ST. LOUIS — Post Holdings Inc. has undertaken several strategies to propel its ready-to-eat cereals business, including looking for ways to better provide value products and packing more protein.
In an Aug. 8 conference call with analysts to discuss third-quarter results, Terry Block, president and chief operating officer, said the St. Louis-based company is constantly on the lookout for ways to add more high protein options across its portfolio. He described protein as the building blocks for bodies to function properly, and as instrumental in assisting lean muscle mass development and satiety.
So far this year Post has launched several cereals featuring a healthy dose of protein, including: Grape-Nuts Fits, which contain 6 grams of protein; Great Grains Protein Blends, 8 grams of protein; and Honey Bunches of Oats Greek, 5 grams of protein. In addition, the company re-launched Original Grape-Nuts with 8 grams of protein this year.
“This is when most breakfast cereals contain only 2 to 3 grams of protein,” Mr. Block said.
More innovation is in store for later this year, when Post plans to introduce Honey Bunches of Oats Morning Energy, which will contain 6 grams of protein and more than two-thirds of the recommended daily allowance of whole grains per serving.
In 2014, Post will take a page from the recently acquired Attune Foods business and will reformulate Grape-Nuts and several Great Grains products to be non-bioengineered, Mr. Block said.
Another important component of Post’s R.-T.-E. cereal business has been a sharper focus on providing value products for consumers on a strapped budget.
“We have stated that we are actively executing against the strategy to better address the economically stressed consumers with quality Post cereal alternatives,” Mr. Block said. “The ongoing Post Good Morenings’ test has provided learnings with regard to product mix, product placement, size mix and marketing. The Good Morenings’ product line-up is being reduced to reflect those learnings.
“Capitalizing on those same Good Morenings’ learnings, this summer we will be expanding our efforts to address this growing household segment — estimated to be about 25% of all U.S. households — with the limited introduction of large-bagged items of Fruity and Cocoa Pebbles, Honeycomb and Golden Crisp. Shipments are scheduled to begin in September.”
Discussing the general performance of the company’s R.-T.-E. cereal business during the third quarter, Mr. Block said Great Grains and Grape-Nuts experienced stronger dollar sales growth while Honey Bunches of Oats and Pebbles sustained setbacks.
New product distribution was seen as the key driver behind growth at both Great Grains and Grape-Nuts during the quarter, and Mr. Block noted that Grape-Nuts Fits helped the base Grape-Nuts brand grow distribution 37% versus last year, leading to the brand’s highest share in two years.
Although Fruity and Cocoa Pebbles performed well during the quarter, sales for the overall Pebbles brand declined 2% due to the discontinuation of Pebbles Boulders and Pebbles Marshmallows at several key customers. Meanwhile, high levels of competition adversely affected dollar sales of Honey Bunches of Oats, contributing to a 4% decline during the quarter.
“Post has become more competitive and is turning the corner with regards to revising long-term negative share and revenue trends,” Mr. Block said. “The combined contribution of the generating demand processes, marketing, sales and R.&D., coupled with manufacturing, is evidencing itself in the marketplace. However, this is a category where competition battles over tenths of a share point. Seeking more and better needs to constant.”
Net income at Post in the third quarter ended June 30 was $1.1 million, equal to 3c per share on the common stock, down sharply from $15.8 million, or 46c per share, in the same period a year ago. Factoring in restructuring and plant closure costs, acquisition related transaction costs and mark-to-market adjustments on economic hedges, adjusted net earnings for the third quarter were $9.5 million, which compared with $17.6 million in the same period a year ago.
Sales for the quarter rose 6% to $257.3 million compared with $241.9 million during the previous year. Post said net sales from current-year acquisitions contributed $10.7 million in the quarter.