Rocky Mountain Chocolate Factory is venturing into a new product line: cereal.
The Durango-based company entered into a licensing agreement with Kellogg Co. to use the RMCF brand on certain cereal products, said RMCF Chief Operating Officer Bryan Merryman during a conference call with investors Thursday.
“This is a true milestone and demonstrates the strength of the Rocky Mountain Chocolate Factory brand,” Merryman said. “All indications are it’s off to a very good start.”
The company won’t have “meaningful” sales information about the cereal until the beginning of June, he said.
Investors responded well to the announcement, but Merryman still had to explain a 56.6 percent decline in income from operations in fiscal year 2013, which ended Feb. 28.
The company released its operating results for the fourth quarter and fiscal year 2013 on Thursday.
Revenue increased 4.9 percent to about $36.3 million in fiscal year 2013, compared with about $34.6 million in the previous fiscal year.
Revenue for the fourth quarter increased 1.6 percent to about $10.3 million, compared with about $10.1 million in the fourth quarter of last fiscal year’s fourth quarter.
Despite the increase in revenue, the overall income from the company’s operations plummeted about $3.31 million during fiscal year 2013.
Merryman blamed the loss on RMCF acquiring a 60 percent controlling equity interest in U-Swirl Inc. in January. The company hopes the acquisition will make its frozen-yogurt franchise, Aspen Leaf Yogurt, profitable. The franchise never turned a profit.
“Now that we have restructured our frozen-yogurt operations, we expect the company’s financial results to recover significantly in the fiscal year that ends Feb. 28, 2014,” Merryman said in a news release.
The company acquired Yogurtini International LLC – a privately owned self-serve frozen-yogurt franchise – and exchanged the Yogurtini assets, Aspen Leaf Yogurt and $78,000 in cash for the controlling interest in U-Swirl.
RMCF management no longer is directly involved in the frozen-yogurt operations, and “this allows us to focus exclusively upon the growth potential of our domestic and international chocolate and confectionery manufacturing, franchising, licensing and co-branding activities,” Merryman said in the release.
The chocolatier announced in March its plans to open stores in South Korea and Saudi Arabia.
Investors were eager to hear how the international expansion effort is going and if the company has future expansion plans in the works.
“It is a top priority of the company to continue expanding around the world,” Merryman told investors. “We’re certainly focused on it, and we’ll roll out international expansion as fast as we possibly can, but it does take time.”
The company is in discussions with “a number of countries” about potential licensing agreements, he said, though he did not specify which ones.
RMCF entered a licensing agreement in 2012 with a partner in Japan to open 100 stores over a 10-year period, but the partner is behind schedule.
So far, fives stores have opened in Japan with two to three more stores planned to open in the next few months, Merryman said.
There is a depreciation of the yen, which is putting financial pressure on the partner, Merryman said, but it also is having operating problems.
“They are holding off on franchising until they have the operation better under control,” he said.
In the meantime, RMCF could seek other partners in Japan to enter into licensing agreements.
“It’s an option we have not 100 percent decided to pursue, but it’s definitely on the table,” he said.
jdahl@durangoherald.com
