Simply Good Foods Turns Again To Ex-ceo Amid Glp-1 Advance

Credit: @AtkinsNutritionals/Facebook

It’s different for a business to re-appoint an aged main executive arsenic CEO but this week The Simply Good Foods Company – location to brands including Quest and OWYN – has done precisely that. And nan emergence of GLP-1 narcotics provides immoderate absorbing context.

Joe Scalzo, who had been Simply Good Foods’ CEO for six years up to July 2023, is returning to nan US company to switch Geoff Tanner, nan business down nan Atkins marque said yesterday (20 January), overmuch to Wall Street’s surprise.

Discover B2B Marketing That Performs

Combine business intelligence and editorial excellence to scope engaged professionals crossed 36 starring media platforms.

Find retired much

After being succeeded by Tanner, Scalzo had moved to nan domiciled of executive vice chairman, a position he held for 13 months up to August 2024 erstwhile he near Simply Good Foods to go a partner astatine US private-equity patient Centerview Partners.

Scalzo’s departure 18 months agone had marked nan extremity of conscionable complete a decade astatine nan business. He was president and CEO of Atkins Nutritionals for four-and-half years up to its waste successful 2017 to blank-cheque institution Conyers Park Acquisition Corp. successful nan SPAC woody that formed Simply Good Foods. Scalzo was past CEO of nan caller entity.

Now he is backmost to, successful nan words of Tuesday’s (20 January) statement, “oversee a caller section at Simply Good Foods focused connected reigniting maturation and improving profitability crossed nan business”. The return of Scalzo could, Wall Street analysts suggest, supply a boost to nan Atkins brand.

Sales pressure

The shakes-and-snacks business has seen its apical and bottommost lines travel nether unit successful caller quarters amid nan ongoing declining income from Atkins, merchandise issues successful nan OWYN business and sluggishness astatine Quest.

In nan twelvemonth to nan extremity of August, Simply Good Foods generated nett income of $1.45bn, up 9% connected nan erstwhile 12 months. However, nan company’s nett income stood astatine $103.6m, down from $139.3m a twelvemonth earlier, arsenic it booked a $60.9m impairment connected nan Atkins brand.

Two weeks ago, Simply Good Foods recorded a 0.3% diminution successful nett income for nan first 4th of its caller financial twelvemonth amid little Atkins income (which nan institution described arsenic “expected”; much connected that later) and from OWYN, a marque that had been enjoying a tally of growth. The institution snapped up US protein-products adjacent Only What You Need (or OWYN for short) successful 2024 and nan marque continued to bask increasing income nether its caller owners but a “product value issue” deed inventories astatine nan unit level during nan quarter.

The company’s first-quarter nett income fell much than a 3rd to $25.3m. Despite those numbers, nan guidance from Wall Street was not unduly negative, though location was a cautionary reside from TD Cowen’s Robert Moskow, who, while describing nan figures arsenic “better than feared”, highlighted immoderate of nan issues that he saw facing nan business.

“While we judge that nan institution has established a realistic guidelines for income and net this year, we expect nan stock’s aggregate to stay subdued owed to structural declines successful nan Atkins marque and volatility successful nan acquired OWYN brand,” he said successful nan aftermath of nan results.

“In our view, nan suddenness of OWYN’s issues highlights nan consequence of nan company’s business model, which relies connected identifying and acquiring early-stage, high-growth brands, often pinch little blase soul processes, to offset Atkins’ structurally declining profile.”

Simply Good Foods had labelled nan latest tumble successful Atkins income arsenic “planned”. The institution has been moving pinch retailers to displacement immoderate of nan support abstraction taken up by Atkins’ “tail” to what it has called “more productive” Quest and OWYN SKUs. It’s besides sought to “modernise” what’s near of nan Atkins range, bringing successful caller packaging, changing prices and adding a four-pack to its meal-bar line-up. The institution did, however, forecast a 20% autumn successful “consumption” for Atkins complete nan 2026 fiscal twelvemonth arsenic a full erstwhile it posted its first-quarter results a fortnight ago.

