The CEO of Smart Balance today (4 August) outlined the opportunity the US health food company sees in the gluten-free category following its acquisition of Canadian firm Glutino Food Group.
Smart Balance yesterday announced the US$66.3m acquisition of Glutino, which sells products under its namesake and Gluten Free Pantry brands.
Stephen Hughes, Smart Balance’s CEO, described the gluten-free market as “similar to the natural food market in the 90s” – highly fragmented and dominated by small founder-owned companies.
“Eating less gluten probably makes a lot of sense to a lot of consumers, whether it does physiologically or not, so there’s an interesting opportunity to grab what looks to be a major growth segment within the natural segment,” he added.
He added that the $2bn gluten-free channel has some “attractive fundamentals” driving growth and is one of the fastest growing categories. Hughes said that the sector is “beginning to go mainstream” and moving into the grocery and superstore channels.
The Quebec-based Glutino produces some 80 SKUs under the Glutino and Gluten Free Pantry brands and also recently began producing gluten-free breads under licence for UK company Genius Foods.
The acquisition makes Smart Balance a “big fish in a small pond” in the gluten-free sector, Hughes said. The company, he explained, wants to position itself as a “thought leader” and “strategic partner for customers”.
In Canada, Loblaw offers over 80 Glutino products, but the US is “more fragmented”, Hughes said, with retailers still wrestling the question of how they address this opportunity.
Hughes suggested that Smart Balance’s larger size will allow it to “move up the food chain” with retailers like Wal-Mart Stores and have more strategic conversations about how they want to address the “gluten-free issue”.
Operationally speaking, Hughes said Glutino is a “young high-growth company” and there would not be any significant synergies between the two businesses. However, Smart Balance will seek out opportunities to improve Glutino’s supply chain efficiencies, or will look at investing in new facilities, Hughes said. Smart Balance plans to leverage its core competencies in supply chain, marketing, R&D, branding and sales, as well as diversifying its portfolio into frozen foods and grocery.
The company reported its second-quarter results today, and increased its full-year forecast on the back of the acquisition.
Smart Balance now expects net sales to grow between 10-12% and operating income to increase 12-14%, up on its initial forecast of net sales to grow at a mid-single-digit rate and for operating income to increase at a high-single-digit rate.
The company expects the acquisition to be accretive to earnings in the next 12 months.