What changed in this filing

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Item 1. Business

2024-02-29 compared with 2023-03-02 · 118 added, 144 removed, 170 unchanged (61% of the section changed)

Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or "our” refer to Utz Brands, Inc.

and its consolidated subsidiaries following the Business Combination, other than certain historical information which refers to the business of UBH and its consolidated subsidiaries prior to the consummation of the Business Combination.

Our core geographies consist of Alabama, Connecticut, Delaware, Louisiana, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, West Virginia, Washington, and Washington D.C.

(our “Core Geographies”).

Our Expansion geographies consist of Arkansas, Colorado, Georgia, Illinois, Mississippi, North Carolina, Ohio, South Carolina, Tennessee, and Vermont (our “Expansion Geographies”).

Our Emerging geographies consist of Alaska, Arizona, California, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Wisconsin, and Wyoming (our "Emerging Geographies”).

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to the “Company,” “we,” “us” or "our” refer to Utz Brands, Inc.

and its consolidated subsidiaries.

Our core geographies consist of Alabama, Connecticut, Delaware, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Virginia, Vermont, West Virginia, and Washington (our “Core Geographies”), with the rest of the U.S.

representing our Expansion geographies (our “Expansion Geographies”).

We are a leading United States manufacturer of branded salty snacks.

We produce a broad offering of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pork skins, veggie snacks, pub/party mixes, and other snacks.

Our iconic portfolio of authentic, craft, and “better-for-you” (“BFY”) brands, which includes Utz, Zapp’s, On The Border, Golden Flake, Good Health and Boulder Canyon , among others, enjoys strong household penetration in the United States, where our products can be found in approximately half of U.S.

households as of January 1, 2023.

We are the second-largest producer of branded salty snacks in our Core Geographies as of January 1, 2023, based on retail sales and we have historically expanded our geographic/distribution reach and product portfolio organically and through acquisitions.

Our iconic portfolio of authentic, craft, and “better-for-you” (“BFY”) brands, which includes Utz, Zapp’s, On The Border, Golden Flake, and Boulder Canyon , among others, enjoys strong household penetration in the United States, where our products can be found in approximately half of U.S.

households as of December 31, 2023.

We are the second-largest producer of branded salty snacks in our Core Geographies as of December 31, 2023, based on retail sales and we have historically expanded our geographic/distribution reach and product portfolio organically and through acquisitions.

Our company was founded in 1921 in Hanover, Pennsylvania, and benefits from more than 100 years of brand awareness and heritage in the salty snacks industry.

As of January 1, 2023, we operate 16 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,100 direct store delivery (“DSD”) routes.

As of December 31, 2023, we operate 14 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,250 DSD routes.

Our business benefits from multiple opportunities to deliver attractive long-term profitable growth.

Our value creation strategies are focused on driving productivity to enhance margins, reinvesting in marketing and innovation to accelerate revenue growth and continuing to make strategic acquisitions.

We believe we are well-positioned for long-term growth as we (a) gained a significant amount of new buyers during 2020 and have continued to add even more buyers through 2022, (b) have significant opportunity in our Emerging and Expansion Geographies and under-penetrated channels, (c) continue to execute productivity efforts that will help to fuel incremental marketing and innovation to accelerate growth in sales, (d) continue to make infrastructure improvements to enable us to continue to scale to greater heights, and (e) continue to make strategic acquisitions that deliver strong synergies and that enhance our competitive positioning.

We believe we are well-positioned for long-term growth as we (a) gained a significant amount of new buyers during 2020 and have continued to add even more buyers through 2023, (b) have significant opportunity in our Expansion Geographies and under-penetrated channels, (c) continue to execute productivity efforts that will help to fuel incremental marketing and innovation to accelerate growth in sales, (d) continue to make infrastructure improvements to enable us to continue to scale to greater heights, and (e) continue to make strategic acquisitions that deliver strong synergies and that enhance our competitive positioning.

We believe each of these growth avenues represents a sizeable opportunity to expand our net sales.

In addition, we further anticipate expanding our margins over the long term through supply chain productivity, revenue management, a higher-margin product mix, and higher margins on incremental sales as we leverage our scalable existing platform.

Recent Developments

Chief Executive Officer and Board Leadership Transition.

Effective December 15, 2022, our Board of Directors (the “Company Board”) appointed Howard A.

Friedman as Chief Executive Officer of the Company and appointed Mr.

Friedman as a Class I director on the Company Board (the “CEO Commencement Date”).

