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Birch Benders brand drags Sovos into the red

LOUISVILLE —  Food-brands umbrella company Sovos Brands Inc. (Nasdaq: SOVO) significantly grew its sales during the fourth quarter of 2023, but its divestiture of the Birch Benders lines of waffle mix resulted in a higher year-over-year loss.

Sovos, which controls Noosa Yoghurt, Birch Bends, Roa’s line of pasta sauce and Michael Angelo’s frozen entrées, saw net sales of $262.1 million in the fourth quarter of last year, a 38.5% increase over the same period in the prior year. 

Sovos’ net loss for the fourth quarter of 2022 was $28.7 million, down from a loss of $3.8 million during the same period in 2022.

Despite the increased losses, Wall Street reacted positively to Sovos’ earnings report on Thursday and Friday. The sales total in the fourth quarter of 2023 beat Zacks Consensus Estimate by 13.57%. 

“In 2022, we delivered another year of sector-leading growth driven by both volume and price, reflecting a uniquely balanced growth profile relative to most of our peers,” Sovos CEO Todd Lachman said in a prepared statement. “I am particularly proud of how our teams responded to a challenging year of historically high inflation and global supply chain disruptions.”

Sovos said its fourth quarter performance was “largely due to the loss on asset sale of the Birch Benders brand and certain related assets.”

The company offloaded Birch Benders in January to Hometown Food Co., a portfolio company controlled by Brynwood Partners VIII LP for an undisclosed sum less than three years after acquiring the brand. 

“Today’s announcement reflects Sovos Brands’ continued commitment to growing our core Rao’s and Noosa brands and, in particular, accelerating Rao’s to $1 billion in net sales and beyond. As we look ahead, Sovos Brands will be a more focused business that is better-positioned to drive sustainable sector leading growth for years to come,” Lachman said in a statement released when the brand was sold. 

Birch Benders’ sales plummeted after losing a major customer, according to media reports, and Sovos wrote down the brand’s value by $42 million last summer.

For the full 2022 fiscal year, Sovos posted a net loss of $53.5 million on sales of $878.4 million. 

Looking ahead, Sovos is projecting sales in 2023 to total $900 million to $925 million.

Source: BizWest