Slack snack sales puncture Lance.

• Author: Speizer, Irwin
• Position: Money Matters

In the past year, investors in Lance Inc. have watched its stock price crumble like one of its Toastchee crackers under a hard shoe. The Charlotte-based snack maker lost half its value amid falling sales and profits. Sales dipped 2.5% to $543 million in 2002; net income slipped 17% to $19.9 million. In March, Lance cut 6.5% of its 4,600 jobs.

That wasn't all. On April 11, Lance said it would dump its Poppers line, miniature versions of its crackers. Richard Tucker, president of Lance Co., its cracker-and-cookie subsidiary, resigned. Overall, first-quarter sales in 2003 slipped 3.2% from the previous year. An $8.4 million pre-tax charge led to a first-quarter loss of 10 cents a share, compared with a 19-cent profit a year earlier. News of the impending loss took another bite out of the stock price, dropping it to $7.07, its lowest level in more than a decade. By late April, it was trading at about $7.50.

Lance had been counting on Poppers to boost sales in a weak snack market. After 10 months, however, sales were about $7 million, less than half of what had been expected.

In 1995, a similar downturn prompted CEO Paul Stroup III to close plants in Texas and South Carolina, lay off 500 workers and take a $40 million charge. Lance recovered slowly but surely. By early 1998, the stock price had risen 67% to $20.

Complicating matters this time is a changing market. Lance distributes snacks throughout North America and parts of Europe, but its stronghold is still the Southeast and Mid-Atlantic states. Spokesman Todd Phillips says major snack makers such as Kraft Foods Inc. have repackaged their cookies and crackers in snack-sized containers, increasing competition for space in convenience stores and vending machines. Frito-Lay has put more emphasis on selling in small stores in remote places, a channel Lance once dominated in the Southeast. Factory shutdowns and layoffs have cut vending-machine sales at mills, where Lance sandwich crackers have long been big sellers.

As it tightens its belt, Lance is trying to improve its vending and grocery sales by reducing turnover among its route salesmen and changing its route-sales structure. The company hopes to improve product placement in stores and do a better job of matching products with local tastes.

Stroup also says new products under discussion could boost sales. But since Poppers turned out to be floppers, it's probably best to take that statement with a grain of salt.

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