Prior to joining the Company, Mr.

Friedman served as Executive Vice President and Chief Operations Officer of Post Holdings, Inc., a consumer packaged goods holding company, from September 2021 to December 2022.

Previously, Mr.

Friedman served as President and Chief Executive Officer, Post Consumer Brands from July 2018 to September 2021.

Prior to joining Post, Mr.

Friedman served as the Executive Vice President and President of the refrigerated meat and dairy business at The Kraft Heinz Company, a global food and beverage company, where he spent the majority of his more than twenty-year career.

Friedman received a Bachelor of Arts in economics from Dickinson College and a Master of Business Administration from the Stern School of Business at New York University.

In connection with the appointment of Mr.

Friedman to the office of Chief Executive Officer, Dylan B.

Lissette, transitioned from his role as Chief Executive Officer of the Company to the role of Executive Chairman.

Lissette will serve in the role of Executive Chairman until the second quarter of 2023, when he will transition to the role of non-executive Chairman of the Board.

On the CEO Commencement Date, Roger K.

Deromedi retired as Chairman of the Board and was elected Lead Director.

Effects of COVID-19.

The novel coronavirus (“COVID-19”), outbreak began impacting consumption, distribution and production of our products in March 2020.

After initial increases in demand in fiscal year 2020, we experienced more modest growth in fiscal year 2021, as reflected by a compound annual growth rate (“CAGR”) for the 52-week period ended December 27, 2020 and January 2, 2022 of 15.1% and 1.7%, respectively, based on U.S.

retail sales for salty snacks based on data from Information Resources, Inc.

As restrictions imposed in response eased in fiscal year 2022, our 52-week CAGR was 16.6% for the 52-week period ended January 1, 2023, based on U.S.

retail sales for salty snacks based on IRI data driven by pricing actions and new distribution.

During period in which restrictions imposed in response to COVID-19 have been in place, generally, producers of food products, including salty snacks, have been deemed “essential industries” by federal, state, and local governments and are exempt from certain COVID-19-related restrictions on business operations.

Notwithstanding that our operations are exempt from certain restrictions, we have taken preventive actions and implemented additional measures to protect our associates that work on site.

Our strategic manufacturing capabilities and DSD distribution network have allowed us to effectively service increases in demand and be responsive to evolving market dynamics driven by changes in consumer behavior.

We continue to monitor customer and consumer demands, and intend to adapt our plans as needed to continue to meet these demands.

Recent Acquisitions and Vertical Integrations

On February 8, 2021, the Company closed on a definitive agreement with Snak-King Corp.

to acquire certain assets of the C.J.

Vitner's business, a leading brand of salty snacks in the Chicago, Illinois area.

The acquisition increases our distribution in the Chicago area and Midwest Region and expands our product offering.

The Company paid the aggregate cash purchase price of approximately $25.2 million which was funded from current cash-on-hand.

On May 11, 2021, the Company announced that its subsidiary, Utz Quality Foods, LLC ("UQF”) entered into a definitive agreement with Great Lakes Festida Holdings, Inc.

to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.

The Company closed this transaction on June 7, 2021 and the purchase price of approximately $40.3 million was funded in part from incremental financing on an existing term loan.

On November 2, 2021, the Company announced that its subsidiaries, entered into a definitive agreement to acquire R.W.

Garcia Holdings, LLC and its' wholly-owned subsidiary R.W.

Garcia Co., Inc.

("RW Garcia"), an artisan maker of high-quality organic tortilla chips, crackers, and corn chips ("RW Garcia acquisition").

At the closing of the RW Garcia acquisition on December 6, 2021, the Company paid the purchase price of approximately $57.9 million which was funded in part from a draw on the Company's line of credit and cash on hand.

In addition to the RW Garcia acquisition on December 6, 2021, the Company closed on an acquisition of a manufacturing facility of which RW Garcia was a tenant.

The cost of the manufacturing facility was approximately $6.0 million.

Recent Acquisitions and Dispositions

During fiscal year 2022, the Company focused on increasing manufacturing and streamlining distribution.

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During fiscal year 2022, the Company bought out and terminated the contracts of multiple distributors who had previously been providing services to the Company.

These transactions were accounted for as contract terminations and asset purchases and resulted in expense of $23.0 million for the 52 weeks ended January 1, 2023.

These transactions were accounted for as contract terminations and asset purchases and resulted in expense of $23.0 million for the fiscal year ended January 1, 2023.

On February 5, 2024, the Company sold certain assets and brands to affiliates of Our Home™, an operating company of BFY brands (“Our Home”).

