Financial results

Pinnacle Foods to focus on gluten-free bakery and frozen foods after posting declining Q2 sales

By Douglas Yu contact

- Last updated on GMT

Pinnacle acquired Boulder, which manufactures brands including Udi’s, in 2015.  Pic: Pinnacle Foods
Pinnacle acquired Boulder, which manufactures brands including Udi’s, in 2015. Pic: Pinnacle Foods
Pinnacle Foods, which is being taken over by Conagra for $10.9bn, has posted a 0.4% annual sales decline in Q2.

The company posted $741.8m in sales versus $744.6m from a year ago, which it said was mainly caused by the phasing of Easter and lower volume and mix.

Conversely, Pinnacle’s quarterly sales were up 1.1%, excluding the timing of Easter (almost three weeks earlier than Easter in 2017), while on a year-to-date basis, sales were up 2%.

Baking mix brand under pressure

Mark Clouse, Pinnacle Foods’ CEO, said during the earnings conference the company’s grocery segment, which includes baking mix brand Duncan Hines, was most affected by the Easter timing.

“Net sales for our grocery segment declined by 7% in the second quarter [to $257m] with retail consumption down 5.5% and market share off slightly,”​ he said, adding Duncan Hines also felt pressures of “continued competitive pricing in base baking businesses.”

However, Clouse said Duncan Hines’ Perfect Size For 1 cake mix remains a “compelling and disruptive snacking platform, evidenced by strong consumption and the attraction of competitive entrants in the space.

“As we lap the strong growth from last year’s initial introduction of the product, we feel good about the nearly 40% growth year-to-date.”

Clouse added: “Given the new competition, we are looking at our offerings to ensure we have the right mix and we were activating additional marketing strategies to support the continued leadership of our first-to-market innovation.”

Innovating beyond gluten-free businesses

Pinnacle acquired Boulder, which manufactures a portfolio of health and wellness brands including Udi’s, Glutino and popcorn brand Earth Balance, for $975m in 2015. 

In Q2, Boulder’s overall net sales increased 5% to $99m year-over-year, within which Earth Balance was up 15% and Udi’s turned to positive consumption growth led by the new gluten-free bread the company launched earlier this year.

Clouse told analysts Pinnacle will innovate beyond its bread category.

“We will also be renovating our gluten-free pizzas and granolas in the third quarter, as well as introducing new flavors in the back half of the year,”​ he said.

Winning frozen and snacking with Conagra

Commenting on the recent acquisition announcement by Conagra, Clouse said combining the company with Pinnacle is “logical and synergistic.

“The complementary nature of the brands and their consumer relevance creates an incredible platform to win in frozen, center of store and snacking,”​ he said.

Pinnacle’s frozen portfolio reported 4.3% consumption increase in Q2, with market share upping 0.3 points. Segment sales increased to $309m from $296m in the same period last year.

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