Lancaster looking for answers in frozen roll category

by Eric Schroeder
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Growth in Flatout flatbread, Marzetti refrigerated salad dressings, New York croutons and Olive Garden dressing contributed to improved sales and earnings for Lancaster in the second quarter of fiscal 2016.

COLUMBUS, OHIO — Adding television advertisements in Sister Schubert’s rolls core markets failed to resonate among consumers, according to specialty food maker Lancaster Colony Corp. Even so, the Columbus-based company said nice growth in Flatout flatbread, Marzetti refrigerated salad dressings, New York croutons and Olive Garden dressing contributed to improved sales and earnings in the second quarter of fiscal 2016.

Net income in the second quarter ended Dec. 31, 2015, was $34,511,000, equal to $1.26 per share on the common stock, up nearly 5% from $32,954,000, or $1.21 per share, in the same period a year ago. Sales increased 7% to $324,769,000 from $303,411,000.

In an October conference call to discuss first-quarter results, Jay Gerlach, chairman, chief executive officer and president of Lancaster, said the company would tackle its most challenging category — frozen dinner rolls — by implementing a comprehensive and attractive promotional plan. But in providing an update on the initiative in a Jan. 28 conference call, Mr. Gerlach said the company’s efforts may have missed the mark.

Frozen dinner rolls are the company's most challenging category.

“We are concerned that we don’t feel that our investment really moved the needle to the degree it should have, and we will be considering what kind of alternative approaches may make more sense in the future,” he said.

Mr. Gerlach was asked whether the company has considered expanding distribution of the traditionally East coast Sister Schubert’s brand to the West coast.

“That would be a little lower on the totem pole,” he said. “I certainly want to continue to expand distribution where possible, but we want to be sure we are taking advantage of potential sell-through to existing consumers and new consumers in our core markets, which are generally in the eastern half the U.S.”

Mr. Gerlach said Lancaster is exploring all aspects of the company’s business as it relates to the frozen dinner roll category in hopes of spurring growth.

“We’re certainly working on some innovation ideas,” he explained. “We’re certainly considering whether there should be some different views on pricing. One of the challenges we feel we continue to have in the dinner roll category is the competition on the fresh bread side of things that obviously has a myriad of choices for the consumer. And while we have a very clean label kind of product in the frozen case, I think we get labeled as a frozen product and a perception that maybe it doesn’t have as clean a label as it does. So we need to figure out how to get that message across to more and more consumers. So, clearly, more work to be done for us in that space.”
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