Under the agreement, Our Home agreed to purchase the Good Health® and R.W.

Garcia® brands, the Lincolnton, NC, and Lititz, PA manufacturing facilities and certain related assets, and assume the Company’s Las Vegas, NV facility lease and manufacturing operations (the “Our Home Transaction”).

In addition, the Company and Our Home will operate under a Transition Services Agreement for 12 months.

The total consideration for the transactions is $182.5 million, subject to customary adjustments.

In addition, post-closing, the parties will operate under reciprocal co-manufacturing agreements under which Our Home will co-manufacture certain of the Company's products and the Company will co-manufacture certain Good Health® products.

Certain Good Health® products will continue to be distributed and sold on the Company's DSD network for Our Home.

Recent Developments

During 2023, we introduced our long-term growth strategy focusing on various initiatives.

Our portfolio strategy is focused on accelerating investments in marketing and innovation to drive top-line growth and achieve share gains in the attractive Salty Snack category.

We plan to further penetrate our Expansion Geographies and untapped channels and customers by further expanding our Power Brands in Expansion Geographies, as well as maintaining our share in our Core Geographies.

We plan to transform our supply chain into a more cost-efficient and flexible system.

As part of our long-term growth strategy, we intend to enhance our independent operator DSD system to further improve execution and generate higher returns and strengthen other organizational capabilities while driving out costs.

Additionally, we intend to improve our balance sheet flexibility by accelerating cash generation and maintaining a disciplined capital allocation approach, which will reduce leverage while opportunistically pursuing acquisitions.

Our business is managed and reported in one operating segment.

However, we actively manage our portfolio of brands by strategically segregating our sole operating segment into Power Brands and Foundation Brands.

However, we strategically manage our portfolio of brands by segregating our sole operating segment into Power Brands and Foundation Brands.

Power Brands, in aggregate, enjoy a combination of higher growth and margins, greater potential for value-added innovation, and enhanced responsiveness to consumer marketing as compared to Foundation Brands.

As a result, we focus our investment spending and brand-building activities on Power Brands while managing Foundation Brands for cash flow generation to support investment in Power Brands and fund other corporate priorities.

Our Power Brands are comprised of our iconic heritage Utz brand and iconic On The Border® brand;

We assess the designation of brands as Power Brands or Foundation Brands and reclassify brands based on their alignment with the criteria above.

Our Power Brands are comprised of our flagship Utz brand and iconic On The Border® brand;

craft brands such as Zapp’s ®, Golden Flake ® Pork Skins, TORTIYAHS!, and Hawaiian ®;

BFY brands such as Good Health ® and Boulder Canyon ®;

BFY brands such as Boulder Canyon ®;

strong regional snacking brands such as Bachman®, Tim’s Cascade® Snacks, and "Dirty" Potato Chips®;

and selected licensed brands such as TGI Fridays ®.

Our flagship Utz brand generated retail sales in excess of $807 million in 2022, representing an approximate 10.3% CAGR (during 2019 through 2022) and making it one of the 10 largest salty snack brands in the United States by retail sales as of January 1, 2023.

Recognized for its iconic logo featuring the “Little Utz Girl” since the 1920s, the Utz brand currently use the slogan "Family Crafted Flavor Since 1921”.

Our flagship Utz brand generated retail sales in excess of $850 million in 2023, representing an approximate 9.4% compound annual growth rate ("CAGR") (during 2020 through 2023) and making it one of the 10 largest salty snack brands in the United States by retail sales as of December 31, 2023.

Recognized for its iconic logo featuring the “Little Utz Girl” since the 1920s, the Utz brand currently uses the slogan "Family Crafted Flavor Since 1921”.

We sell a variety of salty snacks under the Utz brand, including potato chips, pretzels, cheese snacks, pub/party mixes, and others.

Our On The Border brand ("OTB"), which was acquired in December 2020, is a national brand of tortilla chips, salsa and queso.

OTB is the #2 unflavored tortilla chip brand as of January 1, 2023.

Additionally, the acquisition of OTB strengthens our national geographic footprint in our Expansion Geographies and Emerging Geographies and enhances our presence in the Mass and Club retail channels.

Our Good Health and Boulder Canyon Power Brands anchor our position in the BFY category of salty snacking, which has been a high-growth category in recent years.

Good Health , which we acquired in 2014, is positioned well with fun forms and flavors that appeal to the whole family.

