Naturade, a leading marketer of soy protein products, reported net sales of $3.5 million (€3.56m) for the three months ended 30 June 2002, a decrease of 24 per cent over the same period in 2001. Net sales for the six months to end of June were $6.8 million, down 21 per cent over the same period in 2001.
Naturade had an operating loss of $0.7 million for the second quarter and $1.3 million for the first six months of 2002.
The company attributed the sales decline which began in the first quarter to a new distribution phase of building pipeline inventory and to shift in buying, where certain mass accounts began buying direct in 2001 rather than through health food distributors. Repeat business in the mass market increased 1.2 per cent to $2.9 million compared to a 94.2 per cent decline in new distribution to $0.06 million for the first six months of 2002.
For the latest quarter, mass market sales were 38 per cent below the year-ago period. As a result of the K-mart bankruptcy restructuring and sub-par drug store channel performance, repeat sales from mass market customers also showed a 5.9 per cent decline for the second quarter.
Sales to health food accounts were off 8 per cent in the second quarter, reflecting the continuing underlying weakness in that channel and the company's decision to discontinue certain lower volume products. The health food channel accounted for 56 per cent of net sales in second quarter 2002.
The company's main brand of soy protein meal replacements, Naturade Total Soy, launched in early 1999, accounted for 58 per cent of revenue during the second quarter of 2002.
Naturade sales of soy protein powders grew 16 per cent in consumer cash register sales in supermarket, drug store and mass merchandiser accounts for the latest 24 weeks ending 16 June 2002.
Naturade claims that it maintains its market share leadership as the number one brand of natural soy protein powders in the mass market.
The company reported an operating loss of $0.7 million for the second quarter and $1.3 million for the first six months of 2002, compared to operating losses of $0.7 million and $1.4 million, respectively in 2001. The decline in operating loss reflects a significant reduction in interest expense due to a previously reported financial restructuring in January 2002, said the company.
Significantly lower selling and general and administrative expenses for the second quarter were offset by a decline in gross profit from 47.2 per cent to 41.1 per cent of second quarter net sales compared to the same period of 2001.
According to Naturade CEO Bill Stewart: "Our management team has taken aggressive steps to control spending and launch new growth initiatives. We've just completed the reformulation of Naturade Total Soy powder with an improved soy protein technology that makes the product easier to mix and significantly improves the taste.
"We've also expanded the brand's positioning to promote it for weight loss as well as for cholesterol reduction," he added. "We expect this major restage on Naturade Total Soy, plus the introduction of two entirely new brands, to have a measurable impact on second half sales."