If you're familiar with the munchies named Toastchee, Nipchee, and Captain's Wafers, Snyder's-Lance (formerly Lance) has undoubtedly helped you satisfy a snack attack. The company produces single-serve, multi-pack, and family-sized packages of bakery products and sweet and savory snack foods, including cookies, crackers, nuts, potato chips, and pretzels. Its snacks are sold under the Lance, Cape Cod, Tom's, Archway, and Snyder's brands at food retailers, mass merchants, and convenience and club stores in the US. The company also makes private-label and branded snacks for food makers. The company changed its name to Snyder's-Lance in late 2010 after buying pretzel maker Snyder's of Hanover.
Snyder's-Lance plans to complete its integration of the Snyder's of Hanover business during 2012. Fiscal 2011 represented the first year of their combined annual results. During the reporting period, revenue increased among its legacy Lance and non-branded products due to higher prices, increased distribution, and newly introduced products. But the company's annual revenue growth was slowed in 2011 due to higher commodity costs, hurting the food company's private brand product margins.
As part of the company's effort to merge the two businesses, Snyder's-Lance is paying particular attention to what it has deemed its core brands -- Snyder's of Hanover pretzels, Lance sandwich crackers, and Cape Cod potato chips. It's fueling growth among these brands by developing them and expanding their distribution. Within Snyder's-Lance's allied brands, defined as branded products that are outside its core brands, the company's exploring pricing strategies, product packaging, and product configuration to improve profit margins. The snack foods maker also is looking for add-on acquisitions to boost its core products portfolio. It added the popular Pretzel Crisps brand to its pretzel portfolio and entered the deli-bakery section of grocery stores -- a retail area for snacks that's growing -- through its $340-million purchase of Snack Factory in October 2012.
Following the merger, Snyder's-Lance in early 2011 began to convert some 1,300 company-owned direct-store-delivery (DSD) routes to independent operators to improve its distribution network's ability to serve customers. (At the time of the merger announcement, Lance's DSD network was presented as a primary reason for Snyder's of Hanover's interest.) In 2011 the company's DSD network accounted for some 65% of its revenue vs. 2010, when the network generated approximately 38% of revenue. (The dramatic rise from 2010 to 2011 is due to the non-branded partner brand revenue obtained as a result of the merger that is sold through the company's DSD system.) Snyder's-Lance is expanding its DSD network in the Southwestern US. To that end, it entered into a distribution agreement with Inventure Foods in fall 2012 to expand its route distribution system in Arizona.
The company's 2010 revenue had increased more than 6% vs. 2009, boosted by a $49 million contribution from Snyder's and about $18 million from the purchase of Stella D'oro in 2009. (Net income plunged from more than $35 million in 2009 to just $2.5 million in 2010, on merger related charges.) Casting a dark cloud over the merger, the company had reported disappointing fourth quarter results with revenue down 3% (when Snyder's sales were excluded) vs. the year earlier period. While the company has been able to grow sales through acquisitions, much of the growth has been lost on the way to the bottom line by declining margins.
As a result of the stock-for-stock deal, Snyder's of Hanover became a wholly owned subsidiary of the company. Overnight, the merger made Snyder's-Lance the No. 2 salty snack maker in the US. Snyder's-Lance boasts about a dozen owned brands, as well as a vast collection of popular licensed names, such as Bugles. As part of the agreement, Snyder's and Lance retained their corporate offices in North Carolina and Pennsylvania and knit together their executive suites to form a snack food powerhouse. Lance CEO David Singer stayed on as Snyder's-Lance's chief executive. Carl Lee, Jr., president and CEO of Snyder's of Hanover, was appointed president of Snyder's-Lance.
The Snyder's deal attested to Lance's long-standing business strategy of growth through acquisitions. The company's takeovers included the Stella D'Oro brand of packaged cookies, biscotti, and breadsticks, for which Lance paid $24 million. In 2008, Lance acquired the private-label gourmet cookie maker Brent & Sam's for $23 million, as well as name brand cookie maker, Archway, for $31 million.
Snack food is a highly competitive sector in food manufacturing; there are many players, from giants such as Frito-Lay (Lay's Potato Chips, Doritos, Cheetos, Cracker Jack) to little guys like pork rinds maker Rudolph Foods that carve out a spot in either a regional or product niche. Whether large or small, most snack food companies are bowing to customer demand to produce healthier products. To this end, the company has introduced 100-calorie snack packs and whole-grain snack crackers. (It had previously removed lard, trans-fats, and high-fructose corn syrup from its products.)
Wal-Mart, its largest customer, represented about 18% of the company's revenues in 2011.
Chairman Michael Warehime and his wife -- director Patricia Warehime -- owns about 19% of the company's shares.