Annie's shoring up supply chain

by Eric Schroeder
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BERKELEY, CALIF. — Annie’s, Inc. is making good progress in efforts to shore up its supply chain through enhancing the company’s capabilities and improving visibility, said John Foraker, co-founder and chief executive officer of the natural and organic foods maker.

In an Aug. 8 conference call with analysts to discuss first-quarter earnings, Mr. Foraker said Annie’s is nearing completion of a major supply chain project involving a transition to a new manufacturing partner for its rapidly expanding fruit snacks business. He described the initiative as “by far the single largest productivity project in our company’s history.”

“Production is now up and running at our new manufacturer, and we expect the transition to be completed by the end of Q2, consistent with what we communicated on our last call,” Mr. Foraker said. “We now own the formulas and control the most important commodities in our fruit snacks supply chain, enabling lower cost and enhanced transparency. The cost savings from this transition are a key driver of our outlook for margin improvement in the second half of the year.”

Mr. Foraker also indicated the integration of a snack manufacturing plant in Joplin, Mo., acquired from Safeway for $6 million this spring is off to a good start. He said the company is implementing key initiatives in Joplin that will accelerate the company’s pace of innovation and drive productivity improvement throughout its baked snacks business. To that end, Annie’s will spend the second quarter of fiscal 2015 consolidating production of its certified organic brick graham crackers into the Joplin facility. He said the move will drive significant improvement in overall production cost as well as enhanced capacity and ability to drive long-term success.

“Brick grahams have performed exceptionally well in the natural channels where we have amassed a dominant 60% market share just two years after launch,” he said. “These items have low distribution levels in grocery and mass retailers, but are performing well. Improving our cost structure and expanding our capacity in this business will allow us to pursue sizable distribution opportunities in conventional channels where we see lots of potential for growth.”

Annie’s sustained a loss of $1,220,000 in the first quarter ended June 30, which compared with income of $2,172,000, equal to 13c per share on the common stock, in the same quarter a year ago. Net sales increased 10% to $43,297,000, up from $39,318,000 a year ago.
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