Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net sales grew 16% over the prior year, with adjusted EBITDA up 38%.
- Premier Protein saw a 20% increase in net sales and hit an all-time high in household penetration.
- The company secured incremental production capacity, setting up for a strong fiscal 2025.
- BellRing Brands Inc (BRBR, Financial) raised its fiscal 2024 guidance, expecting net sales to grow 18% to 20% and adjusted EBITDA to grow 27% to 30%.
- Premier Protein Powder continued its strong trajectory, growing 44% in Q3.
Negative Points
- Dymatize's US consumption was challenged due to tough comparables, competitive pressures, and softness in the specialty channel.
- Temporary changes in assortment and flavor-specific out-of-stocks led to flat dollar consumption growth in the Club channel.
- The company expects continued inflation in fiscal 2025, particularly impacting the Powder business.
- There was a 400 basis point headwind to consumption growth in Q3 due to delayed shipments.
- Promotional intensity has increased in the RTD shake category, particularly from smaller competitors.
Q & A Highlights
Q: Last quarter, you mentioned planning for a price increase on Premier ready-to-drink shakes. Is that still the plan given the favorable input costs this quarter?
A: Yes, we are still moving forward with the price increase. The favorability in input costs was primarily related to whey protein powders, not our shakes. The whey protein costs were expected to rise sharply, but the impact on our P&L was less than anticipated.
Q: You mentioned securing incremental capacity for Q4. Was this capacity in the pipeline or incremental to what you had planned for this year?
A: The incremental capacity was beyond what we originally planned. This is the first time we've been able to secure additional capacity from our co-manufacturers, which have now stabilized and are passing on efficiencies.
Q: Are there any early reads on cost factors for fiscal '25 that might affect EBITDA growth relative to sales growth?
A: We expect some step-up in marketing and promotional spend as we drive demand. Additionally, we anticipate inflation to continue, particularly impacting our Powder business. However, we believe our price increase on shakes will largely offset these inflationary pressures.
Q: Your biggest shakes competitor is gaining shelf space in mainstream beverage aisles. Does this accelerate your desire to move Premier Shake into more mainstream parts of stores?
A: We are actively evaluating this. Our current strategy focuses on end-aisle displays and multiple placements around the store to increase awareness and trial. We believe this approach can achieve similar results without moving the category.
Q: Will innovation for Premier Protein ramp up next year? Any examples?
A: Yes, we will focus more on innovation in 2025. This includes both "little i" innovation like pack size and format expansion, and "big I" innovation targeting new consumers and occasions. Specific details will be shared later.
Q: What's the focus of the new Dymatize marketing campaign?
A: The campaign, launching this week, focuses on brand awareness and the premium quality of Dymatize products. It features Christian McCaffrey, who authentically uses Dymatize in his regimen. The campaign aims to increase household penetration and highlight flavor.
Q: How has customer response been to the recent price increase?
A: Pricing is never easy, but we have seen no major pushback. Other competitors have also taken pricing recently, which helps. All our price increases are now over the line.
Q: Can you provide perspective on private label competition in your categories?
A: Private label is less mature in our categories, with about 9% in RTD and 4.5% in powders. It maintains share but doesn't grow faster than branded players. Consumers in this category prefer trusted brands, and private label has not significantly impacted our market share.
Q: Can you quantify the impact of temporary changes in assortment on club channel consumption?
A: The changes in club assortment and some out-of-stocks impacted our Q3 consumption, which was about four percentage points lower than expected. This was due to delayed shipments and new product introductions.
Q: How do you plan to address younger consumers to drive household penetration growth?
A: Our marketing campaign will focus on younger demographics to bring them into the category early. This will be reflected in our creative and targeting efforts, as seen in our recent successful ice-cream pop-up activation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
