J&J Snack partnering with Mondelēz, Dunkin’ Donuts

by Eric Schroeder
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PENNSAUKEN, N.J. — Sales of soft pretzels and food service continue to grow at J&J Snack Foods Corp., driving earnings and sales gains at the Pennsauken-based snack foods maker. More growth may be in store thanks to new partnerships with Mondelēz International and Dunkin’ Donuts.

Net income at J&J Snack Foods in the third quarter ended June 28 was $23,678,000, equal to $1.26 per share on the common stock, up 12% from $21,172,000, or $1.12 per share, in the same period a year ago. Net sales increased 8% to $257,113,000 from $237,036,000.

For the nine months ended June 28, net income was $49,625,000, or $2.64 per share, up 13% from $44,058,000, or $2.33 per share, in the same period a year ago. Net sales for the nine months increased 6% to $665,957,000 from $629,770,000.

“All of our business groups contributed to our record quarter,” said Gerald B. Shreiber, president and chief executive officer. “We had particular strong sales growth in our food service soft pretzel category led by our newer products such as pretzel rolls and sticks. Our Icee group also had record sales and earnings, and our retail grocery group had higher earnings as well.”

Sales to food service customers increased $12,651,000, or 9%, in the third quarter to $157,873,000, and increased $24,180,000, or 6%, for the nine months, J&J Snack said. Excluding sales resulting from the acquisition of New York Pretzel in October 2013, food service sales increased approximately 8% for the third quarter and increased 5% for the nine months.

Soft pretzel sales to the food service market increased 14% to $41,337,000 in the third quarter and increased 15% to $119,460,000 in the nine months due to increased sales to restaurant chains, warehouse club stores, school food service and throughout J&J Snack’s customer base. The company said increased sales to one customer accounted for approximately one-third of the increase in pretzel sales in the quarter and in the nine months. Without New York Pretzel, pretzel sales increased about 11% for the third quarter and 12% for the nine months.

“Sales of soft pretzels and food service continue to grow and be extremely strong and includes new pretzel products such as rolls, twists, sticks and soft pretzel buns to casual dining restaurants and club stores,” Mr. Shreiber said during a July 29 conference call with analysts. “Our whole grain soft pretzels for schools is selling very well as we prepare for another round of changes in school food service regulations.”

Mr. Shreiber noted during the call that J&J Snack will be responsible for supplying Dunkin’ Donuts with its new Pretzel Twist, which features a traditional warm, soft pretzel twisted and sprinkled with salt.

“I’ve got to really give kudos to a couple of our people because when we heard that Dunkin’ was looking for a pretzel and they had been talking to others about developing it, we jumped in and we made some product,” he said. “ … our R.&D. capabilities have gone from being there to being, like, really significant.”

Frozen juices and ices sales increased 11% to $18,215,000 in the three months with sales increases and decreases spread across the company’s customer base, and 12% to $38,301,000 in the nine months with about half of the sales increases for the nine months being to warehouse club stores.

Sales of bakery products increased $4,360,000, or 6%, in the third quarter to $72,459,000, and increased 2% to $207,704,000 for the nine months as sales increases and decreases were spread throughout J&J Snack’s customer base, but with one customer accounting for about 75% of the increase in both periods.

Churro sales to food service customers increased 6% to $15,622,000 in the third quarter and were up 1% to $43,003,000 for the nine months. During the conference call, Mr. Shreiber unveiled that J&J Snack has just signed a licensing agreement with Mondelēz International, Inc. for an Oreo churro.

“If you go back and you look at some of our licensing agreements that we’ve been able to establish and maintain over the years, one that comes to mind is Icee,” Mr. Shreiber explained. “Icee now has annual revenue of probably close to $500,000, most of it falling to the bottom line or close to it just on licensing of its name for other products. In this particular case with the Oreo churros, we needed something to help kick-start sales on a recognizable level to fast-food restaurants and casual dining restaurants.

“And I don’t know if I wasn’t as familiar with the Oreo product’s growth the last couple years, but it appears to be strong — like, double digits, 12%, 14% the last couple years. And we’ve noticed that restaurants are really interested in licensing to complement the product.

“So Gerry Law in our marketing group met with Mondelēz, who we have a business relationship with. We’ve been running some of their products in our cookie plant, in our fig bar plant in Moscow Mills, Missouri. So one thing led to the other. And this took about a year in there. They visited us. We visited them. We finally put together a licensing agreement. We hope we pay a lot of money because the upfront fees are very, very minimal. There are none. So this is going to be a win-win situation for us. All we have to do is sell and grow the sales.”
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