Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BellRing Brands Inc (BRBR, Financial) reported a 28% increase in net sales and a 53% increase in adjusted EBITDA over the prior year, indicating strong financial performance.
- The company successfully executed two club promotions in one quarter, significantly boosting consumer and retailer engagement and excitement.
- BellRing Brands Inc (BRBR) raised its fiscal year outlook based on better-than-expected performance in the first half, strong consumption trends, and confidence in ongoing capacity expansion.
- Premier Protein shake consumption grew robustly by 29% this quarter, with high growth across all channels, driven by promotions, strong velocities, and distribution expansion.
- BellRing Brands Inc (BRBR) continues to lead with a market share of 21% in the RTD segment and maintains the top position in the broader convenient nutrition category.
Negative Points
- Despite overall strong performance, Dymatize brand faced challenges with an 8% decline in US consumption, affected by ongoing softness in specialty channels and increased competitive activity in e-commerce.
- Temporary out-of-stocks in some products occurred late in the quarter and into April, although these are expected to stabilize and improve in the second half.
- The ready-to-mix segment grew only 3%, showing a slowdown as consumers traded down to value brands and switched to other high-protein products.
- Increased competitive activity in e-commerce led to a highly competitive environment for Dymatize, with deep discounting by emerging brands impacting performance.
- Input costs for certain materials are expected to rise in the second half of the fiscal year, potentially impacting margins despite planned pricing actions late in the fourth quarter.
Q & A Highlights
Q: Can you discuss the impact of non-promoted sales of Premier Protein this quarter and how they correlate with promoted products?
A: Darcy Davenport, President and CEO of BellRing Brands, explained that about 80% of their growth comes from new households entering the category, which has led to an all-time high in household penetration this quarter. The increase in shipments has generally led to higher sales, particularly in non-promoted products across all channels outside of promotional periods.
Q: Regarding the guidance raise, is there potential to exceed the upper end of the sales guide given the capacity constraints mentioned?
A: Darcy Davenport mentioned that they have sufficient production to meet the full range of their guidance and will assess in Q4 whether to build more inventory or satisfy higher-than-expected demand. They aim to be nimble in managing production and inventory levels.
Q: What were the learnings from the increase in merchandising and promotional mix this quarter?
A: Darcy Davenport noted that the key to success on promotion is display, which helps increase household penetration and brand stickiness. The promotions led to strong results and confirmed that the fundamentals of the brand are intact, with significant retailer and consumer excitement.
Q: How do you expect the input cost environment and promotional activity to impact the financials moving forward?
A: Paul Rode, CFO, explained that they anticipate costs to rise in the second half of the year, particularly for powders, and expect proteins to modestly increase. They foresee significant favorability in protein costs in Q3 but a moderation in Q4. Promotional activity is expected to be balanced throughout the year, with a modest benefit from pricing in Q4.
Q: Can you elaborate on the competitive dynamics observed in e-commerce for Dymatize and the strategies to enhance its market position?
A: Darcy Davenport acknowledged increased competition and aggressive discounting by emerging brands in e-commerce. They plan to be more aggressive in marketing and promotions, particularly leveraging their campaign with Christian McCaffrey to boost brand awareness and engagement.
Q: What are the expectations for household penetration and consumer base expansion, particularly regarding Premier Protein shakes?
A: Darcy Davenport highlighted that Premier Protein has a diverse consumer base with a nearly even male-to-female ratio, which is unique in the category. They continue to attract new consumers, contributing significantly to category growth, and see substantial potential for increasing household penetration further.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
