US snacks firm Snyder‘s-Lance has said there is “a hill to climb” in its private-label business as it faces “ongoing pressures” in the sector.
Snyder’s-Lance yesterday (7 August) reported higher half-year profits but sales was more a mixed picture.
Sales were down thanks to the impact of the independent business owner (IBO) route system conversion.
Adjusted sales were up but brands performed better that Snyder’s own-label business, which saw sales fall 3.2%.
CEO David Singer said Snyder’s-Lance the company had struggled to increase prices on its own-label products.
“When you look at what we’ve got at this point, it’s a very difficult economy,” Singer told analysts on the firm’s earnings call yesterday. “If you look at the consumer, the consumer is not doing particularly well and there is a lot of competition among retailers – all those things conspire to make it difficult to get pricing passed through on the non-branded items. There is a lot of pressure to continue to attract that consumer on the retailer’s part and all of those things conspire to make it more difficult than normal.”
COO Carl Lee added that the company is being “very aggressive” on pricing in private label as it expects to face “ongoing pressures” from the economy and consumer sentiment looking ahead.
“We know exactly what we need to price, we know by customer what we need to do, so we’ve got those plans in place and we’re moving towards them very quickly,” he told analysts. “We’re being aggressive but it is going to be a challenging environment and that is an area that you have to work a little harder and a little longer than you do in your own branded business. We’re comfortable that we’ll work our way through it but it is going to be a hill to climb.”
Nonetheless, Singer said private label continues to be “an important component” of its revenue and top line.
“We do expect to see private brand revenue continue to improve relative to last year. It continues to be an important part of our consolidated business.”
Separately, Singer said the company is actively looking for acquisitions.
“We are looking … we are prepared at this point to consider acquisitions … and we are looking at a variety of things where we could add value, where we could possibly have new core brands. We are also looking at the potential for certain regional brands that could be supported by our direct-store-delivery system, so we are open to a variety of things.”
BB&T Capital Markets analyst Heather Jones said she views the outlook for Snyder’s-Lance in 2013 “positively”.
Despite the mixed sales in the first half of the year, she said the company’s sales growth would “likely continue to be stronger than the average company”.
Jones added: “Surging commodity environments used to upend Lance’s plans, but management’s efforts to improve the business model and internal processes is paying dividends.”