Galaxy sales turn sour

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Galaxy Nutritional Foods (GXY), a producer of plant-based dairy
alternatives, blamed low-carb trends for a net loss in its fourth
quarter. But a change in management and high overheads should also
be considered, reports Philippa Nuttall.

Galaxy​ reported a net loss of nearly $3 million, or 30 cents per share, for the fiscal year ending 31 March 2004 compared to a net income of just over $1 million, or 5 cents per share for the same period last year.

Sales fell 9.5 per cent to $36.2 million from $40 million in 2003. Earnings for the fourth quarter were $614,430, or 6 cents per share, compared to a loss of $241.059, or 1 cent per share, in the same period a year before.

GXY, whose dairy alternatives are phytonutrient-enriched products made from soy, rice and oats, singled out the low-carb trend as a key factor for decreasing sales. It claimed that reduced consumption of products such as bread has had a knock-on effect on the sales of cheese slices, normally eaten with a slice of the low-carb 'black-listed' food. The company also criticised its packaging for lacking a competitive edge in supermarkets, and noted that a grocery labor strike in California had impacted on Veggie brand sales.

Scott Van Winkle, managing director of Adam, Harkness & Hill, agreed that the low-carb trend may have had a negative effect on sales, but thought other factors should also be taken into consideration.

"There certainly has been a decline in the consumption of bread in the US and I would suspect this has had an impact on the sector,"​ he told NutraIngredientsusa. "But the real issue for Galaxy is that it has a large factory - built with higher sales figures in mind - and therefore large overheads. If this were scaled down, the sales figures would look good."

He added that bearing in mind that the company was going through a transitory phase, the reported figures were as expected. Christopher New was appointed as CEO in December 2002 to replace Angelo Morini, founder and president of the company. This change of leadership also led to new appointments to the board of directors.

Despite the figures, Galaxy remained upbeat, saying it expects 2005 sales to increase by more than 10 percent over 2004. "During the last financial year, Galaxy's directors and senior management continued to implement and refine our growth strategies,"​ said Christopher New. "These actions have strengthened our business capabilities and are reflected in today's results."

He added: "Our growth plan for fiscal 2005 includes improved product development and quality and better consumer marketing, product distribution and positioning​".

Van Winkle agreed with the positive outlook, noting the company's increasingly aggressive marketing startegy and the strength of the functional foods industry as a whole.

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