Simply Good Foods sets out stall to fix “executional challenges”

Simply Good Foods is confident the US nutrition business is “well positioned” to fix the “executional challenges” that dogged its second-quarter results.

President and CEO Joe Scalzo, who rejoined the Nasdaq-listed company in January, set out his stall on a call with analysts yesterday (9 April) with a commitment to all of its brands – Quest, Atkins and OWYN.

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“Our brands each speak to unique consumer segments within the category, addressing relevant consumer benefits with differentiated positioning. I believe Simply Good Foods can return to delivering the durable long-term growth that you would expect from a leading nutrition company,” Scalzo told analysts.

His comments came in the wake of Simply Good Foods slashing its full-year estimates for sales, EBITDA and gross margins, replete with a second-quarter impairment for the Atkins and OWYN brands.

Scalzo’s toolbox of fixes include investment behind the full portfolio, pricing actions to offset inflation, to “attack” inefficiency in the supply chain, and an undisclosed number of job cuts.

But the CEO also has an eye on the rising use of GLP-1 weight-loss drugs, the new kid on the block since the introduction of the Atkins diet in the 1970s and its rise again in the 2000s.

“While these therapies are changing how some consumers approach eating, they are also reinforcing the importance of nutrient-dense foods, particularly those high in protein and lower in carbs and sugar, as consumers focus on maintaining muscle mass and overall nutrition balance in a lower-calorie environment,” Scalzo said.

“We believe these trends remain highly consistent with the nutritional principles that underpin our brands.”

Summarising the opportunities behind the three brands, Scalzo called Quest the company’s “growth engine” and its “most important brand” focused on bars and crisps centred on dairy-based proteins. Those, he said, “provide the full spectrum of essential amino acids while avoiding ingredients that can cause blood-sugar spikes”.

Second in line is Atkins focused on “carbohydrates to support healthier eating and weight management”, he added.

“We will reset its retail product assortment with customers in line with its smaller yet loyal consumer base as we investigate our ability to profitably invest to grow its consumer households in the future,” the CEO explained.

However, some short-term headwinds are anticipated. “We expect Atkins will continue to decline in the near term, largely due to anticipated retail distribution losses as shelf sets continue to evolve in the category,” Scalzo said. “Moving forward, our focus is on resetting the retail baseline of the business to a viable core assortment.

“We also believe there is a meaningful role for Atkins with consumers who increasingly choose GLP-1s to lose weight.”

He provided some further thoughts during yesterday’s Q&A session relative to Simply Good Foods’ own brands as weight-loss drugs gain traction in the US with the introduction of a pill variant to join the injectable format.

“Food has changed from GLP-1 medications”

“It’s clear the category has changed. In fact, food has changed from these GLP-1 medications – so how you think about your brands, how you think about position, how you think about innovation has to change,” Scalzo added.

“You have to be very thoughtful about the products that you offer folks who are on these medications because frankly, they don’t eat that many calories, call it 1,100-1,200 calories a day. Nutrient-dense becomes an important quality for the things that people need to eat, and that’s well-positioned for our portfolio.

“One of the behaviours that we’re seeing on the GLP-1s is the cycling on and off the medications. There are points where people are thinking about going on the medication, coming off the medication, and then going back on, and each one of those is a moment where they’re open to our message.”

Scalzo described OWYN as “our entry into clean, plant-based protein”, a brand the business acquired in 2024.

“After distribution reset, we will restart its marketing engine targeting plant-based protein seekers and our great tasting ready-to-drink shakes and powders,” he said.
“OWYN’s household penetration remains relatively small at 4.4%, which highlights the runway for future growth among existing plant-protein consumers.”

Summarising his objectives, Scalzo said: “Our turnaround beliefs moving forward are clear. We will relentlessly attack inefficiency in our supply chain. We will use pricing action as necessary to help offset cost inflation over time.

“We will be less reliant on price promotion. We will lower our fixed overhead structure while improving key areas of functional expertise. We will restore more consistent investment behind our brands.”

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