Our On The Border brand ("OTB") is a national brand of tortilla chips, salsa and queso.

OTB is the #2 unflavored tortilla chip brand as of December 31, 2023.

The acquisition of OTB strengthened the national geographic footprint in our Expansion Geographies and enhanced our presence in the Mass and Club retail channels.

Our Boulder Canyon Power Brand anchors our position in the BFY category of salty snacking, which has been a high-growth category in recent years.

Boulder Canyon offers a line of premium BFY potato chips, including those made with olive or avocado oils.

In the Natural channel as defined by SPINS, LLC, Boulder Canyon is the #2 potato chip brand, growing 23% within the channel in 2022 and its “Canyon Cut” rippled avocado oil-based chip is the #1 selling potato chip item as of January 1, 2023.

In the Natural channel as defined by SPINS, LLC, Boulder Canyon is the #2 potato chip brand, growing 27% within the channel in 2023 and its “Canyon Cut” rippled avocado oil-based chip is the #1 selling salty snack item as of December 31, 2023.

Our Power Brands also include a number of our authentic craft brands including Zapp’s, Hawaiian , and Golden Flake pork skins.

For example, Zapp’s , which we acquired in 2011, offers a line of premium kettle-cooked potato chips with bold, authentic flavors steeped in its New Orleans roots, including “Voodoo,” “Hotter ‘N’ Hot Jalapeño,” “Spicy Cajun Crawtators,” and "Cajun Dill Gator-tators,” among others.

For example, Zapp’s offers a line of premium kettle-cooked potato chips with bold, authentic flavors steeped in its New Orleans roots, including “Voodoo,” “Hotter ‘N’ Hot Jalapeño,” “Spicy Cajun Crawtators,” and "Cajun Dill Gator-tators,” among others.

Hawaiian is a premium kettle chip brand that evokes the feel of the Pacific islands, with exotic flavors like “Sweet Maui Onion,” "Luau BBQ,” "Mango Habanero,” and "Hulapeño.” Our Golden Flake brand, a part of Southern culture since 1923, has a full line of Southern-style pork skins with flavors like “Louisiana Hot Sauce” and "Sweet Heat Barbecue,” which offer great taste and crunch with low carbohydrates.

Our Foundation Brands include strong regional snacking brands, such as Bachman ®, Golden Flake ® Chips and Cheese, Tim’s Cascade ® Snacks , Snyder of Berlin ®, " Dirty" Potato Chips®, and R.W.

Garcia®, as well as other partner and private label brands.

In fiscal year 2023, our Foundation Brands included strong regional snacking brands, such as Golden Flake ® Chips and Cheese, Snyder of Berlin ®, and R.W.

and BFY brands such as Good Health® , as well as other partner and private label brands.

On February 5, 2024, the Company sold the Good Health and R.W.

Garcia Brands to Our Home.

We have historically utilized the strong regional positions and relevance of our Foundation Brands to drive increased distribution for our Power Brands.

We produce a broad range of salty snack foods, including potato chips, tortilla chips, pretzels, cheese snacks, veggie snacks, pub/party mixes, pork skins, ready-to-eat popcorn, and other snacks.

We produce a broad range of salty snack foods, including potato chips, tortilla chips, pretzels, cheese snacks, veggie snacks, pub/party mixes, pork skins, ready-to-eat popcorn, and other snacks which include salsa and dips.

Our products are packaged in a variety of different sizes and configurations, ranging from individual packages to shareable bulk containers.

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Our in-house production capabilities across a range of products also enable us to rapidly respond to evolving consumer needs and preferences and to better create new innovative products to delight consumers.

We also believe that our diversified product portfolio results in more predictable and stable financial performance as we are not overly exposed to only one product sub-category.

We also believe that our diversified product portfolio results in more predictable and stable financial performance as we are not overly exposed to only one salty snack sub-category.

Product Innovation

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In particular, our brands have strong competitive positions across an assortment of popular salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pub/party mixes, veggie snacks, and pork skins.

Over the past several years, we have focused on strengthening our presence in certain salty snack sub-categories that we believe are highly synergistic to our existing business.

In particular, Utz Peanut Butter Filled Pretzel Bites is proving to be a large and sustaining offering, with strong velocities and repeat rates.

Utz Peanut Butter Filled Pretzel Bites is the #1 branded peanut butter filled pretzel item at retail as of January 1, 2023, based on IRI Data.

The Utz brand also delivered flavor innovation on its core potato chips line with a very successful partnership with Grillo’s Pickles.

