CNS Breathe Right Sales, FiberChoice Cuts Produce "Return To Profitability"
This article was originally published in The Tan Sheet
Executive Summary
CNS expects FiberChoice to become a $30 mil. product in the long term, which would equate to about 10% of the fiber category, the company said.
|
CNS expects FiberChoice to become a $30 mil. product in the long
term, which would equate to about 10% of the fiber category, the
company said. The chewable fiber supplement, which launched in April 2000, is
producing $10 mil. in annual revenue, President & CEO Marti
Morfitt reported during a third quarter analysts call Oct. 18. For
the nine months ended Sept. 30, FiberChoice generated $7 mil. in
sales. Although the firm does not envision major line additions in the
immediate future, a new 36-count SKU will join the brand's existing
90-count bottle and 10-count tube. Shipments are slated to commence
by the end of March. Development of other FiberChoice extensions is underway, but
still in the preliminary stages, CNS said. In line with its strategy announced in late June, the
Minneapolis, Minn.-based firm remains committed to trimming its
advertising/promotional support for FiberChoice from first-year
launch levels (1
(Also see "CNS Restructuring Plan Focused On Bolstering Breathe Right Sales" - Pink Sheet, 2 Jul, 2001.), p. 8). CNS' marketing and selling expenses were $6.2 mil. for the third
quarter, a 46.6% drop from $11.6 mil. in the year-ago period, the
firm announced in a same-day release. The majority of the reduction
reflects the FiberChoice spending cuts. Expansion of the Breathe Right nasal strips franchise continues
to be the firm's main priority. In the near term, CNS plans to
"maximize the volume potential" of extensions launched in 2000,
such as adult and children's strips with Vicks mentholated vapors,
Morfitt noted (2
(Also see "Breathe Right Children's Products Provide "Drug-Free" Cold Remedy" - Pink Sheet, 16 Oct, 2000.), p. 10). Looking forward, the company is working on as many as three new
Breathe Right products for next year's cough/cold season. Noting international Breathe Right sales "represent an
increasingly important part of our business, with continued growth
opportunities," Morfitt reported that mentholated strips are
debuting now in Japan, France, Italy, Spain, Belgium/Luxembourg and
the UK, with launches of children's versions expected next
year. In the first nine months of 2001, U.S. and overseas Breathe
Right revenue totaled $43 mil. and $11 mil., respectively. CNS'
growth target is for international brand sales to equal that of the
domestic business. Consolidated net sales in the three months were $18.2 mil., a
5.2% drop from $19.2 mil. in the year-ago quarter, the firm
reported. Domestic net sales were $14.8 mil. (down 10.7%), while
international sales reached $3.4 mil. (up 31%). Although reported sales declined in the quarter, Morfitt
maintained that consumer consumption in the U.S. grew by 10%, based
on data from A.C. Nielsen. The exec explained shipments of the nasal strip were down in the
period due to "pipeline orders" for the Breathe Right with Vicks
strips and children's cold strips placed in the year-ago
period. "Our shipment growth has been below the level of purchases by
consumers...due to retailers' reducing inventory," Morfitt
stressed, adding "sales should resume as retailers return to normal
inventory levels for the cough/cold season." A primetime TV ad campaign for Breathe Right broke Sept. 24 and
is scheduled to air through March 25, the CEO noted. "This is the
longest TV coverage we've had for the Breathe Right brand and
reflects the power of re-deploying inefficiently spent funds [such
as cable TV spots] against more impactful support vehicles." The spending reductions for FiberChoice, coupled with the
"strong consumer sales" of the nasal strips, helped CNS "return to
profitability" in the quarter, the company stated. Net earnings for the three months were $4.8 mil., compared to a
$392,000 loss in the 2000 quarter. The firm reported a loss of $1.7
mil. for the nine months, down significantly from the $6.8 mil.
loss in the year-ago period. CNS' restructuring plan announced in June is expected to result
in $2 mil.-$2.5 mil. in annualized savings. The company anticipates a stable fourth quarter with net sales between $23 mil. and $27 mil.; net revenue for the year is expected to be in the range of $84 mil. to $88 mil. For 2002, CNS forecasts $90 mil.-$100 mil. in revenue and net income of $9 mil.-$12 mil. |