Amplify wants to be 'fastest growing' premium snack group in Europe

08-Aug-2017 - Last updated on 09-Aug-2017 at 14:17 GMT

Amplify Snack Brands has said that it wants to become the “fastest-growing” premium snack brand in Europe as it battles to improve the profitability of its international division.

The US-based snack maker, which manufactures SkinnyPop popcorn, said it is increasing consumer marketing efforts behind international brands such as Tyrrells in order to accelerate growth.

“We are focused on growing profitable and strategic business and investing more into direct consumer marketing to drive trial, awareness and velocities of our products,” Amplify president and CEO Tom Ennis revealed. “To that end, we recently launched our first ever Tyrrells ad campaign in UK and France and we are excited about the unique approach to connect with consumers.”

Tyrells has also been named the “official crisp” of England Rugby. “We believe this, along with our media campaigns, will assist in driving greater brand affinity and awareness and is aligned with our goal becoming the fastest-growing premium snack company in Europe,” the chief executive suggested.

This strategy is showing early signs of success. Delivering the company’s second-quarter results yesterday, Ennis said Tyrrells' revenue growth accelerated to “near double digits” in the period. In particular, Ennis said the Tyrrells brand delivered “strong growth” outside the core UK market. “Tyrrells remains the number one premium potato chip brand in France and has seen very strong growth across other key European and international markets,” he noted during a conference call.

Amplify is also gearing up to launch Tyrrells in North America, with a soft launch scheduled for late in the third-quarter and a national rollout planned for the beginning of 2018.

Lowered outlook

While Amplify said it was “encouraged” by its first-half performance, which showed higher sales but lower profits, the company reduced its forecasts for the year.

On a group-wide basis, the company reported first-half revenue of €160.8m (US$188.2m), a near-65% jump, reflecting the contribution of Tyrrell, which it acquired last year. Operating income, however, dropped 13.4%.

While Amplify was bullish on the medium-term prospects for its international unit, the company cut its full-year outlook to reflect “market pressures”, particularly in the UK. Amplify predicted full-year net sales will reach $385-400m, below prior guidance of $404-420m. The group also cut its adjusted EBITDA guidance range to $92-100m, versus $103-111m predicted in May.

“We believe it is prudent to update our annual outlook for 2017 to reflect the continued near-term market uncertainty,” CFO Brian Goldberg explained.

Credit Suisse analyst Robert Moskow said Amplify made the “right choice” in guiding to a “more conservative back half”.

Dealing with the discounters

In the UK, Amplify said that one of its greatest challenges has arisen from the growing market share of the German discount chains, Aldi and Lidl.

This, Ennis explained, has caused some of its retail customers to adjust their own promotional strategies and increase focus on private label sales.

“As we went into the fourth quarter last year and in particular in the first quarter of this year, what we saw was some of the bigger retailers, in order to combat the discounters like Aldi and Lidl, starting to focus more on their private label brands. And so our branded business didn't get as much promotional support or merchandising support and that was going more towards the private label business for the big retailers like Tesco and others. That had a definite negative impact on our business,” he said.

Amplify manufactures some private label products in the UK and the company did see gains in this sales stream. However, the effect was to dampen profitability and weaken margins. The company, therefore, is working to shift its product mix towards its higher-return branded portfolio.

Ennis observed: “We saw it swing more towards private label versus brand from a mix standpoint. And so… we certainly saw a fall-off in profitability. We could make about 10 to 15 points more on the branded side of the business than we do on the private label side. So part of the turnaround there is really getting much more focused on our branded piece of business in the UK. So we make more money, it's a longer-term, more sustainable business for us. And so that shift has already happened.”

Discounter disruption spreading to US?

Credit Suisse’s Moskow said that moves from Aldi and Lidl to expand in the US could present a challenge for Amplify in its domestic market.

“The growth of hard discounters [in the US] I think is the thing that worries me the most. It can't be that hard for a Lidl or an Aldi to come out with a ready-to-eat popcorn brand that goes right after [SkinnyPop] and at a much lower price,” he suggested.

While Amplify is “monitoring” the expansion of Aldi and Lidl in the US, Ennis downplayed such concerns.

“Historically, we've done very well against kind of private label brands typically because of the premium price position that we have.… Our portfolio is comprised of premium-priced brands. So I think we're better insulated than a lot of the other competitors in our space.”