“If you look at the growth margin side [of the company], the manufacturing footprint is substantially more complicated than it needs to be,” he said at the recent DbAccess Global Consumer Conference.
“This is driven by significant SKU proliferation: 50% of our 2,000 SKUs generate around 5% of our revenue, so we have this long tail generating a substantial amount of manufacturing complexity that’s driving lower cycle time and run time of the plants.”
Snyder’s operates 14 manufacturing facilities, eight of which are operating below 80% capacity utilization.
“There’s an opportunity to rationalize that plant footprint to produce one to 1.5 points of costs of goods improvement,” Pease said.
On the operational side, he noted Snyder’s-Lance has not approached the indirect cost spend with a zero-based budgeting mindset, so there is also probably 10 to 15 points of improvement opportunity there.
Pease said Snyder’s has focused on the non-GMO, organic and clean label trends to ride the better-for-you wave.
“If you look at brand equity, Snyder’s of Hanover, for example, we [are] number one in the market [with] roughly 50% share,” he said. “But it’s a highly Northeast-dominated brand, so there’s opportunity to roll out nationwide to increase distribution.”
Pease added Snyder’s-Lance plans to take its sandwich crackers to the mass US audiences beyond its Southeast home base.
On the other hand, Snyder’s-Lance's popcorn brand, Pop Secret, has been struggling with sales because it has been “baby boomer-focused”, while the company has nearly doubled the number of Kettle Chips flavors to 70 since the acquisition of Diamond Foods a year ago, Pease added.
“Clearly, there’s some cleanup work underway to cut the 50% of SKUs only driving 5% of the revenue,” he said. “We think that can be done with a fairly minimal top line impact, although in an environment where the category trends have been soft from the beginning of the year.”
Advertising expense and export increase
Pease said Snyder’s-Lance spend on marketing and advertising has been historically low: accounting for only 2% of the sales.
The company has not set a target for the marketing goal yet, but aims to increase its advertising budget to between $30m-$40m.
“We can’t invest in the brands at the expense of margins; we have to do both,” he said.
Going forward, Snyder’s-Lance also plans to extend the Kettle Chips footprint in the EU, and particularly focus on growing core international markets, including Australia, China, Korea and Japan.
Snyder’s-Lance's net revenue in Q1 2017 grew 18.7% to $531.5m and is expected to reach $2.2bn for the full-year 2017.