Speaking on the Q4 2013 earnings call after posting a $147m net loss on sales down 11% to $200m, Driscoll said he expects the bottom line to improve in fiscal 2014 as the firm's turnaround plan kicks in, despite higher nut costs.
The Q4 losses were chiefly due to settling an investor lawsuit (click here), a write-down of Kettle-brand assets, and a charge related to a change in the fair value of Oaktree Capital's investment in Diamond Foods, which replaced its CEO and CFO in 2011 in the wake of a walnut-accounting scandal that scuppered its plans to buy Pringles and forced it to restate its earnings.
For the full year, Diamond Foods notched up sales of $864m, down 12% vs 2012, while net losses rose from $86.3m to $163.2m.
Emerald Nuts re-launch looking promising
But the bad news is now behind the firm, said Driscoll, who said a re-launch of core brand Emerald Nuts via a “combination of SKU pruning and repositioning” is now well underway, with 95% of its customers now stocking the new products.
“While it's too soon to draw any conclusions, we are encouraged by early in-market signals”, said Driscoll. “The early signs in terms of velocity for point of distribution are looking promising.
“We also have new items in development that will launch in the second half of the fiscal year for both our canister and Breakfast on the go! product lines.”
Walnuts: We believe that we have now stabilized our supply base
As for walnuts, while Diamond “will have somewhat less supply to sell than last year”, he said, “We believe that we have now stabilized our supply base. This critical step should put us in a better position to add new growers going forward.”
Kettle Chips continue to gain share in natural channel
Meanwhile,Kettle Chips have continued to gain share in the natural channel, while sales are stabilizing in the grocery channel, where Diamond is trying to focus more on building brand equity and innovation and less on discounting, he added.
“We are encouraged about the strategy we are taking. Good evidence of this is in the U.K. where we are seeing the benefits of cost savings and better management of promotional spending being invested in brand support and more effective advertising. This is translated into increased household penetration and solid growth.”
Pop Secret: A standout performer
But the standout performer in Diamond’s portfolio continues to be Pop Secret popcorn, he said.
“Underlying our earnings improvements in the Snacks segment has been the continued momentum of Pop Secret.
“The brand experienced solid growth. We attribute this progress to the combination of increased investment in marketing, distribution gains and improved net price realization.”
Click here to read about Diamond Foods' proposed settlement of a investor-led lawsuit over improper accounting in its walnut business.