Report from Oct 30, 98
OJ launch now on track: The orange juice launch appears on track. Rising prices on conventional orange juice (Tropicana has announced a 10% increase,)due to Florida supply problems, will lower the price spread between organic and conventional OJ, and could lead to more favorable consumer response to organic. HCOW indicated it sees no supply problems this year, as it has less exposure to Florida. Recent taste tests show that Horizon OJ beat both Tropicana and Minute Maid hands down.
New advertising initiatives on the way: Horizon also announced yesterday the appointment of its first consumer ad agency, Citron, Haligman Bedecarre. HCOW plans to launch its new consumer advertising in Q299 in the major markets of New York, San Francisco, Los Angeles and Denver. We are excited about this initiative and think the advertising campaign will accelerate the company's brand building efforts while securing the Horizon consumer franchise.
Distribution gains continue -- Reiterate BUY : With continually
increasing distribution -- HCOW announced new penetration at Giant, HE Butt and Fred Meyer (which could lead to greater penetration into Kroger) -- we see ongoing strong growth from the company's core milk business as well as its other dairy products such as cheese and yogurt. While we are not increasing estimates at this time (FY99 estimate remains EPS of $0.35 on $76.4 million) we think tremendous upside exists here from virtually all HCOW's products. Moreover, the
possibility of a sustained period of high butterfat prices, and continued operational improvements at the farm level, bode well for margins in Q4. We think Horizon is an extremely strong emerging brand in the early stages of conquering a huge category, through organic growth and acquisition opportunities. We reiterate our BUY.
Hambrecht & Quist LLC |