Joining the two brands created a delicious limited time offering that is having success in all channels, including Club.

On The Border Chips and Dips extended their famous Café Style tortilla chip into the seasoned tortilla chip category.

The On The Border Flavored Chips line is rooted in Mexican culinary flavor profiles including salsa, queso and jalapeno ranch, with limited time only flavors expected to launch in the Club channel in 2023.

Zapp’s recently commenced its offering of flavored pretzels with the launch of Zapp’s Sinfully Seasoned pretzels in two flavors;

Voodoo and Jazzy Honey Mustard.

Seeing category leading repeat purchase rates in the 16 and 20 week launch data implies that they have been well received by customers and consumers as of January 1, 2023, based on IRI Data.

Utz also added a new flavor to its iconic Cheese Balls business with "Red Hot Cheddar”.

In the BFY space Utz continues to innovate.

“Good Health ABC Bites” is a fun new letter-shaped snack that we expanded into multipack and seasonal offerings for a fun and educational treat for every occasion.

Boulder Canyon known for BFY oils, such as avocado oil, partnered with Yellowbird Hot Sauce for its second flavor limited-time offering under the Boulder Batch line, bringing spice to a new level.

In particular, Zapp’s Sinfully Seasoned Pretzel Stix is proving to be a very successful innovation.

Launched with two flavors in October 2022, Voodoo and Jazzy Honey Mustard, Zapp’s Pretzel Stix has reached $20 million in retail sales and become a top 10 pretzel brand in its first year.

Voodoo flavored Zapp's Pretzel Stix was named “Best Pretzel Stix” in Self Magazine’s February 2023 Pantry Awards and “Best Pretzel” in People Magazines July 2023 Food Awards Edition, while Zapp’s Pretzel Stix was named “Best New Products” in 2023 Progressive Grocer Editors Picks.

Strong repeat rates on the current line and the launch of two new on-trend flavors, Spicy Cajun and Sweet Cinnamon and Sugar in 2024 support continued strong momentum for Zapp’s Pretzel Stix.

The Utz brand delivered flavor innovation on its core potato chips line with a very positive partnership with Mike’s Hot Honey.

As a Summer Limited Time Offer (“LTO”), Utz Mike’s Hot Honey potato chip dollar sales performed five times higher than the previously best Utz LTO.

Hot Honey is a winning combination of sweet/spicy and a go-to-flavor for potato chip consumers.

Due to this success, Utz Mike’s Hot Honey Potato Chips were transitioned to an everyday item.

Additionally, Mike’s Hot Honey will appear as a variety in a new line of flavored pretzels February 2024 called Utz Mixed Minis.

On The Border Chips and Dip launched two successful LTOs with Sam’s Club including Creamy Salsa Verde and Southwest flavors.

To capture incremental placement and purchase of On The Border Café, seasonal packaging was launched during key holidays in Summer, Holiday and in Football/Tailgate.

We are taking advantage of consumers desire for convenient variety and multipacks with a portfolio of innovation such as the Utz 40 count Classic Snacks Variety Pack, On The Border 30 count Café Variety Pack club LTO, Hawaiian Island 18 count Variety Pack and the new line-up of 10 count multipacks offered in customer favorites such as Utz Original Ripples, Utz Party Mix and Utz Cheese Balls.

In the BFY space, we continue to innovate.

Boulder Canyon known for BFY oils, such as avocado oil, launched two successful LTOs under the Boulder Batch line, Spicy Green Chili, to take advantage of the hot & spicy trend that has now proven to be the #1 flavor in salty snacks, and a dill flavored kettle chip in partnership with Grillo’s Pickles, the fastest growing pickle brand.

Given our long-standing customer relationships, broad production capabilities, and scalable distribution platform, we plan to continue expanding our presence in certain salty snack sub-categories that we believe are highly synergistic to our existing business.

We intend to expand our presence in key salty snack sub-categories through a combination of line extensions of our existing brands, new brand introductions, licensing partnerships with established brands, and/or acquisitions.

We believe our expanded presence across key salty snack sub-categories would enhance our competitive position with customers and would be highly synergistic given our ability to leverage our existing manufacturing and distribution infrastructure.

We intend to continue to expand our presence in key salty snack sub-categories through a combination of line extensions of our existing brands, new brand introductions, licensing partnerships with established brands, and/or acquisitions.

We believe our expanded presence across key salty snack sub-categories will enhance our competitive position with customers and allow us to leverage our existing manufacturing and distribution infrastructure.

