Ice cream maker CoolBrands International has reported a fall in revenues and a loss for the third quarter ending 31 May 2005, blaming the loss of its license for Weight Watchers Smart Ones frozen snacks and falling sales of Atkins Endulge frozen snacks.
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Revenues in the quarter were US$119.7bn, compared with $139.1bn in the same period a year ago. The company’s net loss was $6.9m, compared with net earnings of $11.2m a year ago.
“Our financial results for the third quarter continue to reflect the evolving foundation of our business,” said David J. Stein, co-chairman and chief executive officer. “The investments we are making in new brands – while adversely affecting our current results – are necessary in order to establish brands that can provide a strong base of recurring revenue, and generate future returns over the long-term. Although it is early and success cannot be assured, we are already starting to see positive results from this strategy with No Pudge!, which became our best selling brand during the third quarter and is currently performing well in most accounts where we have distribution.”
The declines in revenues and earnings during the third quarter were due primarily to the non-renewal of the company’s license for Weight Watchers Smart Ones frozen snacks, which was announced on 28 July 2004, as well as declining sales of Atkins Endulge frozen snacks due to the generally reduced popularity of “low carb” products, the company said. These two brands were CoolBrands’ most profitable product lines a year ago and accounted for 53.3% of total branded frozen dessert sales during last year’s third quarter as compared with 19.5% during the quarter just ended. Consistent with its strategy for growth, CoolBrands announced during last year’s fourth quarter that it would implement an aggressive new products introduction program in the frozen snacks segment centred on a new brand license for No Pudge! frozen snacks, as well as licenses for other brands, including Snapple, Crayola, Care Bears and Justice League.
The costs incurred to introduce and support these new brands during the introduction phase contributed meaningfully and materially to the loss for the quarter. In addition, an exceptionally difficult competitive environment in the US ice cream category adversely affected volume and profit margins on all of the company’s products, as every economic measure of the ice cream category showed negative trends for sales volume, margins and retail pricing, with total dollar sales down 4%, unit sales down 2.9%, percentage of volume sold on promotion up 2.7% and average promoted price per unit lower by 1.0%, as manufacturer’s launched the largest number of new products in the category’s history and competed aggressively for market share during a period of heightened price sensitivity on the part of consumers.
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By GlobalData
