I'm considering an investment in Simply Good Foods (SMPL) as part of a 20-year strategy in the consumer goods space. Why? Because I believe consumer goods companies that align with health trends can grow even in downturns. I’m aiming for a long-term hold, looking for strong growth, stable value, and low debt.
Why Simply Good Foods? The company owns three key brands: Atkins, Quest, and OWYN. While Atkins and OWYN have their challenges, Quest is a leader in the protein bar market. If a store sells protein bars, they probably stock Quest. It's a solid brand with mass distribution and great market share among fitness and health-conscious consumers.
Recent Financial Performance: The company has been growing steadily. Fiscal 2023 saw $955.6 million in net sales, driven mainly by Quest, with 14.2% growth in sales. Plus, they operate an asset-light model, which means they outsource manufacturing – keeping costs low and free cash flow high. Cash reserves increased to $208.7 million, and debt was reduced to $237.7 million – signs of solid financial health.
Growth Catalysts:
- Acquisition of OWYN: Simply Good Foods bought OWYN, a plant-based protein brand, for $280 million. This taps into the rising trend of plant-based diets and brings a whole new consumer base.
- E-commerce Opportunities: They’re expanding their e-commerce channels – currently, 21% of Quest and 14% of Atkins sales are online – so there's definitely room for growth here.
Competition & Risks: Simply Good Foods does face competition in both bars and drinks. But Quest’s distribution advantage gives it a strong moat, and with Atkins and OWYN being rebranded, there’s potential for growth. Still, they’ll need to walk a fine line to keep market share against competitors like FitCrunch, Pure Protein, and bigger players like Fairlife (Coke).
Final Thoughts: SMPL feels like an interesting long-term play, aligning with health and nutrition trends while being reasonably valued and not over-leveraged. But it’s not without challenges – especially in marketing, e-commerce, and competition in the drink and bar markets.
If you’re invested or have thoughts on Simply Good Foods, I'd love to hear! And if you've tried any of their products – Atkins, Quest, or OWYN – let me know what you think. Consumer feedback is key in understanding how strong a brand really is.
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