As such, the level of new product innovation and the speed to market with these innovations are critical components of our business.

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Our DSD distribution system allows us to efficiently experiment with new products at retail stores driven by the ability to quickly place new items and collect immediate feedback on sell-through trends.

Finally, given the importance of in-store presence, we have a dedicated graphics team that is able to quickly develop and implement new packaging designs, impactful point-of-sale materials, and retail-ready displays.

Finally, given the importance of in-store presence, we are working with world-class design agency partners to implement new packaging, impactful point-of-sale materials, and retail-ready displays.

Marketing, Advertising, and Consumer Engagement

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however, we are making shifts of spending into more consumer awareness and brand-building advertising.

In fiscal year 2022, we spent approximately $9.9 million related to consumer marketing and advertising expenses.

In fiscal year 2023, we spent approximately $12.3 million related to consumer marketing and advertising expenses and $29.8 million in cooperative advertising.

Consistent with our value creation strategies, we intend to continue to increase our investments in digital and social consumer marketing and advertising focused on our Power Brands as well as continue to allocate our current mix of media spending toward activities with the highest return on investment.

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We believe these marketing strategies will drive long term net sales growth by increasing brand equity, supporting geographic expansion.

In fiscal year 2022, our top 10 customers, all of which are retailers, represented approximately 40% of our invoiced sales, and no customer accounted for more than 15% of our invoiced sales in fiscal year 2022.

In fiscal year 2023, our top 10 customers, all of which are retailers, represented approximately 40% of our invoiced sales, and one customer provided in excess of 10% of our net invoiced sales in fiscal year 2023.

Although orders are processed through purchase orders, as opposed to volume commitments, we have historically benefited from long-term relationships with our key customers, having a sales relationship for more than 20 years on average across our top 15 retail customers.

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Our products also compete with private label or retailer-branded salty snacks.

However, private label represented only approximately 4.5% of category retail sales for the 52 weeks ended January 1, 2023, which has been about flat compared to its share of retail sales since 2016.

However, private label branded salty snacks represented only approximately 5.1% of US category retail sales for the year ended December 31, 2023, less than its approximately 5.5% share of retail sales since 2018.

Historically, the salty snacks category has benefited from favorable competitive dynamics, including low private label penetration and category leaders who compete primarily via marketing and innovation.

Importantly, as of January 1, 2023, we are the #2 brand platform in our Core Geographies, representing nearly 8% of total salty snacks category retail sales based on IRI data.

As of January 1, 2023, in our Core Geographies, we have the #2 position in pork skins and in pretzels with 18% and 16% of sub-category retail sales, respectively.

Importantly, as of December 31, 2023, we are the #2 brand platform in our Core Geographies, representing over 7% of total salty snacks category retail sales based on Circana data.

As of December 31, 2023, in our Core Geographies, we have the #2 position in pork skins and in pretzels with 17% and 15% of sub-category retail sales, respectively.

We have the #3 position in potato chips, cheese snacks and tortilla chips with 12%, 7% and 4% of sub-category retail sales, respectively.

As of January 1, 2023, we hold the #3 company position with in tortilla chips, with a 4% share, primarily driven by sales of our OTB-branded tortilla chips.

We believe we have a strong and defensible position in our Core Geographies with a significant opportunity to enhance our national position by expanding sales in Expansion Geographies (where we represent 3.6% of category retail sales) and Emerging Geographies (where we represent 2.3% of category retail sales).

As of December 31, 2023, we are the #3 salty snack brand platform in the US, representing 4.4% of total salty snacks category retail sales.

Notably, in 2023, approximately $2.8 billion of salty snack retail sales were generated by approximately 1,200 smaller competitors, each with retail sales of less than $200 million.

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Our principal ingredients are generally available from multiple suppliers, but became more difficult to source beginning in 2021 and continuing into 2023 due to ongoing supply chain constraints.

We do not source any of our top 10 inputs under any single-source arrangements.

As such, we have been able to make satisfactory alternative arrangements in the event of this interruption of supply from our vendors.

No single category of raw material purchases represented more than 15% of our Cost of Goods Sold in fiscal year 2022.

In addition to raw materials, we source energy and liquid fuels for our manufacturing facilities and in-house distribution assets.

We do not source any of our top 10 inputs under any single-supplier arrangement.

As such, we have been able to make satisfactory alternative arrangements in the event of this interruption of supply from our suppliers.

No single category of direct material purchases represented more than 15% of our Cost of Goods Sold in fiscal year 2023.

