Utz Brands, Inc. Announces Network Optimization Initiatives To Support Volume Growth, Reduce Costs

Published online: Dec 01, 2023 Articles
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Hanover, PA – Utz Brands, Inc. and its affiliated entities, a leading U.S. manufacturer of branded salty snacks, announced several network optimization initiatives that are expected to support long-term volume growth and reduce costs.

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;
  • Strengthen the company’s relationship with a key co-manufacturing partner that will support the optimization of the company’s network;
  • 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;
  • Announced that the company’s lowest-volume manufacturing plant in Hanover, Pennsylvania will cease operations in the first quarter of 2024;
  • Signed a built-to-suit agreement for a new, ~650,000 square foot leased distribution center located in Hanover, Pennsylvania, expected to open in the first quarter of 2025; and
  • Decided to list for sale (i) its Louisiana manufacturing plant, which was impacted by Hurricane Ida in 2021 and has remained idle since sustaining irreparable damage, and (ii) 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, 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.

The Bluffton Plant, which makes products associated with the TGIF brand as well as certain of the company’s kettle chip brands, was sold to Super-Pufft Snacks USA, Inc. and its affiliated entities, an existing co-manufacturing partner. Super-Pufft received real estate and manufacturing assets in the transaction, and in return, the company entered a newly established co-manufacturing relationship with Super-Pufft, under which Super-Pufft will manufacture certain TGIF products under favorable terms. Over time, the company expects to shift production of these products into Utz owned and operated manufacturing facilities.

The Carlisle Street Plant is the company’s oldest plant and served as a kettle chip manufacturing plant, producing the company’s Utz, Grandma Utz, and Zapp’s brands. With the company’s expansion of its kettle manufacturing capacity across its network, including future kettle production planned for the Kings Mountain Plant, Utz expects to efficiently absorb the volume produced by the Carlisle Street Plant. The company 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 leased Northeast Logistics Center, which the company expects to occupy in the first quarter of 2025, will create incremental warehouse capacity to support long-term growth. As the company has grown sales volume in excess of the salty snack category over the last four years,(1) it has outgrown its existing warehouse network infrastructure in Hanover, Pennsylvania, through which it delivers a majority of the company’s volume.

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. These initiatives demonstrate the company’s ongoing dedication to optimizing its supply chain. The company will discuss this and more at its Investor Day in New York City on Dec. 15.

(1)   Reflects retail sales volume growth for the last 52 weeks ending September 10, 2023, compared to the same period in 2019, per Circana.