HANOVER, PA. — Entering the back half of 2024, Utz Brands Inc. remains focused on expanding into new geographies and stepping up marketing to reach value- and flavor-focused shoppers with its diverse lineup of salty snacks.

“Our second-quarter results reflect strong execution against a clearly defined portfolio strategy as we direct our investments to support our Power Brands to fuel our distribution gains, geographic expansion and volume growth,” said Howard Friedman, chief executive officer, in remarks on the Hanover, Pa.-based snack maker’s latest quarterly performance.

Utz’s Power Brands — led by Utz, On The Border, Zapp’s and Boulder Canyon — paced the portfolio with 4% volume growth in the quarter.

“Importantly, as consumers continue to shop for value outside of traditional grocery, our trends are improving in our non-measured channels to include club, hard discount, dollar and e-commerce,” Friedman said. “In the quarter, our branded volumes increased nearly 10% in our non-measured channels. We will continue to support this momentum with increased marketing investment and disciplined promotional spending adjustments, while we address the softness in our dips and salsa business, where we experienced distribution losses as a key customer consolidated their placement in the salty snack aisle.”

Though Utz has increased volume share in current markets and new regions, the latter have stood out as growth drivers, Friedman said.

“Sales growth was most pronounced in our expansion geographies, with growth of 5% fueled by continued distribution gains, which easily exceeded category performance,” he said.

For the quarter ended June 30, Utz posted net income of $25.4 million, equal to 23¢ per share on the common stock, which compared with a loss of $8.6 million a year earlier. Net sales dipped 1.8% to $356.2 million from $362.9 million. Organic net sales edged up 1.6% to $356.7 million.

“From a subcategory perspective, our growth was led by significant outperformance in tortilla chips and cheese snacks, and our Utz, On The Border and Boulder Canyon brands all gained share during the quarter,” Friedman explained. “Zapp’s share performance was largely impacted by potato chip softness in the grocery and convenience store channels, as we make price-pack architecture improvements and as we lap the introduction of Zapp’s pretzel sticks in the prior-year period.

“Tortilla chip growth was led by On The Border consumption growth of 8%, fueled by strong growth in our core geographies and growth in both traditional grocery and mass channels. Our rebound in cheese snacks continued in the quarter, led by share gains for our iconic Utz Cheese Balls, with strong growth in the grocery, mass and the club channels.”

Share performance in potato chips was impacted by softness in the Zapp’s and Golden Flake brands, Friedman said. Pretzel trends were “below category” but are expected to normalize in the latter part of 2024, he added.

Utz is raising this year’s marketing spend by 60%, up from 40% previously, Friedman said. On the innovation front, the company has launched a limited offering of Mike’s Hot Honey Extra Hot potato chips; Utz Mixed Minis flavored pretzels; new seasonal and large-pack offerings; and Boulder Canyon Spicy Green Chili potato chips and Canyon Poppers cheese snacks, both made with avocado oil.

“Persistent inflation and higher borrowing costs are impacting consumers, and many food categories this year are being impacted, including salty snacks,” Friedman said. “We are observing a shift in consumer behavior lagging from several years of inflation. For us, this is resulting in more value-seeking behaviors, whether it be deal-shopping, channel-shifting or shopping the price ladder. Given this dynamic, we are taking a pragmatic and more moderate outlook for salty snack category growth in 2024.”

For the full year, Utz raised its growth outlook for adjusted earnings per share from between 23% and 28% to 28% and 32%. The company pruned its organic net sales guidance from growth of 3% or better to 3%. The change implies second-half organic sales growth of 4.5%, versus 1.5% in the first half, said TD Cowen analyst Robert Moskow.