In addition to raw ingredients and packaging, we source energy and liquid fuels for our manufacturing facilities and in-house distribution assets.

We utilize various buying strategies to mitigate the impact of changes in input prices, including fixed-price forward purchases as well as commodity hedging arrangements with third parties (particularly for energy, vegetable oils, wheat, and corn).

A number of external factors such as weather, commodity markets, and governmental or agricultural programs can affect the cost of raw materials used in our products.

To provide greater visibility, we typically look to enter into pricing arrangements covering a meaningful portion of our forecast purchases over the next 3 to 18 months.

As of February 1, 2023, we believe we have entered into pricing arrangements covering over 45% of our budgeted raw material needs in fiscal year 2023.

To provide greater visibility and mitigate risks, we typically look to enter into pricing arrangements covering a meaningful portion of our forecasted purchases over the next 3 to 18 months.

As of December 31, 2023, we estimate that we have entered into pricing arrangements covering approximately 36% of our budgeted direct material needs in fiscal year 2024.

Manufacturing.

We manufacture our products primarily through 16 company-operated manufacturing facilities across the United States.

These include four legacy Utz facilities and twelve facilities that were added over the last ten years from acquisitions (for more details see Item 2 “Properties” in this Annual Report on Form 10-K for more details).

Our facilities had the capacity to produce approximately 500 million pounds of salty snacks annually in 2022 based on management’s estimate of available capacity, excluding weekly sanitation, over a seven-day work schedule, providing us with significant available capacity to accommodate increased sales.

As of February 14, 2024, we manufacture our products primarily through 10 company-operated manufacturing facilities across the United States.

These include three legacy Utz facilities and seven facilities that were added over the last ten years from acquisition (for more details see Item 2 “Properties” in this Annual Report on Form 10-K for more details).

Our facilities have the capacity to produce approximately 500 million pounds of salty snacks annually, after the effect of the Our Home Transaction, based on management’s estimate of available capacity, excluding weekly sanitation, over a seven-day work schedule, providing us with significant available capacity to accommodate increased sales.

We believe this available capacity across our manufacturing footprint will enable us to leverage existing fixed costs to generate higher margins on incremental organic sales or acquired brands as well as generate potential future cost savings through consolidating our manufacturing footprint.

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We also utilize several co-manufacturers for certain products, with the most significant being our OTB branded tortilla chips as well as branded salsa and queso.

During fiscal 2022, we began investing in talent and process improvements, associated with standing up our Integrated Business Management ("IBM") process, which uses supply and demand planning to optimize manufacturing and other supply chain and logistics processes.

In addition, pursuant to the Our Home Transaction, under reciprocal co-manufacturing agreements Our Home will co-manufacture certain of our products and we will co-manufacture certain Good Health® products.

During fiscal 2022, we began investing in talent and process improvements, associated with setting up our Integrated Business Management ("IBM") process, which uses supply and demand planning to optimize manufacturing and other supply chain and logistics processes.

Distribution.

We offer national distribution of our products through our flexible, hard-to-replicate distribution system that combines direct-to-warehouse, direct-to-store, distributor, and direct-to-consumer capabilities.

We offer national distribution of our products through our flexible, hard-to-replicate distribution system that combines DSD, DTW, direct-to-consumer and distributor capabilities.

We believe this hybrid system, which we have built and enhanced over nearly a century, offers us flexibility to cost-effectively distribute our products to a wide range of retail locations where salty snacks are sold.

Additionally, we believe our distribution system is highly scalable, resulting in the ability to drive higher margins on incremental revenues and enabling us to realize significant cost savings when integrating acquired brands onto our established platform.

We have historically expanded the geographic reach of our distribution network from our Core Geographies, where we benefit from strong brand awareness and heritage to our Expansion and Emerging Geographies, where we have expanded both organically and through acquisitions.

During the 52 weeks ended January 2, 2022, we were able to expand our market share in our Core Geographies and our Emerging Geographies, led by significant market share gains in our grocery channel according to IRI data of U.S.

We have historically expanded the geographic reach of our distribution network from our Core Geographies, where we benefit from strong brand awareness and heritage, to our Expansion Geographies, where we have expanded both organically and through acquisitions.

During the fiscal year ended December 31, 2023, we were able to expand our market share in our Expansion Geographies, led by growth in the grocery channel according to Circana data of U.S.

retail sales in the salty snacks category.

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Direct-Store-Delivery:

We believe we are one of only four scale U.S.

We are one of only four scaled U.S.

salty snack providers with extensive DSD capabilities.

