Simply Good Foods: Refreshes Atkins, Forecasts FY24 Single Digit Sales Growth
Banking on the “twin tailwinds” of sustained growth by snacks and wellness trends, Simply Good Foods is increasing its marketing spend in Quest and embarking on a “revitalization plan” for the Atkins brand, president and CEO Geoff Tanner reported on its Q4 earnings call.
The company posted 17% net sales growth with gross margins of 37.6% growth across the combined Atkins and Quest brands during its Tuesday morning call. Pricing during the quarter was up 3.5% and volumes grew 13.4% in Q4. Simply Good’s full-year pricing was up 7% overall while volume dipped slightly -0.2% (compared to +8.7% in FY22).
Net sales for the fiscal year grew to $1.24 billion, a 6.3% increase year-over-year. Adjusted EBITDA was $245.6 million versus $234.0 million in FY22.
A former J.M Smucker executive, Tanner took over Simply Good Foods chief executive role in March. On the call this morning, he described the nutritional snack category that the company’s two brands operate in as a “teenager” with only “50% household penetration versus 90% for most center-store categories.”
“I believe the category could double over the next five to seven years,” he added.
In order to capture that market potential, Simply Good announced it is in the process of implementing a revitalization program for Atkins “to stabilize the brand and get it to its full potential,” Tanner said.
That strategy was laid out in a five-point plan which included addressing innovation gaps, executional missteps at retail and brand perception. Upgrading product taste and accelerating innovation will be the first priorities before the company shifts its focus to optimizing price points and prioritizing ecommerce growth.
The final two points included targeted communication strategies through a new advertising campaign launched this month called “Who Knew” that pairs brand ambassador and actor Rob Lowe with comedian Wanda Sykes to bring brand skeptics back to Atkins. Atkins’ packaging is also set to be modernized later this year.
Tanner acknowledged that the brand “clearly dropped the ball on innovation,” resulting in distribution losses, and is trying to recapture an addressable market of weight conscious consumers with an eye towards strengthening its footprint in the club and ecommerce channels.
Part of the Atkins revamp also includes targeting consumers who are actively interested in GLP-1 weight loss drugs such as Ozempic. Conducting its own research with people taking GLP-1 drugs, Simply Good Foods reportedly found that both the Atkins and Quest brands had long term opportunities as “excellent off ramps” for maintaining weight loss gains.
In terms of Quest Nutrition, MULO + c-store retail growth was up over 26% YoY in FY23 with bars and snacks sales up about 25% driven by higher volumes, according to data provided by Circana. Simply Good plans to support Quest with further media investment for the end of year.
Shaun Mara, Simply Good CFO, said the company forecasts a smaller gross margin growth during FY24 but still expects solid single digit sales growth. The company is not expecting to raise pricing in FY24.
