Utz Brands, Inc. (NYSE:UTZ) Q2 2023 Earnings Call Transcript

Michael Lavery: Okay, great. Thanks so much.

Operator: Our next question comes from the line of Peter Galbo from Bank of America. Please go ahead.

Peter Galbo: Hi. Good morning, guys.

Howard Friedman: Good morning.

Peter Galbo: Ajay, maybe just a quick clarification. You talked about improving free cash flow in the back half. But did you give an actual updated target on free cash flow for the year?

Ajay Kataria: We did not. We are still at the same target. I think we said about 50 million.

Peter Galbo: Okay, cool. And then, Howard, just kind of going back to Andrew’s question around — maybe less so around branded competitors, but more so focused on potato chips. We’ve seen a pretty meaningful uptick in the private label penetration on potato chips in particular. Understanding that you have volume growth baked in, just how are you thinking about that dynamic? Again, it’s off of a low base, but it has been a notable uptick here over the past couple of quarters. So just the interplay you’re seeing between branded and private label maybe in that subcategory?

Howard Friedman: Yes. So I appreciate the question, Peter. Look, I think it’s very normal in this environment that we start to see private label come back into the conversation. They play an important role for retailers. We are fortunate that they’re still only about 5% of the overall category. So a relatively lower base to build off of, but again not terribly surprised to see them — to be in the market. I think for us, it actually highlights the need for us to continue to do brand building and innovation. When we launch something like Mike’s Hot Honey, there isn’t an obvious corresponding competitive item. So you’re competing on value as opposed to price. And so that’s where I think we tend to stand out. I feel good about where our potato chip portfolio is overall.

Utz is doing — continues to perform. We obviously had a very heavy lap to do versus prior year in our core. But overall, we continue to be pretty comfortable with where we are. And I think ultimately, our path to success in that sub-cat and all of the others is brand building, driving consumer demand and value beyond just price.

Peter Galbo: Great. Thanks very much, guys.

Howard Friedman: Thank you.

Operator: Our next question comes from Jim Salera from Stephens, Inc. Please go ahead.

Jim Salera: Hi, guys. Thanks for taking my questions.

Howard Friedman: Hi, Jim.

Jim Salera: Howard, if I look at the geographic distribution, it looks like power brands did particularly well across your expansion geography. What would it take to lift the performance in the core market so that we see that kind of more in line with expansion?

Howard Friedman: Yes, Jim, I appreciate the question. It’s a conversation that we continue to have to make sure that we are growing our core — we’re holding in our core and then obviously expansion be our net growth driver for market share. And so when the core does not perform quite the way we would expect it to, it’s an area that we spend quite a bit of time. I’d offer you a couple of things. First, part of the challenges we’ve had in the core more recently are really around our foundation brands versus our power brands. And so as those brands fulfill their role in the portfolio, we obviously have a little bit of a drag there that can become a little bit more challenge. And those are things like we’ve got to get Golden Flake right footed.