PARAMUS, N.J. — The acquisition of Udi’s Healthy Foods, L.L.C. earlier this year continues to pay dividends for Smart Balance, Inc. as the former’s brands have provided credibility with customers and entrenched Smart Balance as the strategic leader in gluten-free, said Steve Hughes, chairman and chief executive officer of Smart Balance, Inc.
In a Nov. 8 conference call to discuss third-quarter financials, Mr. Hughes explored wide-ranging ways in which Smart Balance is taking the lead on gluten-free. At the core, is the combined strength of the Udi’s and Glutino brands.
“Retailers are looking for strategic partners to address the gluten-free trend and the combination of these two premiere brands enable us to provide consumers with a two-tiered brand solution with a comprehensive portfolio of great-tasting products,” Mr. Hughes said.
That portfolio expanded in the third quarter with the introduction of 12 new Glutino products, including a range of pasta items, new crackers, snacks, potato chips, tortilla dippers and two new Genius bread items. The company also plans to launch more than 20 new Udi’s and Glutino items in 2013.
“Overall, Glutino has secured warehouse distribution of over 300 incremental items across all retail customers year-to-date,” Mr. Hughes said. “As evidenced by strong distribution gains in the warehouse, our consumers are committed to getting in front of the gluten-free trend. The challenge over the next 6 to 12 months will be to secure the space at retail to ensure these headquarter acceptances result in retail distribution gains.”
One of the retail outlets in which Udi’s and Glutino figure to gain space is Wal-Mart Stores, Inc. Mr. Hughes said executives with Wal-Mart have told him Udi’s is one of the most requested brands in the entire store. Currently, Udi’s is in about 50 to 100 Wal-Mart locations, but that should change soon, he said.
“The likelihood is (Wal-Mart) is going to figure out how to get Udi’s in 3,100 stores in the next 12 to 18 months,” Mr. Hughes said. “It’s pretty exciting. This Udi’s brand, I’ve been developing and building brands for 35 years and I have never seen anything, any brand, with this kind of connection.
“They launched Udi’s in Canada 12 months ago with four items. No devoted marketing in Canada. They went from zero to the No. 1 brand in bakery in Canada with four items. And Loblaws just went from 4 to 17 items on Udi’s. I mean, we’re getting clumps of migration. I think when Udi’s moves into these grocery categories it’s going to have a real, major impact.”
Two of those categories where Udi’s and Glutino stand to make a splash are pizza and pasta, Mr. Hughes said.
“I think pizza is going to be a great dimension for us,” he said. “If you don’t know anything about gluten-free, it really gives us an entry into any category that’s got wheat in it. While the world doesn’t really need another pizza, the world does need a gluten-free option.”
A recently introduced Glutino pasta only has been on the shelf for four weeks, but recently outsold the company’s pretzels over a one-week period, a further sign that consumers are eager to try new gluten-free products, he said.
Asked by an analyst why he has confidence that the Udi’s and Glutino brands will maintain their current market share of gluten-free and maybe even grow, Mr. Hughes responded, “We really are the big fish in the small, but growing pond. All of our competitors right now are really offering one brand, one category idea. And they’re small, mostly very undercapitalized companies.
“I think the thing that is really unique is by putting Udi’s and Glutino together we’ve got a business that will do $160 million this year, growing at 50%. The No. 2 brand now is like $25 million. And it’s one category. Very narrow play. With that though comes the infrastructure that was in place. We had built phenomenal credibility with customers with Smart Balance. Smart Balance, while it hasn’t had the kind of growth in the last few years we would like to see, over the last 15 years it has been the fastest growing brand that’s been in the market for the last 15 years, and that creates a lot of credibility with customers.”