the third time is the charm. The natural and organic food maker this month began shipping its new frozen snack items, pizza poppers and bagels into more than 1,700 Target stores.It is not the first foray into frozen for Annie’s, which earlier introduced frozen pizzas and entrees. But John Foraker, co-founder and CEO, indicated in an Aug. 7 conference call with analysts that this launch has a different feel.
“We are excited by the potential for frozen snacks because they taste great, they have an attractive entry price point, and the margins are better than our earlier frozen products,” he said.
Foraker said Annie’s has “learned a lot” from its frozen foods introductions over the past couple of years and has fine-tuned its approach to the category. He said frozen snacks was always an area Annie’s felt had potential, but the company also recognized the difficulties the category presented from a supply chain standpoint.
“We learned a bunch of things in these earlier launches, and what we have learned that’s applied to this one is, we are going to have a really good entry price point,” he said. “So you can expect to buy a box of these for around $4. The other offerings that we have had have been $8.99, $9.99 or higher price points, and when we look at the category and what we have learned, we see no evidence that there’s any less of a consumer opportunity there from the research that we originally did a few years ago and continue to build on.
“If anything, the opportunity is growing from a retailer perspective because those categories, as you know, are relatively unhealthy, and retailers are aggressively reaching out to brands like Annie’s and others that appeal very strongly to millennial consumers. Households run by millennial parents and young adults who really have been moving away from frozen in general. And our brands are an opportunity for those retailers to innovate and bring them back into those categories.”
As a result, Foraker said Annie’s is putting a major effort behind frozen snacks. The products are launching nationally at Target and are expected to expand broadly after that.
Elsewhere in frozen, he said Annie’s is still working on enhancing its pizza offering and still is trying to find its way on the frozen entrée business.
“The lasagna items are doing particularly well,” he said. “The other items are just doing okay. So we are looking at that, too, to figure out what is the right long-term approach to driving success in the frozen entrée category. We are optimistic about the long term. It hasn’t been easy. We don’t think we necessarily had exactly the right price value relationship and offerings to be successful. We think we are much closer to that with frozen snacks.”
Annie’s sustained a loss of $1,220,000 in the first quarter ended June 30, which compared with income of $2,172,000, equal to 13 cents per share on the common stock, in the same quarter a year ago. Net sales increased 10 percent to $43,297,000, up from $39,318,000 a year ago.
