Utz IPO Seeks To Satisfy Consumer Staples Cravings

09/01/20 08:42AM EDT

Below is a brief excerpt from a complementary research note written by our Consumer Staples analysts Howard Penney and Daniel BiolsiWe are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.

Utz IPO Seeks To Satisfy Consumer Staples Cravings  - 9 1 2020 8 38 03 AM

Utz, the fourth largest snack manufacturer (as seen in the below chart), had its first day of trading on the NYSE yesterday.

Shares in the former SPAC increased 40% over the past week, which should keep the light green for other offerings.

Several SPACs could come in the consumer staples sector, including Gores Metropoulos (GMHI), Pershing Square Tontine (PSTHU), Yucaipa (YAC), and PMV Consumer Acquisition.

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Snacking has been a habit Americans have participated more of during the pandemic.

Salty snacks have been among the best categories of CPG, with annual growth of 4.3% from 2010-2019. 95% of the country snacks at least once per day, and private label penetration is low (5-6%) and not expanding. Utz sales grew 11% in the Q2 pandemic.

Utz has been a family run business for the past 100 years. The Rice and Lissette families will retain their 90% equity stake, now comprising half of the company.

The current CEO has been more acquisitive, adding ten companies since he took over as CEO in 2012. Last year Utz acquired Snyder of Berlin from Conagra Brands.

The company has a demonstrated history of extracting synergies from its targets, as seen in the following chart. The proceeds were used to pay down debt from the acquisitions and $60M to the family ownership.

The company intends to grow sales 3-4%, increase marketing spend from 1% currently to 3-4% in the future, raise EBITDA margins from 13.3% to the mid-teens, and grow EPS 8-10%. A 2% dividend yield and future acquisitions will enhance returns further.

The company appears to check many of the boxes for investors, and we are happy to welcome it to the public markets.

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