Drug, club and foodservice: The next big growth opportunities for gluten-free?

By Elaine WATSON

- Last updated on GMT

Boulder Brands CEO Steve Hughes: 'We are trying to get precise numbers but we… believe we are the number two gluten-free company in the world'
Boulder Brands CEO Steve Hughes: 'We are trying to get precise numbers but we… believe we are the number two gluten-free company in the world'

Related tags: Gluten-free diet

Drug stores, club stores and the foodservice market could be the next big areas of opportunity for gluten-free, according to Boulder Brands, which owns two of the biggest names in the sector: Udi’s and Glutino.

Speaking on the firm’s first quarter 2013 earnings call last week, Boulder Brands CEO Steve Hughes said: “Drug is a bit of wildcard but we got the call from Walgreens and they want to go test a 3 to 6 foot section of gluten-free, so they want our recommendation on the planogram and if that works that would be great.”

Walgreens wants to test a 3 to 6 foot section of gluten-free

Club stores also have untapped potential, he said: “There are products in club today that are gluten-free. We’ve never focused on it. They’re doing quite well. We know one cracker company that was doing $14m on one item in club.   

“We’ve just made a strategic hire of someone who is very wired in Costco. We obviously have a great relationship with Sam's, and I think we’re going to see some progress here but that’s business that over the next several years could be a nicely profitable $50m business for us, this could be all incremental.”

Foodservice is about three years behind grocery on gluten-free

As for food service, he said: “I think this year we are on track to do about $10m on food service.

"I think it’s about three years behind grocery on gluten-free, everybody is aware of it, everybody is trying to figure it out, but we’re knocking down whether or not​ [the growth potential is in] bread, it’s pizza, hamburger, hot dog buns…”

He added:“It’s kind of an early stage. But I think we are going to see really strong robust growth at good margins on food service for the foreseeable future and I think once we get the facility ​[Boulder Brands' giant new facility in Denver, Colorado] up there won’t be another person or major food service operator that's​ [not] going to want to partner with ​[us] when they decide to get serious about gluten-free.”

Retailers are expanding the space allocated to gluten-free   

UDIs-gluten-free-FNCE
Udi's at the Food & Nutrition Conference & Expo (FNCE) in Philadelphia last fall

In the first quarter of 2013, Udi’s organic net sales surged 62% while Glutino net sales grew 34%, he revealed.

“We have increased the average number of items in conventional grocery retail for Glutino to 10.3 items for the most recent four week period ending in March. This is up 8.1 items versus a year ago.

“[And] Udi’s averaged 6.9 items in conventional grocery category compared to 4.6 a year ago. An increasing number of retailers are committed to three devoted​ [gluten-free] sections: A gluten-free section in grocery, bakery and frozen.”

Currently, more than half of conventional retailers have gluten-free areas in their stores, he said. ”Retailers who have space such as Walmart are expanding their gluten-free offerings and retailers who don’t currently offer a dedicated gluten-free space such as Safeway are making room.”

We believe we are the number two gluten-free company of the world

Udis-gluten-free-products

Meanwhile, conversations about launching the Udi’s brand in the UK market are progressing well, said Hughes, who has just announced the acquisition of UK-based gluten-free firm  Davies Bakery, 

The deal will be used as a platform to help launch Udi's into the UK market via a new subsidiary called Boulder Brands UK, he said.

We have had some initial conversations with customers who are very excited about Udi’s coming to the UK…and if it works in the UK, it will probably work in the rest of the Europe.”

He added: “We are trying to get precise numbers but we… believe we are the number two gluten-free company in the world.

"Dr. Schär is number one, they are based in Germany and we are on a growth path that compared to their growth path would probably take us to number one brand in the world… in gluten-free within the next 12 to 18 months.”

The largest most sophisticated gluten free bakery in the world

Boulder Brands is currently engaged in a major project to consolidate five Udis’s factories into one giant, state of the art manufacturing facility opening in Denver, Colorado, in the fall, that it claims will be “the largest most sophisticated gluten free bakery in the world”.

Udi's-gluten-free-pizza

Said Hughes: “We clearly have an advantage given our scale. Many of our competitors are very much in the batch production model.

"I think this move with the continuous bread line is a bit of a game changer and is going to give us... some more consistent product and the cheapest possible bread made in the gluten-free​ [market].”

Click here​ to read more about the gluten-free opportunity in foodservice.

Click here​ to read more about the gluten-free market, who is buying gluten-free products, and why.

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