Diamond Foods Nuts, Not Crazy

Diamond Foods (DMND - Analyst Report) supports existing and new products through a unique advertising strategy -- namely, Diamond's products are marketed through television advertising during the major sporting events, such as the Super Bowl, the World Series, the Olympics, the U.S. Open, and now March Madness.

The company has announced a new TV advertising campaign to debut on April 4th and April 6th during the Final Four and Championship games. Three new TV commercials will be aired, which will continue the company's "Natural Energy" campaign that depicts "the bad things that can happen when you don't eat Emerald Nuts at 3 p.m."

One of the key factors for Diamond's sales growth has been the continued investment in its brands through advertising campaigns that target key sporting events. Though the company devoted 3.9% of sales to advertising in the last fiscal year -- which is about average for a food company and well below the 8.4% of sales than Kellogg Co. (K - Analyst Report) devotes to advertising -- given the small size of the Diamond's revenue base of $542 million, it may seem peculiar that a company of Diamond's size would target high profile sporting events, which have very high advertising fees for 30 second spots ($3 million for the 2009 Super Bowl).

However, management has obviously targeted the right audience for its Diamond® and Emerald® brands by focusing on high-profile sporting events because they are also natural snacking occasions. The effectiveness of Diamond's strategy can be measured by the company's 11.5% sales growth, which is well above the average sales growth for a packaged food company, and by market share gains.

Specifically, the Emerald® brand has recently achieved market share of 8% in US Grocery stores for the 4-week period ended February 21st, which a new record high for the company.

Diamond is a branded food company focused on processing, marketing, and distributing culinary nuts and snack products under the Diamond® and Emerald® brand names. In September 2008, the company acquired the Pop Secret® franchise from General Mills (GIS - Analyst Report).