Food Business News - November 20, 2012 - 18

Diamond Foods restates ﬁnancials
Challenges remain as company works to recover from accounting errors
the results for the ﬁrst three quarters of 2012 demonstrate that Diamond faced challenges. However, we have a strong brand portfolio to build upon and have launched a new strategic direction with a focus on investing in innovation and brand building, signiﬁcantly improving our cost structure and rebuilding our walnut supply.” Diamond said recent retail sales results tracked by Nielsen reﬂect the company’s changes in brand strategy. “For both Emerald and Kettle, Diamond has reduced trade spend to improve net price realization and leverage brand equity rather than use discounting as a means to drive sales,” the company said. Emerald snack nuts and Kettle Brand potato chips sales were down 5.5% and 8%, respectively, year-over-year in the 12-week period ended Oct. 27, according to Nielsen, reﬂecting planned reductions in promotional spending. Meanwhile, sales for Emerald Breakfast on the go! were up nearly 29%, and Pop Secret grew almost 12% during the period, Nielsen said. In a Nov. 14 conference call with analysts, Mr. Driscoll stressed that Diamond continues to face several challenges that will require “comprehensive and aggressive measures.” “Our margin proﬁle has substantial room for improvement,” he said. “We are highly leveraged, and we have walnut supply challenges, issues with our Emerald brand and cost structure pressures. In order to tackle these issues, we have moved quickly to launch a wide ranging set of initiatives, with primary focus on cost reduction, capacity rationalization and improved net price realization. We have also initiated a signiﬁcant shift in the company’s brand-building focus to a more balanced and sustainable growth model.” Looking ahead to the remainder of ﬁscal 2012, Diamond Foods said full-year sales should total between $975 million and $980 million, with snacks sales forecast at $600 million to $605 million, and culinary sales at $290 million to $295 million. Adjusted EBITDA was forecast at between $78 million and $81 million. FBN

Gluten-free market to $4.2 billion in 2012
ROCKVILLE, MD. — The market for gluten-free foods is expected to reach $4.2 billion in 2012, which represents a compound annual growth rate of 28% during the 2008 to 2012 period, according to a recent report from Packaged Facts on the gluten-free market. Snacks and granola bars represent about 15% share of the market, and frozen dinners/entrees/pizzas, crackers/salty snacks, and shelf-stable dinners and soups each represented about 11% to 12% of sales. A Packaged Facts survey showed 18% of adults are buying or consuming food products labeled as glutenfree, up from 15% in October 2010. In addition, the share of gluten-free consumers who are buying more of these foods has jumped nearly 30 points and is now reaching 90%. “The conviction that gluten-free products are generally healthier is the top motivation for purchase of these products,” said David Sprinkle, research director at Packaged Facts. The belief gluten-free products are generally healthier was the top motivation for purchase by a signiﬁcant margin with 35% of gluten-free consumers citing this as the top reason. Packaged Facts cited several reasons for consumer opinions about perceptions of gluten-free. For example, consumers may have ﬁrst become aware of the category while shopping at health and natural food stores. Also, “free-from” designations suggest what the food does not contain is somehow undesirable and a food without those ingredients or components is better for you. Packaged Facts said between 2008 and 2012, the number of global new gluten-free product announcements grew by a compound annual growth rate of 48%. More than 80% of new product introductions are in North America and Europe. Overall, the market is expected to exceed $6.6 billion by 2017. FBN

SAN FRANCISCO — After CO Aft working ki several months to complete its preparation of restated consolidated ﬁnancial statements, Diamond Foods, Inc. has ﬁled the statements for ﬁscal years 2010 and 2011, and for the ﬁrst three quarters of ﬁscal 2012. Diamond Foods sustained a loss of $53,400,000 in the nine months ended April 30, 2012, which compared with net income of $23,733,000, equal to $1.08 per share on the common stock, in the ﬁrst nine months of ﬁscal 2011. Net sales for the period totaled $757,429,000, up 3.5% from $731,972,000 in the same period a year ago. Diamond said the increase reﬂected an 11% gain in culinary/retail in-shell sales and a 10% increase in snack sales, offset by a 36% decrease in total non-retail sales. For the full year ended July 31, 2011, Diamond Foods said net income was $26,567,000, which compared with previously reported earnings of $50,211,000. For the full year ended July 31, 2010, net income was restated at $15,676,000, which compared with previously reported earnings of $26,211,000. In NASDAQ trading late Nov. 15, Diamond shares were at $15.28, down 22%. Diamond Foods has worked on restating and updating ﬁnancial records since Feb. 8, 2012, when it said ﬁnancial statements for the ﬁscal years 2010 and 2011 would need to be restated because of questions surrounding certain payments to walnut growers. “Today Diamond made an important ﬁrst step in becoming current with our ﬁnancial reporting, and we look forward to completing our other required ﬁlings,” said Brian Driscoll, chief executive ofﬁcer. “Clearly,

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November 20, 2012

Food Business News - November 20, 2012

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