Utz Brands, Inc. Q3 FY2024 earnings call

• Marketing step-up continues through the rest of the year.
• Innovation is building, with expansion in geographies and bringing On the Border into core.
• Distribution has been gaining, especially in expansion geographies.
• Laps get easier in the fourth quarter.
• Productivity program and automation/capital installation ongoing, with Kings Mountain to start up for kettle business.
• Non-measured channels continue to grow and step up.
• Category remains rational, with household penetration strong when promotions, marketing, and innovation are forward.

Potato chips faced competitive issues during the quarter. Other subsegments held up reasonably well. Tortilla chips (On the Border) saw distribution gains, had a wider price gap historically, and benefits from merchandising support. Boulder Canyon was growing rapidly, approaching $100 million in sales.

• Reaffirmed full year organic growth outlook of 2% to 2.5%, expecting significant sequential acceleration in 4Q to at least 3.5%.
• No formal 2025 guidance yet, but feeling good about 4Q performance and lap periods for 2025.
• Focus on controlled factors like distribution gains and lap periods driving results.

• Competitive pricing impacting volume to value translation.
• Promotional environment volatility affecting velocity and translation.
• Convenience channel challenges.
• Uncertainty in category normalization and volume to value conversion.

Q: Reaffirmed full year organic growth outlook with significant sequential acceleration in 4Q, how much visibility to this acceleration and reconcile with consumption data?

A: Howard Friedman mentioned marketing step-up, innovation, distribution gains, and easier laps in 4Q as factors with good visibility.

Q: Key competitor stepping up competitive activity on tortilla chips, how taken into consideration?

A: Howard Friedman said On the Border has wider price gap historically, distribution gains, and merchandising support, feeling comfortable competitively.

Q: 4Q exit rate setting up for 2025, any nuances in 2025?

A: Howard Friedman talked about productivity program, C Store lap improvement, and zaps challenges as material drivers for 2025.

Q: Promotional environment, gained volume share but lost dollar share, how balance price and volume?

A: Howard Friedman said category remains rational, foundation brands had price pack architecture work and promotional shifts, volume value story with focus on expansion and pricing consideration.

Q: Distribution progress, capacity for bigger wins, role of DSD?

A: Howard Friedman said ongoing distribution gains, good capacity utilization, and hybrid model with DSD and direct to warehouse options.

Q: Competitive activity and geographic expansion, impact on distribution gains?

A: Howard Friedman said no change in geographic expansion strategy, retailers like incremental and curated assortment, rational actor approach.

Q: Shipment benefit and customer/consumer reaction to merchandising?

A: Howard Friedman said seasonal shipment planned, promotional lifts improving and elasticities consistent with expectations.

Q: Promotional lift, consumer response to inflation and online shopping?

A: Howard Friedman said consumers seek value, promotional price elasticity improving, category testing different price constructs.

Q: New substrates in snacking category, capability to make alternate substrates?

A: Howard Friedman said capability exists, but key is consumer insight and addressable market.

Q: Promotional tactics in potato chips shifting, need to change tactics?

A: Howard Friedman said will revise tactics if needed, focus on faster execution and speed, but confident in current plans.

Q: 2025 on-algorithm year if reliant solely on volume?

A: Howard Friedman said controlling factors like distribution and non-measured channels working, but category normalization a work in process.

Q: Convenience channel and gas prices, lift in pulse purchases?

A: Howard Friedman said no unique perspective on correlation between gas prices and convenience channel pulse purchases.

Q: Household penetration, which brands driving it and why?

A: Howard Friedman said On the Border and Boulder Canyon driving it, due to distribution gains, product quality, and unique taste.

Q: On the Border dips and salsa, softness, turnaround?

A: Howard Friedman said contraction in distribution last year, cycling through, but underlying business healthy, focusing on brand innovation.