Business Overview
Utz Brands, Inc. (UTZ) is a leading U.S. manufacturer of branded salty snacks with a rich history dating back to 1921. Founded in Hanover, Pennsylvania, the company has steadily expanded its distribution channels and product portfolio, offering a diverse range of iconic, authentic, and better-for-you snack options to consumers nationwide.
Utz Brands' core geographies span across the Northeastern and Mid-Atlantic regions of the United States, where the company has acquired strong regional brands and distribution capabilities in recent years. The company's journey began as a small, family-owned business in 1921, focusing initially on producing and distributing its signature potato chips and pretzels in the Northeast and Mid-Atlantic regions. Over the decades, Utz steadily expanded its geographic reach and product portfolio through organic growth and strategic acquisitions.
Notable milestones in the company's expansion include the acquisitions of regional brands like Golden Flake and Zapp's in the 1980s and 1990s, which helped Utz expand into new markets and snack categories. These strategic moves allowed the company to diversify its offerings and strengthen its market position in the highly competitive and consolidated salty snack industry.
Throughout its history, Utz has faced challenges such as managing costs and productivity amid fluctuations in commodity prices and the need for ongoing capital investments in its manufacturing and distribution network. Despite these obstacles, the company has successfully built a diverse portfolio of authentic, craft, and better-for-you snack brands that enjoys strong household penetration across the United States.
By the 2020s, Utz had become the second-largest producer of branded salty snacks in its core geographies, with products available in approximately half of U.S. households. The company's success is anchored by the strength of its flagship Utz brand as well as other power brands like ON THE BORDER, Zapp's, and Boulder Canyon.
As of December 29, 2024, the company operated eight primary manufacturing facilities with a broad range of capabilities, enabling it to produce a wide variety of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pork skins, party mixes, and popcorn.
The company's products are distributed nationally to grocery, mass, club, convenience, drug, e-commerce, and other retailers through direct shipments, distributors, and approximately 2,500 direct-store-delivery (DSD) routes. Utz Brands' portfolio of authentic, craft, and better-for-you (BFY) brands, including Utz, On The Border, Zapps, and Boulder Canyon, enjoys strong household penetration, with its products found in approximately 49% of U.S. households as of the end of fiscal year 2024.
Financials and Growth Strategies
In the fiscal year ended December 29, 2024, Utz Brands reported total revenue of $1.41 billion, a slight decrease of 2.0% compared to the prior year. This was primarily due to the divestiture of the Good Health and R.W. Garcia brands, which contributed $3.3 million to the year-over-year decline. Excluding the impact of this divestiture and certain independent operator (IO) conversions, the company's net sales increased by 1.3%, driven by favorable volume and mix of 1.5%, partially offset by a 0.2% decrease in net price realization.
Gross profit for the fiscal year 2024 was $494.8 million, with a gross profit margin of 35.1%, an increase from 31.7% in the prior year. This improvement was primarily driven by benefits from increased productivity, including plant network optimization activities, favorable sales volume and mix, and ingredient cost deflation, which more than offset supply chain cost inflation, investments to support the company's productivity initiatives, and slightly lower pricing.
For the fiscal year 2024, Utz reported net income of $30.74 million, operating cash flow of $106.17 million, and negative free cash flow of $1.69 million. The company's most recent quarter (Q4 2024) saw revenue of $119.43 million and net income of $2.10 million.
Utz's financial performance has been driven by its diverse portfolio of branded salty snack offerings, which represented 87% of net sales in fiscal year 2024, excluding the impact of the Good Health and R.W. Garcia divestiture. The Utz brand alone generated retail sales exceeding $850 million in 2024, representing a 7.1% compound annual growth rate from 2020 to 2024. Utz is now one of the 10 largest salty snack brands in the U.S. by retail sales.
The company's other power brands have also contributed significantly to its success. On The Border (OTB) is the #2 unflavored tortilla chip brand in the U.S., while Boulder Canyon is the #2 potato chip brand in the natural channel, growing 32.7% within the channel in 2024.
To drive long-term profitable growth, Utz Brands is focused on several key initiatives:
1. Accelerating investments in marketing and innovation to drive top-line growth and achieve share gains in the salty snack category. 2. Further penetrating its Expansion Geographies and untapped channels and customers, while maintaining its share in its Core Geographies. 3. Transforming its supply chain into a more cost-efficient and flexible system through productivity efforts, network optimization, and automation. 4. Enhancing its balance sheet flexibility by accelerating cash generation and maintaining a disciplined capital allocation approach to reduce leverage while pursuing strategic acquisitions and divestitures.
