Beer Marketer's Insights - Simply Good Foods Reports Flat Q1 but Sets Range of Initiatives on Atkins, Quest, OWYN

Simply Good Foods turned in a flattish Q1 this morning as modest growth in its Quest and OWYN platforms was offset by co's enforced retreat on underperforming Atkins brand. Tho it's expecting Q2 to be soft too it expects recovery in 2d half as it coaxes retailers into turning some Atkins facings over to Quest and OWYN and gets past quality issue that hit OWYN this past year. As for Atkins, early results from new clinical studies suggest it has a constructive role to play among consumers taking GLP-1 weight loss drugs, so marketing team will be riding that in coming weeks as it returns to traditional role as weight management brand rather than broader nutrition brand. With shares off roughly 40% over past year, co is deploying lotsa capital in buying back stock, tho prexy/CEO Geoff Tanner told investors today that M&A remains in the mix as potential growth generator. Recall that SMPL has been assembled from successive additions of Quest and OWYN to Atkins base. Here&#39;s what the numbers showed: Net sales edged down 0.3% to $340.2 mil in period. Quest grew 9.6% on 12% retail growth despite weakness in its legacy bar biz while Atkins dropped 16.5% on 17.8% decline at retail. Plant-based OWYN sagged 3.3% as it cycled effect of quality issue on retailer inventories but retail takeaway was +17.8%, testimony to brand's continued strong growth prospects. Gross margin narrowed sharply to 32.3% from 38.2% on higher input costs, mainly elevated cocoa prices and tariffs, which exacted $4 mil cost. Excluding some accounting and one-time issues, GM was a bit more robust at 33.1%. Tanner noted that co has locked in better price on cocoa even as recently taken price hikes have showed anticipated elasticity, meaning they're not unduly deterring shoppers from making their purchases. Operating income dropped 31.2% to $37.6 mil.Among key brands, Quest's new 45 g Protein Milkshake is off to strong start, with further retailer pickups in the offing. On bar side, Tanner acknowledged there's work to be done to resuscitate core entries but more recent additions like Overload bars are performing well. He's also optimistic about new high-protein Bake Shop Donut. (Yes, donuts now are a health food.) "We're obviously not happy with flat," he said. "We're the leader in the bar segment and we should be driving it." That will happen as multiyear plan kicks into gear via initiatives to revive core and yet-undisclosed new platform due for spring announcement.As for Atkins, the 19% drop in retail consumption was consistent with outlook, with Tanner reminding that two-thirds of that was lost distribution, particularly in club channel, as co cuts slower-moving "long-tail" sku's. Those clinicals could offer a path forward in showing that GLP-1 users who consume Atkins items tend to retain more muscle mass, experience fewer side effects like headaches, nausea and gas pain, and enjoy metabolic benefits for those suffering from diabetes. The selling team will be bringing the news to retailers in coming weeks.Nor is team's enthusiasm for OWYN dimmed. It has lots of upside just in ACV for its core shakes, even as small powdered biz is growing by over 50% and will get more support. There will be platform innovation on this brand too. So OWYN, which stands for "only what you need," retains "tremendous runway" from its positioning at "leading edge of the clean movement." To fulfill promise, SMPL is ramping up marketing to level exceeding 10% of sales this year.New Leaders on Quest, OWYN Tho it didn't come up on earnings call today, there have been some key leadership changes within Simply. Recall that co had suffered separate departures of leaders of its two growth brands, Quest and OWYN. Quest chief Stuart Heflin, who left to take CEO role at Peet's Coffee & Tea (BBI, Nov 17), has been succeeded in top role by svp/gm Ryan Thomas, who's been running Atkins since housecleaning there and retains that role. Ryan, a former Campbell Soup and Smucker exec, arrived at SMPL in Oct 2023 to run Atkins marketing. Meanwhile, role left by former OWYN CEO Mark Olivieri (BBI, Sep 25) now is held by Mike Clawson as gm, co's website indicates. The ex-Del Monte exec arrived in Oct 2024 as chief commercial officer, a role he retains. Olivieri hasn't yet indicated what his next stop will be tho he's made it clear it will be on entrepreneurial side again. It's not clear whether Thomas' and Clawson's roles on Quest and OWYN are interim or permanent.M&A Still a Possibility With its shares in the tank lately, Simply has concluded that repurchasing shares is best use of capital for now. Today it just added another $200 mil to pool for that purpose. But that doesn't mean Simply doesn't remain in hunt for right acquisitions, as Tanner informed questioner on call. Terming the share buybacks "opportunistic," he assured, "M&A is something we're always looking at. There are targets out there. Obviously, we would want to get it at the right price." Until recently, copacking squeeze had served as entry barrier but lately new entries have been proliferating, representing both new competition but also M&A opportunities. CFO Chris Bealer added that balance sheet remains robust enough to support the recent modest increase in debt level.

Simply Good Foods Reports Flat Q1 but Sets Range of Initiatives on Atkins, Quest, OWYN

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