28 conference call with analysts to discuss fiscal 2012 results.

Mr. Block said the “meets” approach is about “better fulfilling the cereal needs of the economically stressed households, offering Post-level quality alternatives to the competitive set at attractive price points.” To that end, Post’s first “meets” initiative, Good Morenings, was introduced into a test market with limited exposure in June. Good Morenings are priced to sell at 14c per oz for most stock-keeping units at retail, which is in line with the major value competitor and only slightly higher than private label, he said.

“We are learning from our test market what adjustments need to be made around product mix and levels of marketing support as we prepare to expand this effort more broadly in January 2013,” Mr. Block said.
In addition to Good Morenings, Post has launched a private label program to engage and align with retail customers to better address quality needs with Post’s desire for improved partnership and plant productivity, Mr. Block said. Products associated with the program are expected to begin shipping in the second quarter of fiscal 2013.

Mr. Block also provided a detailed look at how many of the company’s brands have been able to “beat” consumer expectations.

He said consumers have responded positively to the company’s restage efforts in its Honey Bunches of Oats line, starting with the addition of more granola bunches in every box. The brand will remain a priority in fiscal 2013, including the launch of two new products in January: mango coconut and Honey Bunches of Oats Greek yogurt.

“(Honey Bunches of Oats Greek yogurt) beats expectations, resulting from a technology breakthrough enabling both inclusions and enrobing of authentic Greek yogurt in the granola clusters that comprise 30% of the product,” Mr. Block explained. “These product efforts will be accompanied by refreshed packaging across the entire Honey Bunches product lineup and a new advertising campaign that promises to bring a smile to Honey Bunches users and non-users alike.”

Post’s Pebbles brand also has responded to the company’s revamped programming, which included an emphasis on a more chocolaty flavor of Cocoa Pebbles and more directed consumer support accompanied by better execution at retail, Mr. Block said.

Meanwhile, Mr. Block cited Grape-Nuts as the “turnaround story of the year.” For the year, as measured by Nielsen, Grape-Nuts dollar volume increased 3.8%, and for the fourth quarter it was up 7.2%.

“Going forward, we are managing the brand to capitalize on these positive trends with a stronger, proven product positioning; an improved mainline product, boosting protein levels to among the highest in the cereal category, offering more energy to fuel the start of the day; and launching … Grape-Nuts Fit in January,” he said. “Grape-Nuts Fit combines the heritage of traditional Grape-Nuts with a texture and flavor that needs to be tasted to be appreciated. Contemporizing the Grape-Nuts brand and getting Grape-Nuts Fit into the hands of the target audience are the top priorities for the overall brand this year.”

Elsewhere, Mr. Block said Post plans to communicate Shredded Wheat’s health and nutrition benefits in 2013, and is addressing problems with Raisin Bran by adding more raisins.

Mr. Block identified Great Grains as Post’s “best” product offering.

“It has a less-processed consumer benefit and continues to outperform the category, growing dollar volume 7.9% for the year, as measured by Nielsen,” he said. “The less-processed positioning resonates with consumers, especially when supported with great advertising and a product lineup that delivers against the consumer’s expectations.”

Post is adding to the Great Grains lineup with Great Grains Protein Blends in two flavors: cinnamon hazelnut, and honey oats and seeds. The cereals began shipping this past summer in select markets and will roll out nationally in January 2013.

“Early feedback is positive in terms of initial consumer takeaway,” Mr. Block said. “Great Grains is on trend for consumers seeking more healthy cereal alternatives.”

Looking ahead, Mr. Block said Post will continue to increase the intensity it puts behind innovation and renovation in an effort to enhance the market position of its brands.

“Specifically, the core strategies are to strengthen the breadth of the portfolio’s consumer appeal; to improve the interactions at the customer interface; to accelerate innovation and renovation; to optimize our product-supply network advantage and scale; and to build a lean, resourceful organization,” he said.

Net income at Post Holdings, Inc. in the year ended Sept. 30 totaled $49.9 million, equal to $1.45 per share on the common stock, which compared with a loss of $424.3 million in fiscal 2011.

Adjusted EBITDA, meanwhile, totaled $214.6 million in fiscal 2012, down 14% from $248.9 million in fiscal 2011. Post said the adjusted EBITDA reflects its status as a stand-alone public company and not as an operating segment of Ralcorp.

Sales for fiscal 2012 were $958.9 million, down 1% from $968.2 million during fiscal 2011. The sales decline was attributed in part to a 3.2% drop in overall volumes, partially offset by higher gross and net selling prices.
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