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Protein power BellRing Brands reported a tepid fiscal Q1 this morning as array of insurgent brands lent promotional turbulence to protein shake category and said its longtime CEO Darcy Davenport will be heading to the exits in coming year once her replacement has been found. Shares crashed 14% in trading today. They're off 70% in past year. The surprise announcement described Davenport as electing to "retire" no later than Sep 30, tho she's listed as only 52 years old in annual meeting info mailed out in Dec. Recall, tho, that at companies like PepsiCo, senior leaders like CFO Hugh Johnston have elected to "retire" only to pop up in CEO role somewhere else a few weeks later. So it's possible Davenport has a destination in mind. Still, today's stated plan is for her to exit role as soon as successor is found but no later than that Sep date. She's slated to serve in advisory role after that. No question she's served some hard years at BRBR, seeing it thru Dymatize and Power Bar acquisitions, its spinoff from cereal maker Post Holdings to independently listed company, then pandemic and supply chain snarls that put co in triage mode on offerings while it scrambled to assemble more durable and extensive copacking network. Tho unflappable on investor calls, it could be that she's just exhausted from all that. Certainly, BellRing chmn Robert Vitale was effusive in his praise for her "incredible contributions" as "she led sales growth from $140 million to over $2.3 billion and helped create a pure-play company focused on proactive wellness." Tho we're supposedly in an era where protein reigns supreme, despite its continued leadership in category BRBR has seen its shares erode 70% in past year, as we'd noted above.Sales in Q1 edged up just 0.8% to $537.3 mil compounded of 0.7% volume gain and 0.1% in price/mix. Even that tiny rise benefited from advancing of some orders from Q2 along with strength of once-struggling Dymatize brand, +15.8%, tho it also cycled some club channel promos that weren't repeated this year. Workhorse Premier Protein brand suffered 1.2% net sales decline on 0.2% volume decrease and 1% decrease in price/mix. Within that brand, the core protein shakes were off 2.2%. Still, Davenport noted that was better than expectations and took solace from notion that "the RTD shake category remains healthy. And Premier continues to hold a leadership position with 22% market share and best-in-class household penetration, brand equity scores and repeat rates." Beyond first period, BRBR anticipates that trends will improve during rest of year as merchandising initiatives, ads and innovation take hold. GLP-1 drug usage remains a tailwind too.In category where whey and other input costs always are a challenge to manage, gross margin dropped nearly 8 pts to 29.9% from 37.5% as Trump tariffs compounded problem. Those lower margins caused operating profit to drop to $78.5 mil from $115.3 mil a year earlier.New Competitors Already Being Shaken Out Tho buzz behind protein has brought an array of new competition to category, both in form of protein shakes and powders and infusion of protein into other formats, Davenport continued to take long view. True, "the success of the category has attracted competition," she said. "As insurgent brands work to establish themselves in the market, we expected promotional spending would increase," mainly in club channel and in mass to lesser extent. Those insurgent brands are "spending a ton of money on demos, on promotion, displays . . . I do not think it is the new normal . . . It's like this protein craze, and it&#39;s like a land grab." Currently, about half of category is comprised of leading brands like Premier, another 10% are insurgent and crossover brands and about 30% are declining legacy brands that have been "share donors" for years. (Simply Good Foods' Atkins would certainly be one, we'll note.) "There&#39;s an extra 10% that basically just follow the category growth."In CEO's view, "over the longer term, we continue to expect retailers to consolidate the shelf behind a handful of the best-performing brands and move them to more heavily trafficked aisles. We remain confident in our ability to continue leading the category. Though we anticipate some near-term transitional impacts, on these competitive dynamics play until these competitive dynamics play out. We believe that mainstream appeal, high repeat rates, and execution capabilities will determine the long-term winners." She indicated that in club, where thresholds are high, shakeout already is occurring.One questioner wanted to know: is she considering acquiring any promising insurgents, following the model of some energy players? "We are evaluating the kind of consumer metrics to see and increment and interaction with our brands to see if there are any that we think would be interesting, add-ons to our business," she replied.Innovation Gets Real Again For a while, recall, innovation was a non-factor at BRBR as co cut even popular sku's as it navigated severe production squeeze. That's over now, and flow of new stuff is accelerating. Among items off to a good start has been Coffee House line, where 4-pks of Caramel Macchiato have been moving briskly in Jan. The idea there is to twin 30 g protein with caffeine equivalent of a cup of coffee via liquid with sweeter palate than core Cafe Latte shake. "It's kind of flirting with the energy category a little bit," she said.Next up: pair of shake lines that she teased ahead of 2d half debut. One heightens the protein content and the other "offers consumers a completely different drinking experience versus our core products" and should reel in incremental consumers. She left it at that for now, allowing she was being "purposely vague."Some of those will require enlisting new copackers. Some might also warrant new modes of distribution. "We&#39;ll use our existing distribution for all of the new products" but "as we go down the path of working on kind of a DSD solution, obviously, we would be able to sell these products in those channels as well. But right now, we are all about using our existing distribution channels."Playing the Singles Game Another unlock for Premier is single bottles, a departure for multipack brand merchandised on dry shelves. Davenport said singles did double the volume this Jan of a year earlier via incremental displays that drove sampling. Next question: "Do we need people in the store restocking shelves more than we&#39;re doing it right now?" Maybe just certain stores in certain regions? For a co that hasn't historically deployed DSD, "it is like a very steep learning curve." So that's gotta be figured out. (We got help from Motley Fool transcript in writing this story.)

Reporting Tepid Q1 Amid Intensified Competition, BellRing Brands Says CEO Davenport Will Move On; Shares Crash 14%

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