The insular management at hipster seltzer fave LaCroix, owned by National Beverage (FIZZ), best get a clue says one Wall Street critic.
“LaCroix management has been unable to provide any significant innovation over the last few years, they have just been adding new flavors,” Guggenheim Securities analyst Laurent Grandet said on Yahoo Finance’s The First Trade. “There is also just increased competition.”
Grandet’s recent call that LaCroix sales are in “free-fall” has done its part to push National Beverage shares down 40% year-to-date. Talk about a fall from grace for a brand — and stock — that could do no wrong two years ago. But it’s hard to argue with the facts, as presented by Grandet and National Beverage’s latest quarterly results.
Grandet, citing Nielsen data, points to LaCroix’s sales diving by mid-single digit percentages from March through April. In May, Grandet notes, LaCroix sales plunged 15%. For the quarter ended January 26 — the most recent reported — National Beverage sales fell 3% due to weakness in LaCroix. Earnings per share dropped to 53 cents from 88 cents a year ago.
Keep in mind, the seltzer category by most estimates continues to grow in excess of 15% annually.
The Guggenheim analyst believes that besides increased competition in the seltzer space from PepsiCo (PEP) and Coca-Cola (KO), National Beverage’s reputation has been hurt due to claims the ingredients it uses aren’t all natural.
“When I last met with the company the stock was about $120 and I think the company was expecting the stock to go even higher. Now it’s about one-third of where it was nine months ago. So we have written that the most likely future of the company would be that a private equity firm could buy into it. But the management would have to make a mental shift to accept that the actual value of the company is much less than it was,” said Grandet, who rates National Beverage at a Sell.
“We don’t think the current management is appropriate to drive this business up and don’t think they are going to deliver any significant innovations,” added Grandet.
National Beverage’s current management team primarily consists of LaCroix’s 82-year-old founder and CEO Nick Caporella. The often prickly Caporella — no stranger to penning bizarre rants against those attacking LaCroix’s ingredients — has tight control of the company. Caporella’s son Joseph is the company’s president — both Caporellas sit on National Beverage’s five-person board of directors.
National Beverage didn’t immediately respond to Yahoo Finance’s request for comment on Grandet’s claims.