Simply Good Foods (SMPL) Q2 2025: Quest Salty Snacks Up 45%, Accelerating Brand Mix Shift
Quest’s salty snacks platform delivered 45% growth, powering a decisive brand mix shift and margin uplift even as Atkins declines deepen. The quarter marked a pivotal acceleration in distribution and innovation, with Quest and Owyn now comprising 70% of net sales and driving double-digit growth. Leadership reaffirmed full-year guidance, citing strong category fundamentals and productivity initiatives to offset input cost and tariff pressures.
Summary
- Brand Mix Shift Accelerates: Quest and Owyn now drive the lion’s share of growth, offsetting Atkins’ contraction.
- Distribution and Innovation Lead: Salty snacks and new platforms expand Quest’s reach across channels and aisles.
- Margin and Productivity Focus: Cost discipline and productivity initiatives counterbalance inflation and tariff headwinds.
Performance Analysis
Simply Good Foods posted 15% top-line growth in the second quarter, with Quest and Owyn’s double-digit gains more than offsetting a double-digit decline in Atkins. Quest now accounts for 60% of company net sales and continues to outpace the nutritional snacking category, which itself remains robust with 12% growth and 16 consecutive quarters of high single-digit or better category expansion. Owyn, acquired in mid-2024, grew retail takeaway 52% and is scaling rapidly through both new doors and increased velocity per store.
Gross margin declined 120 basis points to 36.2%, primarily due to the inclusion of lower-margin Owyn and the ongoing Atkins contraction. Adjusted EBITDA rose 18%, reflecting strong operating leverage from the higher-margin Quest business and disciplined spending. The company continued to deleverage, repaying $50 million of term loan debt in the quarter and lowering net leverage to 0.7 times trailing EBITDA. Cash flow from operations was lower year-over-year, mainly due to inventory investment, but capital intensity remains minimal.
- Salty Snacks Surge: Quest’s salty snacks platform grew 45%, now 35% of Quest retail sales, and is on track to match bars in size within a year.
- Atkins Drag: Atkins sales fell 11.5% as the brand lost distribution and scaled back low-ROI promotions, with further declines expected into the second half.
- Owyn Early Momentum: Owyn’s ready-to-drink shakes and powders delivered strong velocity and distribution gains, with management targeting a doubling of sales in three to four years.
Brand mix is increasingly favorable as Quest’s higher contribution margin (about 10 points above Atkins) becomes a larger share of the portfolio, supporting both profitability and future investment capacity.
Executive Commentary
"Our momentum continues with double-digit growth for Quest and Owyn, more than offsetting declines for Atkins. Specifically, first half retail sales for Quest and Owyn, which collectively represent approximately 70% of our net sales today, increased 12% and 57% respectively."
Jeff Tanner, President and CEO
"Quest contribution margin percentage is about 10 points higher than Atkins. As a result of that, the contribution margins of the two brands have diverged... Once we get the synergy capture for Owyn, its contribution margin should be in line with Atkins beginning next year."
Sean Mara, CFO
Strategic Positioning
1. Quest’s Platform Expansion Drives Growth
Quest is evolving from a bar-centric brand to a multi-platform powerhouse. The salty snacks platform, now a $300 million-plus business, is the standout, benefiting from expanded manufacturing capacity and a successful club test with a major retailer. New product launches—including overload bars and ready-to-drink milkshakes—are broadening Quest’s reach and household penetration, which remains low at 15% unaided awareness.
2. Owyn Integration and Growth Runway
Owyn, plant-based nutrition, is scaling rapidly with both distribution and velocity gains. Despite low awareness and only seven SKUs per store, Owyn’s retail velocities are industry-leading, and management expects to double net sales in three to four years. Integration is on track, with synergy capture set for fiscal 2026 to bring margins in line with the legacy portfolio.
3. Atkins Rationalization and Strategic Repositioning
Atkins, weight-loss focused brand, is intentionally shrinking its footprint as the company reallocates space and investment to faster-growing, higher-margin brands. Distribution losses at key club accounts are being offset by Quest and Owyn gains, and new Atkins innovation (e.g., Atkins Strong shakes, new packaging) is targeted at sustaining relevance, especially among GLP-1 drug users. The goal is to stabilize the brand’s base velocity as the physical footprint contracts.
