Annie’s deepens distribution, churns out record sales, earnings

by Eric Schroeder
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BERKELEY, CALIF. — Annie’s, Inc., a natural and organic food company, turned in a record year of sales and profits during fiscal 2014 as the company was able to realize growth opportunities by giving consumers “high-quality, great-tasting products.”

“FY14 was a year of accelerated distribution growth, especially in mainstream channels,” John Foraker, co-founder, chief executive officer and director of Annie’s, said during a May 29 conference call with analysts. “Annie’s products can now be found in over 35,000 grocery stores across all channels, up low double-digit on a percentage basis from a year ago. This growth was led by continued distribution gains of purple box mac and cheese which now holds 74% (ACB) in U.S. grocery.”

Mr. Foraker said Annie’s not only expanded its retail footprint during fiscal 2014, the company deepened its distribution in many retail accounts, resulting in double-digit growth in total distribution points in both grocery and mass channels. The company experienced continued strength in velocities as a result of successful efforts to drive increased mainline distribution, he said.

“This is great progress, and importantly we know we still have lots of runway for distribution gain,” he said. “Annie’s is still significantly underpenetrated relative to our potential, especially in the grocery channel, where the average retailer carries roughly 14 of our key 33 items.”

The pace of innovation is accelerating at Annie’s. Mr. Foraker said fiscal 2014 was “the most robust year of product innovation in our history,” as Annie’s introduced more than 40 new stock-keeping units across the portfolio, more than double the number of new product introductions in the prior-year. In total, new products, defined as products introduced over the past 12 months, accounted for 10% of gross sales dollars in fiscal 2014, up from 7% in fiscal 2013. Mr. Foraker pointed to solid contribution from two new platforms — microwavable cups and family-sized frozen entrees — as key drivers of the growth.

The innovation train is expected to continue to chug along in fiscal 2015, Mr. Foraker said. Specifically, he highlighted three areas of focus.

“First, as we announced earlier this month, we have entered the meal and snack kit category, where we recently launched in a major mass retailer,” he said. “Second, we have plans in place to expand our frozen lineup in the second quarter when we’ll be bringing the Annie’s brand to the $1 billion frozen snacks category with our entry into two segments: pizza poppers and mini pizza bagels. Third, we’ll be placing a significant focus on driving greater penetration of our cookie and cracker business in FY15 by expanding mainline distribution of our new bagged snacks line, and by leveraging our recent Joplin (Mo.) manufacturing investment to pursue close-in innovation opportunities.”

Net income at Annie’s in the year ended March 31 was $15,289,000, equal to 90c per share on the common stock, up 36% from $11,252,000, or 66c per share, in fiscal 2013. Sales increased 20% to $204,104,000 from $169,472,000.
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