CoolBrands' New Frozen Snack Licenses
CoolBrands International Inc. announced it has entered into four new brand licenses for new frozen snacks CoolBrands intends to distribute in the U.S. in 2005. The new brands licensed to CoolBrands for the frozen snacks category consist of:
- CARE BEARS, by agreement with Those Characters From Cleveland, Inc., a subsidiary of American Greetings Corporation
- JUSTICE LEAGUE, including BATMAN, SUPERMAN and WONDER WOMAN, by agreement with DC Comics, a subsidiary of Warner Bros. Consumer Products Inc.
- NO PUDGE!, by agreement with No Pudge! Foods LLC
- SNAPPLE, by agreement with Snapple Beverage Corp.
CoolBrands said that hot competition is forcing it to focus on keeping or winning market share, even at the expense of profitability.
The company, which released lackluster results last week amid the launch of those new brands, said it plans to beef up its board with five new independent directors who have industry expertise.
The change in strategy is in response to the "unexpected and regrettable" upcoming loss of its right to use the Weight Watchers brand and a "fundamental shift in the competitive dynamics" in the marketplace, David Stein, president and co-CEO, said in a conference call.
CoolBrands' fourth-quarter profit dipped to $14.7 million, down from $14.8 million, a year earlier. Quarterly revenue increased 16% to $178.7 million. Although the slippage in profitability was marginal, the fourth-quarter results chilled an otherwise hot year for CoolBrands.
The Toronto-area company made two strategic acquisitions that increased its manufacturing and distribution capabilities. It also feasted on the premium prices it initially commanded for health-conscious products lines including the Weight Watchers SmartOnes and Atkins Endulge, a low-carb frozen snack.
Stein said this type of product has now moved into the mainstream, which is a mixed blessing since CoolBrands' rivals have unleashed an avalanche of new frozen treats, heating up competition for shelf space in retailers' freezers.
"Somewhat feeding that fire is the fact that our two main competitors -- Unilever and Nestle-Dreyer -- appear to be aggressively pursuing market share build at the expense of strong profitability," Stein added.
CoolBrands is responding by adopting a similar strategy for its 2005 financial year, he added.
"In fact, our successful bottom-line-oriented strategy of 2004 and 2003 must change to an aggressive top-line-oriented strategy for 2005," Stein said.
"Which means increased promotional frequency, moderating of our average retail pricing, escalating our new-product introductions and, overall, investment to retain an increased market share."
In the long term, CoolBrands will return to a better balance between sales and profitability, "but it's clear that the immediate challenge, for all competitors in the frozen snacks category, is market share," Stein said.