4. Margin Management and Productivity Initiatives
Gross margin guidance remains cautious due to anticipated input cost inflation and tariffs. Management is executing a stepped-up productivity program to offset cost shocks, with a focus on supply chain agility and ingredient sourcing flexibility. The brand mix shift toward Quest and Owyn is structurally accretive to margins over time.
5. Channel and Physical Availability Expansion
Quest is pushing into new aisles and channels, with salty snacks gaining placement in mainline snacking aisles and new club rotations expected in fiscal 2026. Dedicated retail execution teams and increased merchandising are accelerating the mainstreaming of nutritional snacking, driving both trial and repeat purchase.
Key Considerations
The quarter marks a turning point in Simply Good Foods’ brand mix and operational focus. Management is prioritizing high-growth, high-margin platforms while managing the legacy Atkins business for profitability and stability.
Key Considerations:
- Brand Portfolio Realignment: The shift from Atkins to Quest and Owyn is both a growth and margin story, with Quest’s contribution margin about 10 points higher than Atkins.
- Salty Snacks as a Growth Engine: Salty snacks’ rapid expansion is increasing Quest’s shelf space and consumer touchpoints, with new club and mass channel opportunities ahead.
- Owyn’s Distribution and Velocity: Owyn is achieving the rare feat of simultaneous distribution and velocity growth, with upside from increased SKUs and broader awareness.
- Margin Risk Management: Productivity initiatives and ingredient sourcing flexibility are crucial to offsetting inflation and tariff uncertainty in the back half.
- Atkins Stabilization Metrics: Investors should watch base velocity and the impact of new innovation as signals of stabilization for Atkins, even as the physical footprint contracts.
Risks
Margin pressure remains a central risk, with input cost inflation (notably cocoa and dairy) and potential retaliatory tariffs creating uncertainty for the second half and beyond. The Atkins brand contraction, while strategic, could weigh on top-line momentum if Quest or Owyn growth rates moderate. Distribution gains are lumpy and timing-dependent, especially in club and mass channels, and any delay could impact near-term results. Management’s ability to execute on productivity and sourcing initiatives will be tested as macro volatility persists.
Forward Outlook
For Q3, Simply Good Foods guided to:
- Continued double-digit growth for Quest and Owyn, with Quest retail takeaway now expected in the low double-digit range for the year.
- Atkins point-of-sale to decline in the low double digits, reflecting further distribution losses and less promotional activity.
For full-year 2025, management reaffirmed guidance:
- Total net sales growth of 8.5% to 10.5%, with Owyn reaching $140 to $150 million in sales.
- Adjusted EBITDA up 4% to 6%, with gross margin down about 200 basis points year-over-year.
Management highlighted several factors that will shape results:
- Tariff and input cost impacts are mostly covered in guidance, but retaliatory tariffs remain a wild card.
- Quest’s salty snacks and Owyn’s new distribution wins are key swing factors for second-half performance.
Takeaways
Simply Good Foods is executing a strategic brand mix transformation, with Quest and Owyn driving both growth and margin expansion as Atkins is right-sized. The company’s focus on innovation, distribution, and productivity positions it well for continued outperformance, but input cost and tariff risks will require ongoing vigilance.
- Brand Mix Drives Margin and Growth: The portfolio shift toward Quest and Owyn is structurally improving profitability, even as Atkins contracts.
- Distribution and Innovation Are Key Levers: Physical availability and new platforms are unlocking new consumer segments and incremental sales.
- Margin Management Will Be Tested: Productivity and sourcing initiatives are essential to offset inflation and tariff headwinds, and execution will be critical in the second half.
Conclusion
Simply Good Foods is capitalizing on the mainstreaming of high-protein, low-sugar snacking, with Quest and Owyn now at the forefront of both growth and profitability. The company’s ability to manage brand transitions, cost headwinds, and channel expansion will define its trajectory as category leadership intensifies.
Industry Read-Through
The nutritional snacking category remains a secular growth story, with mainstream consumer adoption and innovation driving sustained double-digit expansion. Brand mix and margin management are becoming critical differentiators as inflation and tariffs pressure gross profit across the sector. Physical availability and cross-category innovation are increasingly decisive for brands aiming to win in both legacy and emerging channels. Competitors should note the importance of productivity initiatives and agile supply chains in navigating ongoing macro volatility.