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[January 31, 2014]
Hillshire Brands plans new products [Chicago Tribune :: ]
(Chicago Tribune (IL) Via Acquire Media NewsEdge) Jan. 31--Hillshire Brands Co. is planning a slew of new products and hunting for new business this year as it seeks to maintain its position in meats and frozen foods, company officials said Thursday.
But President and CEO Sean Connolly declined to be specific about what consumers can expect to see on grocery shelves beginning in late February, or what the company might add to its stable of brands, which includes Jimmy Dean sausages, Ball Park hot dogs and Hillshire Farms lunch meats.
"We see attractive opportunities in the market, we are evaluating ... what makes sense strategically," Connolly told the Tribune on Thursday.
There's also the challenge of managing rising costs for beef and pork, which industry watchers say the company is working hard to keep from trampling its bottom line.
Rising commodity costs have spurred Chicago-based Hillshire to raise prices, Connolly said. That, in turn, has crimped sales volume, which declined more than 3 percent in the most recent quarter.
Still, Hillshire reported Thursday that sales for its second fiscal quarter that ended Dec. 28 climbed 2.1 percent, to $1.08 billion, from $1.06 billion the year before, beating Wall Street expectations.
Net income for the same period was 92 cents per share, compared with 53 cents per share a year earlier. Operating income was $116 million, up nearly 17 percent from $99 million a year earlier.
Wall Street had expected Hillshire to register $1.06 billion in sales and profit of 50 cents per share, according to Thomson Reuters I/B/E/S.
The challenge will be for Hillshire Brands to find a balance between raising prices without losing market share, analysts say.
"They have been able to withstand the price increase ... without much consumer pushback," said Morningstar analyst Ken Perkins.
During a conference call, Connolly said that prices will continue to go up in the third quarter of its fiscal year and that the company will be aggressive about maintaining customer loyalty in the wake of higher prices.
The company spent 3 percent of sales in its second quarter on marketing, advertising and promotions but expects to boost that to 5 percent as it aims to increase its 20 to 30 percent penetration rate in the frozen breakfast category and maintain its 30 percent penetration rate in the deli meats and hot dogs categories.
"Our philosophy remains the same," Connolly said. The company is staying on its path to lure new consumer segments -- such as the health-conscious morning protein seekers, Hispanics and millennials -- and boosting its efforts in digital and social media.
The strategy also includes rolling out new products aimed at wooing busy yet health-conscious consumers who want to start off their mornings with more protein and fewer calories.
Hillshire aims to have new products make up 13 to 15 percent of its sales by fiscal 2015, the company has said.
Hillshire is also looking to expand its presence in the grocery store beyond frozen meals, and packaged and deli meats.
"We're interested in snacking; it's a huge behavior with U.S. consumers," Connolly told the Tribune.
"Consumers are increasingly looking for snacks that are low in fat, low in carbs and offer satisfaction," he said, noting the company's purchase last year of the maker of Golden Island jerky products.
But industry watchers say that Hillshire could also be setting its sights on dinner -- and products that, unlike beef and pork, aren't so vulnerable to market whims. A similar example was rival Hormel Foods' recent purchase of Skippy peanut butter from Unilever.
"Dinner is clearly a category that lends itself to convenience for consumers they are trying to target," Perkins said.
"They'd like to leverage the brand into different meals of the day and extend it across products," he added.
Shares of Hillshire Brands closed up 6.7 percent Thursday, at $35.74.
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