Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Utz Brands Inc (NYSE:UTZ) expects to maintain its core market share while expanding in new markets through increased distribution and marketing support.
• The company has a strong productivity program, delivering $60 million in 2024 and aiming for over $150 million from 2024 to 2026.
• Utz Brands Inc (NYSE:UTZ) is making significant capital investments in automation and capacity expansion, which are expected to improve efficiency and reduce costs.
• The company is experiencing strong consumer reception for its Boulder Canyon brand, which is growing rapidly and has surpassed $100 million in sales.
• Utz Brands Inc (NYSE:UTZ) is expanding its distribution network, particularly in western regions, and plans to increase advertising to boost consumer awareness.

Negative Points

• The category growth for fiscal 2025 is expected to be flat to slightly positive, indicating a sluggish market environment.
• Utz Brands Inc (NYSE:UTZ) anticipates a modest headwind from pricing in fiscal 2025 due to increased competitiveness and a promotional market.
• The company is facing challenges in the C-store channel, which has been a persistent issue and is expected to improve only modestly over the year.
• Non-branded and dips and salsa segments have been underperforming, although the company expects these declines to stabilize.
• There is lumpiness in promotional spending and consumer purchasing behavior, which may impact sales and require adjustments in strategy.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with UTZ.

Q: What is your category growth assumption for fiscal '25, and does it include holding value share in core markets while expanding in new markets? A: Howard Friedman, CEO: We expect the category to grow around 0% to 1% next year, slightly better than flattish. Our strategy remains to hold core market share and grow in expansion markets through distribution gains and increased marketing support.

Q: How do you plan to manage pricing headwinds in fiscal '25 given the sluggish category and increased competitiveness? A: Howard Friedman, CEO: We aim to deliver value beyond price through bonus bags and a price pack architecture. We expect the promotional category to normalize as participants focus on marketing, innovation, and the right assortment.

Q: Can you provide historical data on the branded salty versus non-branded, non-salty breakout? A: Kevin Powers, Investor Relations: We will provide historical components of the net sales breakdown for the first three quarters of last year to better track it relative to scanner data.

Q: What are the key drivers for expanding EBITDA margin in 2025 despite sales deceleration? A: Ajay Kataria, CFO: Our productivity program remains strong, with a line of sight to $150 million over three years. Investments in supply chain and capabilities will net about 80 basis points of EBITDA margin expansion.

Q: What are your expectations for distribution expansion, especially geographically, and what investments are needed? A: Howard Friedman, CEO: We continue to see interest in our portfolio and are gaining distribution in regions like Texas, Michigan, and Colorado. Investments focus on consumer awareness rather than promotional price points.

Q: How do you view the C-store channel and consumer behavior in terms of purchase rates? A: Howard Friedman, CEO: We expect improvement in the C-store channel and modest growth by next year. Consumers continue to seek value, shop promotions, and buy across the price ladder.

Q: Are there any changes in retailer allocations for salty snacks promotions in 2025? A: Howard Friedman, CEO: We haven't seen changes in display activity allocations. We continue to focus on core and expansion markets with strong household penetration and consumer interest.

Q: Do you need to acquire brands perceived as better for you, or is Boulder Canyon sufficient for organic growth? A: Howard Friedman, CEO: We feel great about our portfolio and its elasticity. Boulder Canyon has flexibility to enter different subcategories. We will consider acquisitions if they align with our capabilities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.