Matthew Smith, an equity expert covering Simply Good Foods for Jefferies, welcomed Scalzo’s return. “Scalzo brings contiguous class expertise and he is very acquainted pinch nan institution and brands,” he said this week. “We position nan announcement arsenic a positive, bringing backmost a seasoned manus to reside underperformance earlier income maturation momentum stales successful nan Quest and OWYN brands.”

Smith believes nan thrust of Scalzo’s attraction will beryllium connected those 2 brands. In nan first quarter, Simply Good Foods said Quest accounted for 67% of its nett sales, pinch OWYN opinionated astatine 9% and Atkins, aft aggregate quarters of declines, now down astatine 27% (the company’s world business makes up nan remaining 2%).

“We judge Mr. Scalzo’s attraction will beryllium connected maintaining topline momentum for Quest and OWYN, including improving Quest capacity extracurricular of nan salty snack/chip class wherever maturation remains robust, continuing nan activity to right-size nan Atkins business (now little than 30% of full sales) and recovering margins towards humanities levels,” Smith said.

An opportunity for Atkins

Nevertheless, location is nan position that Scalzo’s re-appointment could beryllium a changeable successful nan limb for Atkins, particularly successful nan discourse of nan rising usage of GLP-1 medications.

Simply Good Foods has been conducting a aviator objective study involving GLP-1 users who consumed Atkins products. One group were connected nan Atkins fare and nan different followed what Tanner told analysts 2 weeks agone was “a much accepted low-fat diet”.

Alongside nan publication of nan first-quarter financial results, nan institution said nan investigation had thrown up “encouraging results” connected users’ musculus retention and digestive comfort.

“We conscionable sewage nan results backmost successful past month, truthful it’s still very early but those results were very encouraging,” Tanner said. “Patients connected nan Atkins fare who person taken nan supplier tended to clasp much musculus mass, which is simply a captious rumor for group connected nan drug, tended to acquisition less broadside effects: less headaches, nausea, little gas. And location were immoderate different important differences connected metabolic outcomes, peculiarly for those pinch diabetes.”

As Tanner conceded, nan investigation was a aviator and nan institution has “a batch much to learn”. However, he told analysts Simply Good Foods’ income squad would put nan results to its unit customers, which themselves “are besides trying to fig retired really to meet nan needs of GLP-1 patients”.

While nan nutrient manufacture is cautiously watching really GLP-1 narcotics impact depletion and truthful sales, immoderate manufacturers and brands are engaged moving retired really they mightiness beryllium capable to capitalise connected nan usage of nan medication.

Some connected Wall Street propose Atkins could benefit. “Under Tanner’s leadership, nan institution had taken nan position that it could get backmost to its high-single-digit maturation algorithm by giving outsized support to its Quest and OWYN brands, positive early acquisitions, while ceding Atkins’ support space,” Moskow explains. “They took this attack pinch nan presumption that nan user entreaty of programmatic diets for illustration Atkins was fading.

“In our view, this made nan institution much limited connected early-stage maturation brands for illustration OWYN, which are little predictable and often person little blase soul controls. Given Scalzo’s inheritance pinch nan Atkins brand, we fishy nan institution will now research shifting nan company’s strategical guidance to springiness it much support, possibly capitalising connected nan needs of GLP-1 users for higher macromolecule diets.”

At Mizuho Securities, John Baumgartner believes location is “healthy maturation imaginable for each 3 brands” pinch “opportunities to amended performance” astatine Quest (he cites “disappointing” caller innovation” and OWYN (pointing to nan value issues) – and he agrees Scalzo’s return could springiness Atkins a caller lease of life, particularly owed to nan committedness of nan caller pilot.

“We judge it creates a template for renewed entreaty of nan brand, successful a GLP-1 world, akin to how Atkins thrived among ‘non-programmatic dieters’ who embraced nan patient mundane low-sugar lifestyle, speech from simply ‘low-carb’, complete a decade ago,” he says. “We besides statement that nether Mr. Scalzo’s leadership, the Atkins brand maintained maturation and relevance agelong aft ‘low-carb’ fame ebbed and was replaced by paleo, keto, etc.”