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With a Fearless and Willing to Fail Attitude, Diamond Foods Emerges as Powerhouse

Scrappy Little Snackmaker Wins Big -- And Aims to Get Bigger by Scooping up Pringles

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Founded by California walnut growers a century ago, Diamond Foods is emerging as a snack powerhouse that could grow even bigger next year if it completes a planned acquisition of Pringles from Procter & Gamble. But despite its new heft, the marketer has kept the same scrappy, fearless attitude that fueled yet another year of rising sales for its Emerald nuts, Pop Secret popcorn and Kettle potato chips brands.

Pringles would triple Diamond's snack business.
Pringles would triple Diamond's snack business.

How fearless? Diamond has a "fail fast" philosophy in which new lines are put into the market not long after they are conceived so that they can be evaluated and then changed if necessary before being rolled out nationally. Diamond piloted its "Emerald Breakfast on the Go!" product for a year with one retail customer, tweaked it along the way, and then totally overhauled it and put it in national distribution just 12 weeks after making the changes.

The brand of blended nuts, dried fruit and granola clusters was rolled out widely in January and by Oct. 2 already reached $13 million in sales and commanded nearly 3% of the trail-mix category, according to SymphonyIRI, which excludes Walmart data. "It was the fastest launch in our history and it was in a totally different category than we've ever launched into," said Andrew Burke, exec VP-chief marketing officer.

Diamond also knows when to take a simpler approach. Consider Pop Secret, which it acquired from General Mills in 2008, and is now sold in 77% of grocery stores. Diamond almost singularly plugs the popcorn as a movie snack, inserting coupons in Netflix orders and running ads in which animated popcorn characters watch and discuss scenes from classic movies. That's hardly a novel idea, but Diamond's relentless focus on the positioning is paying off, with Pop Secret's main offering up 4.5% in sales in the year ending Oct. 2, and now commanding a 17.2% market share, putting it second behind Orville Redenbacher, according to SymphonyIRI.

The focused strategy replicates what Diamond has done with its Emerald nut brand, which since 2007 has been positioned not just as an afternoon snack, but one to enjoy at 3 p.m. for a natural boost of energy. And it still works, with brand sales up 16.4% in the year ending Oct. 2, according to SymphonyIRI.

While other brands seek new occasions, "we actually try to be more specific," Mr. Burke said. "It comes from a survivor mentality," he added.

While Diamond's marketing budget might be smaller, it is growing. Ad expenses jumped by $11.5 million in fiscal 2011 to $44.4 million, while the company projected its ad investment will grow by 20% to 25% for first half of 2012. Much of that is being driven by the marketer's first-ever national TV campaign for Kettle brand potato chips by Diamond agency-of -record Deutsch, Los Angeles, which is agency of record for all Diamond products. The brand continues to make gains, with sales up nearly 10% in the year ending Oct. 2 and market share growing to 2.8%, placing it seventh among leading brand varieties, according to SymphonyIRI.

Next year, it hopes to complete another bold play: a planned acquisition of Pringles that would triple the size of Diamond's snacks business. But the transaction hit a bump recently when Diamond announced it was delaying the anticipated closing date from this year to early next year due to an internal accounting investigation concerning its payments to walnut growers.

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