‘Gentle breeze’ guides pretzel business at J&J Snack

by Eric Schroeder
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PENNSAUKEN, N.J. — Buoyed by continued strength in its pretzel business, net income at J&J Snack Foods Corp. in the first quarter ended Dec. 28, 2013, was $12,426,000, equal to 67c per share on the common stock, up 22% from $10,226,000, or 54c per share, in the same period a year ago. Net sales increased 6% to $203,523,000 from $191,408,000.

“We are satisfied with our sales growth of 6% this quarter,” Gerald Shreiber, chairman, president and chief executive officer, said during a Jan. 28 conference call with analysts. “Sales of soft pretzel and food service continued to be extremely strong, and include new pretzel products such as rolls, sticks and soft pretzel buns to casual dining restaurants and club stores. Additionally, our whole grain pretzels for schools is selling very well as we prepare for another round of changes in school food regulations.

“Frozen juices and ice sales in food service were up as it appears we have at least stabilized our business in schools, and hope to begin to see some growth. Hand-held sales included in food service were relatively okay as we continue to make inroads with new customers. Churro sales were up only 1% as we lapped a major roll-out to a major fast-food restaurant chain last year. Excluding that customer, sales were up 8%.”

Sales to food service customers increased 7% during the first quarter of fiscal 2014 to $138,780,000, with soft pretzel sales to the food service market increasing 21% to $39,308,000. J&J Snack said sales of soft pretzels increased at restaurant chains, warehouse clubs, school food service and throughout the company’s customer base. Excluding New York Pretzel, which was acquired in October 2013, pretzel sales increased about 19%, J&J Snack said.

Elaborating on the pretzel business, Mr. Shreiber said J&J Snack is adding new customers and segments.

“We’re developing new products,” he said. “Some of them are brand new like our pretzel twist. Some of them are variations of old product sticks. And we’re getting trial. We have people in our food service that are dedicated to these restaurants. … And we’ve been working on this for really about three years. And it’s almost like planting a good tree and harvesting every year. We are beginning to bloom. Now, we hope that this will continue. But, meanwhile, we are developing further products in our R.&D. section so that we can keep this momentum.

“We’ve had a gentle breeze behind our efforts getting it done. I just hope we don’t run into any headwinds.”

At retail, soft pretzel sales increased 4% during the first quarter to $8,915,000.

Overall bakery products sales to food service markets increased 1% during the first quarter, rising to $69,076,000.

J&J Snack said sales of frozen juices and ices to food service markets rose 9%, to $8,229,000. Frozen juices and ices sales decreased in the retail supermarket category, falling 1% to $6,423,000 on a volume decrease of 4%.

Also during the call, Mr. Shreiber addressed an analyst’s question about the impact of bioengineered foods and other areas of ingredient sourcing.

“We look at it,” he said. “We’ve had to reformulate over the past five or six years with respect to schools, with respect to other what we call ‘no-no ingredients.’

“Obviously sugar and some of the comments, even though it’s not happening, particularly led by some states on sugar, might have an effect. But most of the adjustments we’ve been through. We’ve seen our school business — which got clobbered for about three years — down 15%, 20% a year for three years running. And then we ultimately reformulated, developed some new products, whole grain in there. And now for the first time in three years we’re seeing that business come back and it’s up.

“So I think we’ve met most of the serious challenges. We’ve gotten trans fat out. We have 100% juice in our products. So, I like our position right now. And short of some revelation that would come out of somewhere unknown, I happen to like our position.”
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