Utz Brands Targets Cost Optimization and Volume Expansion

Recently, Utz Brands announced several network optimization projects that are anticipated to promote cost savings and volume growth over the long run.

These initiatives are expected to simplify the company’s existing plant network and streamline its operating structure by consolidating volume into a smaller number of facilities, which is expected to lower costs and improve margins, and strengthen Utz Brands’ relationship with a key co-manufacturing partner that will support the optimization of the company’s network. Also, they will create incremental capacity in the company’s warehousing network to support future growth, drive efficiency, and strengthen customer service, and monetize assets that are not strategic to the company’s long-term footprint.

These actions are expected to create a more efficient and flexible network to support the company’s growth and better serve its customers. As part of these efforts, Utz has divested the company’s manufacturing plant and all related assets in Bluffton, Indiana (the “Bluffton Plant”), and announced that the company’s lowest-volume manufacturing plant in Hanover, Pennsylvania (the “Carlisle Street Plant”) will cease operations in the first quarter of 2024.

Also, it signed a built-to-suit agreement for a new, approximately 60,387 square meters leased distribution center located in Hanover, Pennsylvania (the “Northeast Logistics Center”), expected to open in the first quarter of 2025, and decided to list for sale its Louisiana manufacturing plant, which was impacted by Hurricane Ida in 2021 and has remained idle since sustaining irreparable damage, and its Alabama plant, which was closed in June 2023.

“Following these actions, the Company will have 13 active plants, which includes the manufacturing facility in Kings Mountain, North Carolina (the “Kings Mountain Plant”), purchased in April 2022. The sale and closures are expected to drive increased net sales averages in its remaining plants. The volume from these closed facilities is expected to be absorbed by the remaining plant network and should reduce fixed overhead and drive efficiencies in manufacturing conversion costs,” according to a recent press release.

Super-Pufft Snacks USA, Inc. and its connected organizations (“Super-Pufft”), an existing co-manufacturing partner, purchased the Bluffton Plant, which produces goods under the TGIF brand as well as several of Utz Brands' kettle chip brands. In exchange for entering into a newly formed co-manufacturing arrangement with Super-Pufft, which will allow Super-Pufft to manufacture some TGIF goods on advantageous terms, Utz Brands gave Super-Pufft real estate and manufacturing assets.

“Over time, the Company expects to shift production of these products into Utz-owned and operated manufacturing facilities,” the document reveals.

The company's oldest facility, the Carlisle Street Plant, was used to manufacture kettle chips under the Utz, Grandma Utz, and Zapp's brands. Utz anticipates being able to effectively absorb the volume produced by the Carlisle Street Plant thanks to the company's growth of its kettle manufacturing capacity across its network, including future kettle production planned for the Kings Mountain Plant.

“Utz Brands expects to stop production at the Carlisle Street Plant in the first quarter of 2024, after which it plans to explore asset monetization options. No job loss will occur due to the Carlisle Plant closure,” the company’s representatives mentioned.

The leased Northeast Logistics Center will add warehouse space to support long-term expansion, and Utz Brands anticipates moving in during the first quarter of 2025. The company has outgrown its current warehouse network infrastructure in Hanover, Pennsylvania, via which it delivers the majority of the company's volume since sales volume has increased over the past four years beyond the salty snack category.

“The Northeast Logistics Center building will be adjacent to the Company’s High Street and Kindig Lane facilities, driving cost and inventory efficiencies across the Hanover distribution campus. It will improve inventory management by managing items in one single location and will facilitate customers’ ability to order multiple brands on a single order, streamlining transaction flow and improving customer service. The more optimized warehouse footprint will enable investment in automation and the implementation of a best-in-class warehouse management technology system. The Company does not expect material future cash or capital expenditures in connection with the initiatives outlined herein,” the press release also reveals.

These initiatives demonstrate Utz Brands’ ongoing dedication to optimizing its supply chain. The company will discuss this and more at its Investor Day in New York City on December 15, 2023.