Utz Brands uses a fast follower strategy to grow sales

Utz Brands, the Pennsylvania-based company behind Utz and ON THE BORDER chips, delivered record net sales this quarter. During Q2 2022, Utz produced net sales of $350m, an with organic sales increasing 13.6% from the prior year. Most impressive, the company grew its category share. For the 13 weeks ending on July 3, retail sales grew 16% versus an overall category increase of 14.8%. Based on the success and limited price elasticities, Utz raised sales guidance for the year. “We now expect total net sales to grow 13% to 15% and for organic net sales to grow 10% to 12%,” CEO Dylan Lissette told investors on the earnings call.

One of the biggest standouts is the ON THE BORDER brand, which grew 15.4% in the quarter. The company bought the tortilla chip brand in 2020. Today, management estimates that it’s a $350m a year brand and projects it to grow to $450m. Not bad for an investment of $480m.

The Fast Follower Strategy

The fast follower strategy is a common strategy within the CPG world. Here, second-tier brands mimic the strategies and pricing of dominant brands. They get away with it because they’re typically lower priced. Companies maintain reasonable margins because they spend less on R&D. Utz Brands will never have the first exciting entrant in a category, but they’ll always follow shortly after.

Back in June Ajay Kataria, EVP & CFO, of the company, spoke about the strategy with price increases.

So really the entire category has been taking prices multiple rounds in the last 12 months. And the good thing about our salty snack category, it has a very rational category leader, which has an outsized share of the category. And they have been moving price up to cover inflation, and we have been fast following the category leader. And we have been sort of activating pricing as necessary to close the gaps where we see them, and that’s been the plan.

And we have taken three sort of broad-based rounds of pricing Q4 last year, February this year, and then again May this year. And then in between, we have been taking sort of closing the gaps, optimizing mix, doing things here and there across customers, across subcategories and product portfolio that we have.