The reformulation included new consumer packaging and the conversion of more than 20 million pounds of expeller-pressed oils to non-GMO versions.
But like General Mills - which told analysts in March that ditching GMOs from original Cheerios had not boosted sales - Boulder Brands has not seen a positive impact, at least not yet, with net sales of Smart Balance declining 15.2% in the third quarter of 2014 (Q3) and under-performing items to be replaced by Earth Balance products, which are doing far better.
Speaking to analysts on the company's Q3 earnings call yesterday, CEO Steve Hughes said: “Regarding Smart Balance, despite our non-GMO launch, the negative trends in the spreads category continued, and we have not seen a widespread lift in our sales due to the non-GMO launch. [However] we continue to believe that it is the right move for us as a company with respect to delivering on our mission, vision and principles.”
We are experiencing some growing pains
In the third quarter of 2014, Boulder Brands posted a net loss of $132m compared with a loss of $1.6m in Q3 2013, impacted by weaker sales of Smart Balance products, high egg white costs and operational disruptions connected to its largest customer (UNFI).
Net sales rose 13% to $133.9m over the same period, with strong growth at Udi’s Gluten-free (+21.2%), frozen food brand EVOL (+145%) and plant-based brand Earth Balance (+28.6%) offset by disappointing sales at Smart Balance and weaker sales at Glutino, its other gluten-free brand (in part because it has switched some lines over to Udi’s).
Boulder Brands also lowered long-term projections for Smart Balance and recorded impairment charges to goodwill and the Smart Balance trade name of $150.5m.
“While we are experiencing some growing pains, Boulder Brands has one of the strongest portfolios in the natural products industry," said Hughes.
"Our brands have leading market shares for the segments we compete in, gluten-free, plant-based, and pure and simple.
“The category fundamentals in each of these segments remain strong, and EVOL, Earth Balance, Udi's and Glutino index at over 150 with Millennials.”
Smart Balance, meanwhile, resonated more strongly with boomers, he said.
EVOL generated sales of $12m in Q3 2014, vs $17m in the whole of 2013
On Udi’s, he said: “We're going to see Walmart make a major move on Udi's frozen entrées and handhelds that'll ship in the fourth quarter; and we're going to see Target make a very significant move on Udi's frozen.”
On EVOL, he added: “Since acquiring EVOL last December, sales have increased substantially from the $17m for the full year of 2013 to $12m in the third quarter of 2014 alone.”
The strategy for spreads includes swapping out underperforming Smart Balance items with Earth Balance items and moving Smart Balance and Earth Balance to dairy-free butter, he said. “Long-term, Earth Balance, we think, can become a business of scale the way EVOL has become a business of scale.”