Operational Highlights and Challenges
During the fiscal year 2024, Utz Brands made several strategic moves to streamline its operations and focus on its core business. In February 2024, the company sold certain assets and brands, including the Good Health and R.W. Garcia brands, to affiliates of Our Home, a better-for-you operating company. This divestiture generated a gain of $44.0 million for Utz Brands.
Additionally, in April 2024, the company sold its Berlin, PA and Fitchburg, MA manufacturing facilities and certain related assets to Our Home, recognizing a gain of $4.3 million. These divestitures align with Utz Brands' strategy to optimize its portfolio and focus on its core branded salty snack business.
The company has also been proactive in addressing supply chain challenges, including inflationary pressures on commodity and logistics costs. Utz Brands has implemented various cost-saving initiatives, such as plant network optimization, automation investments, and procurement optimization, which have helped to partially offset these headwinds and improve its profitability.
One area of focus for the company has been the performance of its tortilla chip business, which faced some softness in fiscal year 2024 due to lapping prior year promotional activity and certain assortment decisions. However, the company's On The Border tortilla chip brand continues to enjoy strong consumer reception, and Utz Brands is working to address this through bonus pack offerings and other pricing and promotional initiatives.
Liquidity and Financial Position
As of the end of fiscal year 2024, Utz Brands maintained a solid financial position with $56.14 million in cash and cash equivalents. The company's debt-to-equity ratio stood at 0.054, indicating a relatively low level of leverage. Utz also had access to $158.70 million under its ABL facility, net of outstanding letters of credit, providing additional financial flexibility.
The company's current ratio of 1.11 and quick ratio of 0.76 suggest that Utz Brands has adequate liquidity to meet its short-term obligations. These ratios, combined with the company's available credit line, demonstrate its ability to manage working capital effectively and navigate potential short-term financial challenges.
Industry Trends and Market Position
The U.S. salty snacks category has experienced robust growth, with an approximate 7.80% CAGR from 2020 to 2024. This growth was particularly pronounced in 2020 due to the COVID-19 pandemic and again from 2022 to 2023, driven by inflation. Utz Brands has historically outperformed the overall category, with its retail sales increasing by a 3.60% CAGR during 2023 and 2024.
Utz Brands' strong market position is evident in its household penetration, with its products found in approximately 49% of U.S. households. The company continues to focus on maintaining its strong market share in its Core Geographies while expanding its presence in its Expansion Geographies through increased marketing support and distribution gains.
Outlook and Guidance
For the fiscal year 2025, Utz Brands expects the salty snack category to grow modestly, in the range of 0% to 1%, which the company describes as "slightly better than flattish." Despite this relatively subdued category outlook, Utz is confident in its ability to deliver attractive long-term profitable growth.
The company anticipates holding its core relative market share while growing in expansion markets as distribution gains and increased marketing support take hold. Utz expects a modest headwind from pricing in fiscal 2025 but believes it can deliver value beyond just price through tactics like bonus bags and price pack architecture.
In terms of growth patterns, Utz expects a relatively even split between first half and second half growth in fiscal 2025. The company also anticipates that the weakness experienced in the dips and spreads category will start to improve in May 2025 and progressively get better through the second half of the year.
For fiscal 2025, Utz is guiding for EBITDA margin expansion similar to the approximately 80 basis point expansion achieved in fiscal 2024. This expansion is expected to be driven by the company's productivity program and supply chain optimization efforts.
Additionally, Utz does not anticipate another double-digit decline in its non-branded business in fiscal 2025, compared to the 18% decline seen in Q4 2024. This stabilization in the non-branded segment should contribute to overall revenue growth.
It's worth noting that Utz demonstrated strong performance in January 2024, with over 6% growth, suggesting they beat their previous guidance for Q1 2024. This positive momentum provides a solid foundation for the company's fiscal 2025 outlook.
Conclusion
With its iconic brand portfolio, strong manufacturing and distribution capabilities, and a clear strategic roadmap, Utz Brands continues to demonstrate its ability to craft flavorful snacks and drive sustainable growth for the benefit of its shareholders. The company's focus on productivity initiatives, supply chain optimization, and strategic investments in marketing and innovation is expected to drive margin expansion and support its ability to navigate the evolving competitive landscape.
Despite challenges such as a modestly growing category and potential pricing headwinds, Utz Brands remains well-positioned to capitalize on its strong market presence, diverse product portfolio, and operational efficiencies. As the company continues to execute its growth strategies and adapt to changing consumer preferences, it is poised to maintain its position as a leading player in the U.S. salty snacks market.