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UTZ CEO on its ‘good acquirer’ reputation after $25M Vitner’s deal

Yahoo Finance’s Myles Udland, Brian Sozzi, and Julie Hyman discuss the snacking industry with UTZ CEO, Dylan Lissette.

Video Transcript

BRIAN SOZZI: UTZ bag, another acquisition this week, its third one since going public last August. This one will make it a larger player in the Chicago snack food market. Let's bring in UTZ CEO Dylan Lissette for more. Dylan, good to see you, as always, here. So you acquired a brand called Vitner's, well known in the Chicago area. Why Chicago?

DYLAN LISSETTE: Well, really, it's the fourth largest salty snacks market in the United States. It's right on a contiguous path for us as we move, like, from the East Coast into the Midwest. We really like it because it's sort of the starting point for further expansion into Michigan, into Wisconsin, and to other areas of the Midwest. So it's a great brand.

But importantly, we're going to be able to take our power brands that we have, UTZ and Zapp's and Good Health and Boulder Canyon and other brands that we have on to that distribution network within Chicago really soon after closing.

BRIAN SOZZI: You know, we were joking before we came on air that I read your s-1, maybe not all 390 pages, but most of it. And there's one theme to your company, you've been aggressive in acquiring other companies the past 10 years, certainly since you went public. One thread throughout all these deals, at least to me, the multiples you're getting look very, very attractive. They seem low compared to, let's say, other brands in the market. How are you finding these deals, and what are you finding inside these companies? Why are you getting them so cheap?

DYLAN LISSETTE: Well, it's a great question. I mean, I will say that it's a testament to our team. It's a testament to the fact that the company has been around for a hundred years. I've been with UTZ for now over 25 years. And I think we built the reputation as a good acquirer. And we've gone after, quite frankly, some pretty complicated deals that maybe other people would not take the time or the effort to execute on.

We did, in 2016, take private of a public company. We did another take private in 2017. We extracted some DSD assets from the Conagra company in 2019. And again, this latest one in Chicago with Vitner's is an extraction of a set of a-- a subpart of a company. So it's complicated. And I think that may be one of the reasons that we are able to get so many of them done because we're willing to do the work.

JULIE HYMAN: Hey, Dylan, it's Julie here, it's good to see you. So walk us through just from a sort of logistics perspective, when you integrate these companies, what that looks like. Do you end up consolidating manufacturing operations? Or is it more distribution operations to make those acquisitions make sense for you? How does that work?

DYLAN LISSETTE: Yeah, I mean, every single one that we've done has been somewhat different. But just zeroing in on Vitner's as an example, in this case, we actually bought the intellectual property to the Vitner's brand and we're moving the production of the potato chips and the cheese curls and the popcorns out of its current owner's facilities over time into one of our facilities that we operate already. So we're going to move those pounds into our production facility, increasing the efficiency of that facility by utilizing more capacity.

So that's one aspect of it. Obviously, on the distribution side, what we are able to do is integrate it somewhat. If we have existing operations in the area, we may be able to take out a warehouse or synergise some routes, make them more effective. As an example, we acquired Kitchen Cooked, which is a central Illinois brand, in December of 2019. And we really were able to bring a lot more of our power brand products onto that distribution network and increase the efficiency of those routes and penetrate and get greater ACV and market share for our brands.

So it's a complicated system of integration, and each deal that we have done has a little bit of different flavor to it. But it's something we're really good at at this point because our team has done so many of them that it's not just four or five people doing these integrations, it's 30, 40, 50 people within the organization who've done a lot of them.

JULIE HYMAN: I've got a request from someone on our team to bring back the UTZ Crab Chips. But I do--

DYLAN LISSETTE: We still have them. We still have the Crab Chips.

JULIE HYMAN: That's what I thought too. I'm a big fan of the Zapp's chips as well, which I know is in your portfolio. This might seem like a silly question, but when you talk about buying the intellectual property and then bringing the manufacturing in-house, how do you preserve-- I mean, for people who are really loyal to these products, because that's kind of the way the people are with these kinds of snacks, right? How do you make sure that they do taste exactly the same if you're using the same recipes, but you're making it in a different facility?

DYLAN LISSETTE: Yeah, 100%. And so in a case like this where we bought the intellectual property, we're getting the full recipe. We understand what equipment is being made on, our teams will work with their team to ensure that we're making it the right way. You know, for example, and I just saw the Zapp's bag on the screen. You know, we are actually having our 10-year anniversary in April of this year of 2021 of acquiring the Zapp's brand.

The Zapp's brand is now made in three different manufacturing plants across the country. The brand has grown tremendously. And part of that is because we really have stayed true to the quality of that product since the day we bought them. So we're very in tune.

We have a great team that's very in tune to making sure that we don't just buy something and change something, we will go out of our way to ensure that we have the right processing equipment or manufacturing equipment, the right recipes, and we're using the same suppliers, the same corn, the same mozza, the same seasoning, you know, whatever it is that we can make sure that we are replicating it as close as humanly possible.

MYLES UDLAND: And Dylan, just finally, thinking about the mix this year, it's been such a strange year for anyone in the grocery category that the habits people have gone back to. You know, comfort food has been a big part of what consumers have defaulted to. And when I think comfort food, I think potato chips, you know, I think about hot cheese twists, things like this.

What has that mix been like, and how do you maybe think about any normalization in trends? Or did people, you know, try to be healthy and realize, I actually like potato chips, and I'm just going to keep buying them even, when the pandemic is over?

DYLAN LISSETTE: Yeah, I mean, 100%. You know, as a company, especially prior to the Truco On the Border Tortilla Chip acquisition, we were heavily weighted towards potato chips, about 50% of our business was potato chips. And in the year 2020, especially through sort of March forward when the pandemic and the eat-at-home trends really started, you know, potato chips just grew tremendously. I mean, you know, much more so than pretzels, much more so than tortillas.

And that trend is abating a little bit, where it's slowing down a little bit. But to your point on comfort food, on legacy brands, on buying what you know, some of the better-for-you brands are not selling as much as you would expect. Typically in January, you'll have that big lift of dieting and better-for-you eating. And we're definitely seeing that as well. But those trends tend to abate.

As you can imagine, you dedicate yourself to work out every day, the first day of January. And by 10 or 15 days in, you may have given up on that endeavor somewhat. So we've been at this for a very long time as a company and as brand managers. And so we kind of understand the seasonality of a lot of these trends, from potato chip eating to better-for-you eating to keto and pork rinds and no carbs and all of the different nuances.

BRIAN SOZZI: Hey, Dylan, since we have you in the chair, I mean, you want to announce any more deals? I mean, you're on with us, clearly you're on a roll.

DYLAN LISSETTE: Well, I can't do that. What I will tell you is that--

BRIAN SOZZI: I tried.

DYLAN LISSETTE: --I think we're really good at it and so we've got a-- we're a pure play salty snack brand, and we want to be the fastest growing, and we want to be the second largest platform in the US, and we're well on our way.

BRIAN SOZZI: All right, well, I had to try. Just wouldn't be doing my job if I didn't. We'll leave it there. UTZ CEO Dylan Lissette, always good to see you. Have a good weekend, stay safe. We'll talk to you soon.

DYLAN LISSETTE: Yes, you too. Thank you very much.