Diamond Foods says the raw power of the Pringles brand is a vital component in its future success.
The company, which also produces Kettle chips and Emerald snack nuts, yesterday (15 September) announced an increase in sales, profits and projected earnings in its annual results.
Speaking to reporters after the announcement, Steve Neil, the chief financial and administrative officer, and Andrew Burke, chief marketing officer, say April’s $2.35bn acquisition of Pringles will herald a new era of improved synergy and market penetration – even in the face of the “stagflationary environment” highlighted earlier this month by PepsiCo CFO Hugh Johnston.
Burke said: “I would say we are fortunate across our portfolio because we have premium snack brands and differentiated products which makes us a little less subject to elasticity than baseline products.
“We are facing more commodity pressure than we were a quarter ago. We are going to see market compaction in the retail business in some of our value channels.
“But that being said we are a business that has a lot of room to grow.”
Pringles has 90% distribution in the convenience store sector, a situation that Burke says offers significant growth opportunities for Kettles, which currently has 27% distribution, while Emerald has 10%.
He added: “If we can put our combined businesses together we can leverage the strength that Pringles brings.”
Diamond also hopes to reap the advantages presented by using incoming Pringles staff to work across Diamond’s full product range.
Burke said: “We are in the process of identifying and bringing over key leaders from the Pringles business into the Diamond Foods organisation. These leaders are going to have responsibilities beyond just Pringles.
“Our first focus will be on-boarding them to help them get settled and familiar with the full basket of products.
Neil says their retail partners have also reacted positively to Diamonds acquisition of Pringles.
“The feedback we have received from (retail partners) has been positive and they are excited to see what we can do in the snack category”, he said.
“I think it’s going to be very enabling for us and it’s is more encouraging as we would have hoped.”
However, the management team acknowledge that Pringles must be put on a stable footing before the efficiencies can be leveraged – a process they expect to take six months at least.
Neil said: “First we’re going to take the business and try to keep it running well. You cannot underestimate the challenge of keeping things that are going well to continue to go well and that’s been a big part of our efforts in this integration process.”
But this prudent, measured approach hasn’t stopped Diamond from raising its expected annual net sales to between $1.85bn and $1.95bn, after having previously forecast net sales of approximately $1.8bn for fiscal 2012.