Competitors may be sweating sales declines in the frozen section, but Pinnacle Foods, Inc. said it is positioned for growth in the cooled-off category.
With a frozen portfolio driven mostly by Birds Eye Vegetables and Birds Eye Voila! bagged meals, what the company said are two “very on-trend categories,” Pinnacle has held or regained share in frozen foods through innovation and brand-building.
“Vegetables have been consistently growing, and we were not happy with the fact that we were losing some share in the first half of the year,” said Bob Gamgort, chief executive officer, during a Nov. 13 earnings call with analysts. “As you can see in the recent share period, we are gaining share. Birds Eye Voila! has performed incredibly well in a category that has not done well. So we are not only getting share growth, we are getting absolute growth in both consumption and shipments, and we’ve got a great pipeline of innovation on that.”
Challenges in frozen foods, he added, impact the single-serve entree category, which represents a relatively small portion of Pinnacle’s portfolio with Hungry-Man dinners, a product line with long-term stable share, Mr. Gamgort said.
“So, we are happy with the growth that we are seeing, and particularly in frozen vegetables, we think there’s a lot of upside to it,” he said. “And it’s a good place to be from a retailer standpoint because retailers are looking across frozen for an answer, and they see pockets of growth in vegetables, in seafood. And we’ve got good positions in them. And so that will lead to more investment in those categories from a retailer's standpoint.”
During the quarter, Pinnacle introduced Birds Eye Recipe Ready, a 20-item line of pre-chopped and blended vegetables to enable faster preparation for stir-fries, fajitas, pot pies, pizzas and more.
“In addition, we have been gaining significant share all year on our Birds Eye Voila! complete bagged meals, and this trend continued in the third quarter,” he said.
Frozen foods represent a critically important category for retailers, Mr. Gamgort said.
“There’s a lot of conversation about the perimeter of the store,” he said. “The perimeter of the store is really driving the traffic. But, let’s be clear, the center of the store and especially frozen is driving the profitability. So, they need it.”
The single-serve meal slump may be attributed to three trends, he said.
“I think the first is there is an economic issue here, which is these are more premium on a per-serving basis,” Mr. Gamgort said. “It’s a more premium price point than making it yourself or going to some more components. And clearly, with all of the consumer pressures that we talked about here, that does weigh on this.”
The category needs reinvention and innovation, he said.
“If you take a look at Birds Eye Voila!, we have had tremendous growth on that business over a long period of time, and we are offering meals for two,” he said. “But it’s in a skillet versus microwave format. It’s a much better delivery from a taste standpoint and also from a nutritional standpoint. So, there’s still a need for convenient meals. It’s just they need to be contemporary in terms of the flavors they deliver and the health profile, and people have to feel good about cooking them as well.”
The third component, he said, may be too much variety.
“There’s just a tremendous amount of assortment in there, and there’s a lot of confusion as well,” he said.
Investment in core brands and improved productivity, plus solid net sales growth in the North America retail business, tripled earnings during the third quarter.
For the quarter ended Sept. 29, the company posted net earnings of $40,685,000, equal to 35c per share on the common stock, up from $9,878,000, or 12c, from the same period of the previous year. Net sales for the quarter increased to $572,455,000 from $567,905,000 last year.
Net sales for the Birds Eye Frozen segment increased 0.8% to $258 million from $256 million in the year-ago period, driven by growth of Birds Eye vegetables, including new Birds Eye Recipe Ready blends and Birds Eye Voila! bagged meals, which offset declined for Mrs. Paul’s and Van de Kamp’s seafood, Hungry-Man dinners and Celeste pizza.
The Duncan Hines Grocery segment posted a 4% increase in net sales to $224.2 million from $215.6 million last year, reflecting higher sales of Vlasic pickles, Mrs. Butterworth’s and Log Cabin syrups, Duncan Hines baking mixes and frostings, Comstock and Wilderness pie and pastry fruit fillings and the company’s Canadian business, partially offset by lower sales of canned meat.
The Specialty Foods segment saw a 6% decline in net sales to $90.3 million during the quarter from $96.3 million last year, reflecting lower sales of private label canned meat.
Results for Wish-Bone salad dressings, which Pinnacle acquired on Oct. 1 from Unilever, were not included in third-quarter results. The company said it expects the business to modestly benefit fourth-quarter performance.
