US cereal firm Post Holdings has reported a “self-inflicted” market share loss in the first quarter (Q1) of 2013 and plans new product launches backed by large ad campaigns to become a long-term share gainer.
During its conference call Post said its market share in ready-to-eat cereal was 10.2% for Q1, down a “disappointing” half a share point versus Q1 2012.
‘Work to do’
Terence Block, president and Chief Operating Officer of Ralcorp, said: “The decline was largely Honey Bunches of Oats related and somewhat self-inflicted as we made the spending decision to reallocate funding to better support our innovation pipeline and new advertising campaigns breaking in our second quarter behind Honey Bunches of Oats, Grape Nuts and Shredded wheat."
He added: “We obviously have a lot more work to do to become a long-term share gainer”
According to Block, brand-building will assist share resurgence. Post is launching what Block called, “the most aggressive new product line-up Post has had in years”.
The company will launch Honey Bunches of Oats Greek Yoghurt and a separate Mango Coconut variety in Q2. Other launches include Great Grains protein blends, Grape Nuts Fit and Sesame Street apple and banana flavors.
“Importantly, these items are targeting different consumer segments of the cereal usage experience,” said Block.
Post will focus on building brands with big marketing campaigns. It will market Grape Nuts Fit as the cereal that fuelled Sir Edmund Hilary to climb Mount Everest 60 years ago and will be carrying a health claim on Shredded Wheat based on its own survey that said 9 out of 10 doctors would recommend Post Shredded Wheat as part of a healthy diet to help reduce the risk of heart disease.
Earnings down in Q1
Post’s Q1 net earnings were down almost 40% in Q1 compared to last year at $7.6m, predominantly due to costs related to its spin-off from Ralcorp announced in February last year.
Adjusted EBITDA for the quarter was $52.5 million versus $45.6 million for the same time period a year ago while net sales rose 8% due to volume increase and a rise in average net selling prices.
Natural platform with Attune
Post acquired San Francisco-based cereal firm Attune Foods for $9.2m in December last year.
“Acquiring Attune Foods allows Post to participate in the natural channel where Post is today unrepresented,” said Block.
He added that Attune affords Post an organic and probiotic platform for the future.
Post reaffirmed its guidance for 2013 and said it expected adjusted EBITDA to be between $210m and $225m.