Skinnypop cheesy popcorn, Amplify Snack Brands
Two new ready-to-eat Skinnypop popcorn offerings are made with real cheese and feature aged white cheddar and pepper jack flavors.

AUSTIN, TEXAS — Has ready-to-eat popcorn lost its pop? Growth of the recently robust category has slowed significantly this year, said Thomas C. Ennis, president and chief executive officer of Amplify Snack Brands, Inc., parent company of No. 2 brand SkinnyPop. However, he remains optimistic in a near-term rebound.

Tom Ennis, Amplify Snack Brands
Thomas Ennis, president and c.e.o. of Amplify Snack Brands

“We do not believe recent ready-to-eat popcorn category trends are indicative of the future of the category,” Mr. Ennis said during an Aug. 8 earnings call with investment analysts. “In the first half, we saw some smaller competitors executing some very aggressive promotional and pricing tactics that have taken dollars out of the category that we do not believe are sustainable.

“Additionally, the ready-to-eat popcorn category, while now larger than pretzels, still has a lot of headroom to grow due to high consumer liking with relatively low household penetration.”

SkinnyPop has a 19% share of the $1.3 billion category, which grew 4% in the latest quarter, Mr. Ennis said. That pace of growth has slowed from double-digit increases in recent years.

Skinnypop microwave popcorn, Amplify Snack Brands
Skinnypop recently expanded into the microwave popcorn category.

“We believe the ready-to-eat popcorn category has a lot of room for continued growth and anticipate the category returning to high single-digit growth territory,” Mr. Ennis said.

In addition to increased promotional activity by competitors in the space, Mr. Ennis attributed the category softening to broader trends seen across the food and beverage industry.

“There's just this overall kind of slowdown in U.S. food, and I'm not quite sure exactly what's driving that,” he said. “We certainly know that there's more sales in unmeasured channels. We're seeing restaurant growth spark again, and so maybe there's some loss dollars there, but I think you're seeing this overall more challenging environment in U.S. food than in snacking itself.”

Paqui chips, Amplify Snack Brands
 New distribution and increased velocity of the Paqui brand helped boost net sales for Amplify.

On heightened competition in ready-to-eat popcorn, he said, “Unfortunately, this year, we've got some smaller competitors who are rumored to be in the sales process and are executing some really irrational and questionable trade pricing tactics out there, and that's certainly having an impact on the category and on the SkinnyPop as well…

“We've decided to take a much longer-term view and protect the economic health of the category and the economic health of the SkinnyPop brand. So, we chose not to follow.”

Amplify Snack Brands, which also makes Paqui tortilla chips, Oatmega protein bars and Tyrrells kettle-cooked potato chips, had net income of $1,186,000 in the second quarter ended July 1, equal to 2c per share on the common stock. This was down sharply from $8,768,000, or 12c per share, in the prior-year period.

Tyrrells Crisps, Amplify Snack Brands
Amplify acquired Tyrrells last August.

Net sales of $100,974,000 were up 69% from year-ago sales of $59,866,000. The increase in net sales reflected the addition of the Tyrrells and Oatmega businesses, strong growth from SkinnyPop product innovation, and new distribution and increased velocity of the Paqui brand, according to the company.

Adjusted EBITDA increased 3.9%, as higher net sales and gross profit were offset partially by higher adjusted spending, general and administrative expenses.

In the company’s North America segment, operating profit in the second quarter ended July 1 totaled $22.1 million, which was even with the same period a year ago. Net sales totaled $69.6 million, up from $59.9 million. The company sustained an operating loss of $500,000 on sales of $31.3 million in its International segment during the quarter.

Oatmega whey protein cookies, Amplify Snack Brands
The addition of the Oatmega business helped with sales growth.

To improve SkinnyPop performance in the coming quarters, the company plans to increase strategic brand investment with a focus on advertising in digital, print and television, Mr. Ennis said.

“Given SkinnyPop's best-in-class brand loyalty yet relatively low household penetration and low awareness, the new advertising campaign should draw new consumers into our franchise, reinforce the brand decision for existing users, cement loyalty and make consumers aware of our new items,” he said.

Additionally, the brand recently has introduced a spate of innovation, including an extension into microwave popcorn, popcorn cakes and mini popcorn cakes. Two new ready-to-eat popcorn offerings are made with cheese and feature aged white cheddar and pepper jack flavors. 

Skinnypop popcorn cakes, Amplify Snack Brands
Skinnypop recently has introduced a spate of innovation, including popcorn cakes.

“Our real cheese flavors taste amazing and allow us to leverage our strong SkinnyPop brand equity into the largest sub-segment of the ready-to-eat popcorn category,” Mr. Ennis said. “Initial results are encouraging, with strong in-store velocities, and we are pleased with the positive customer and consumer reception for these great new flavors.”

For the full year, management expects net sales of $385 million to $400 million.

“We remain encouraged by our first-half results, which were in line with our initial guidance,” Mr. Ennis said. “And while we believe it is prudent to moderate our second-half guidance to reflect the challenging retail environment, we still expect to deliver very strong results, achieving pro forma revenue growth in the mid- to high-teens during the back half of this year.

“We are in the right space, with the right brands, with plenty of white space and runway ahead of us for continued profitable growth.”