WESTERVILLE, OHIO โ A successful licensing program with Chick-fil-A and Buffalo Wild Wings has paid huge dividends for Lancaster Colony Corp. over the past few years. Now, the manufacturer and marketer of specialty food products for the retail and foodservice industry has its sights set on another giant in the quick-service restaurant industry: Subway.
Speaking to analysts during a Feb. 1 conference call, David A. Ciesinski, chief executive officer, said Lancaster has partnered with Subway to offer four different sandwich sauces, including Subwayโs most popular flavor: sweet onion teriyaki. The sandwich sauces โ along with steak sauces under the Texas Roadhouse brand โ will begin shipping to retailers later this month, Ciesinski said.
The addition of Subway and Texas Roadhouse to Lancasterโs licensing portfolio would not have been possible if not for the companyโs early learnings in its partnership with Darden Restaurants and Olive Garden, Ciesinski said.
โWhat we learned first and foremost is that the proposition in retail was relevant,โ Ciesinski said. โAnd second, that the proposition could actually be net accretive to the foodservice business in terms of the positive perception around the brand. Fast forward, as weโve moved beyond Darden and obviously continue to nourish that relationship, but added Buffalo Wild Wings and Chick-fil-A. I think itโs just allowed us to demonstrate this proposition a little bit more broadly. Texas Roadhouse was a collaborative conversation. It was actually brokered by one of our big customers in retail. And then Subway was one that was an inbound conversation as well. So itโs an interesting time. And I think itโs a manifestation of the fact that the lines between retail and foodservice are blending. Weโre seeing more occasions that are at home. And our partners out there in foodservice are becoming increasingly open to this idea.โ
Meanwhile, Ciesinski said Lancasterโs retail partners like Kroger and Walmart โlike the idea of bringing relevant new items to these categories.โ
โNo tree grows to the moon, but I think our intention here is just to continue to work carefully to look for good partners where we line up at the values level,โ he said. โWeโre looking for long-term relationships in this space. And weโre going to try to see how far we can take this.โ
The new licensing deal came against the backdrop of strong financials at the Westerville-based company. Net income at Lancaster Colony in the second quarter ended Dec. 31, 2023, was $51.48 million, equal to $1.87 per share on the common stock, up 29% from $39.97 million, or $1.45 per share, during the second quarter of fiscal 2022. Net sales were $485.92 million, up 1.8% from $477.39 million.
Ciesinski told analysts during the conference call that the company had three priorities: accelerate core business growth; reduce supply chain costs and grow margins; and expand core with focused mergers and acquisitions and strategic licensing deals.
โOur reported gross profit margin improved to 25%, an increase of 360 basis points versus last year, which reflects favorable pricing net of commodity costs, or PNOC, following two years of unprecedented inflation, in addition to the positive impacts of our cost savings initiative,โ he said.
Operating income in the companyโs Retail segment totaled $59.52 million in the second quarter, up 21% from $49.35 million in the same period a year ago. Net sales increased to $263.99 million from $257.76 million, an increase of 2.4% over the same period in 2022.
โIn our Retail segment, net sales growth of 2% was driven by carryover pricing, volume gains for our successful licensing program, continued strong performance for our New York Bakery frozen garlic bread and increased demand for our Reames frozen egg noodles,โ Ciesinski said. โRetail segment sales volume measured in pounds shipped, declined 1.9%. Excluding the impact of a product downweighting initiative, and our reduced commitment to private label bread, retail sales volume increased 1.2%.โ
In the Foodservice segment, operating income increased 1% to $27.15 million, up from $26.7 million in the same period a year ago. Sales also increased, rising 1.5% to $221.92 million from $218.63 million.
In the six months ended Dec. 31, 2023, net income was $95.44 million, or $3.47 per share, up 23% from $77.57 million, or $2.82 per share. Net sales were $947.49 million, up 4.9% from $902.93 million.