Within our DSD system, either independent operators (“IOs”) or Utz-employed route sales professionals (“RSPs”) pick up products from our manufacturing facilities, distribution centers, storage facilities, or small bins and distribute and sell these products to retail stores within a geographic territory.

Our DSD system is utilized by both large and small customers, and we believe it provides us a competitive advantage in expanding distribution, increasing shelf space, executing in-store merchandising activities, and ensuring products are fresh and available wherever consumers shop.

Our DSD network included approximately 2,100 individual routes reaching over 83,500 retail stores in 2022.

Our DSD routes are managed by a combination of approximately 2,000 IOs, covering approximately 93% of our routes, and approximately 140 RSPs, covering approximately 7% of our routes as of January 1, 2023.

Over the last several years, we have converted from a predominately company-owned RSP model toward the use of third-party IOs.

We believe this transition benefits us by creating motivated independent owner-operators and a more variable cost structure for our company.

We expect to continue working on our ongoing transition from RSPs toward IOs in 2023 (See “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability — Independent Operator Conversions ” for more details).

Within our DSD system, our independent operators (“IOs”) pick up products from our manufacturing facilities, distribution centers, storage facilities, or small bins and distribute and sell these products to retail stores within a geographic territory.

Our DSD system provides service to both large and small customers, and it provides us a competitive advantage in expanding distribution, increasing shelf space, executing in-store merchandising activities, and ensuring products are fresh and available wherever consumers shop.

Our DSD network included approximately 2,250 routes reaching over 83,000 retail stores in 2023.

Our DSD routes are comprised of approximately 2,200 IOs, covering substantially all of our routes as of December 31, 2023.

Over the last several years, we have converted from a predominately company-owned route sales professionals ("RSP") model toward the use of IOs.

We believe this transition benefits us by creating motivated IOs and a more variable cost structure for our company.

(See “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability — Independent Operator Conversions ” for more details).

Third Party Distributors:

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Our direct-to-consumer shipments are delivered from our central warehouse facility to consumers using FedEx, U.S.

Postal Service, or other third-party carriers.

E-Commerce represented approximately 6.6% of our retail sales in fiscal year 2022 and is an accelerating part of our business, with the channel having grown significantly since 2019.

Postal Service, or other third-party carriers and is an accelerating part of our business, with the channel having grown significantly since 2019.

Food Safety and Quality.

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Human Capital

Supporting our people is a foundational value for Utz.

We believe our success depends on our ability to attract, develop, and retain key personnel whose skills, experience and industry knowledge benefit our operations and performance.

Our Board, Board committees, and management oversee various associate initiatives including compensation and benefits programs, succession planning, leadership development, diversity and inclusion.

Utz aims to both attract and retain a qualified workforce through an inclusive and accessible recruiting process and online platform, as well as by offering competitive wages, benefits, and training opportunities.

Each day we demonstrate the family values espoused by our founding family in our workplace culture:

inclusivity, well-being and professional growth.

These values are celebrated and help to drive our success which relies on our ability to attract, develop and retain key personnel whose skills, experience and industry knowledge benefit our operations and performance.

Our Board of Directors (“Company Board”), Company Board committees and management oversee various associate initiatives including compensation and benefits programs, succession planning, leadership development, diversity, equity and inclusion.

We aim to both attract and retain a qualified workforce through an inclusive and accessible recruiting process and online platform, as well as by offering competitive wages, benefits, and training opportunities.

We also support and develop our associates through company-wide training and development programs intended to build and strengthen associates’ leadership and professional skills.

Diversity, Equity and Inclusion

Utz recognizes that it is vital for our performance as a world-class company to demonstrate dignity and respect in the workplace for all associates.

By embracing the diverse perspectives and backgrounds of our associates, we strive to ensure that we have a workplace where every associate feels that they are valued and that they can contribute not only to our success, but their success, as well.

To foster a work environment that values all people, Utz partnered with a nationally recognized consulting firm to help develop a comprehensive diversity, equity, and inclusion strategy, which includes various aspects of human capital management, including recruiting, training, and leadership development.

As of our latest ESG report, our associate demographics in the U.S.

We recognize that the diverse perspectives and backgrounds of our associates are vital for our performance, and by embracing it, we ensure that we have a workplace where every associate feels that they are valued and that they can contribute not only to our success, but their success, as well.

Since partnering with a consultant, we have developed a three year strategy that is underway that includes various initiatives, projects and actions that have yielded positive results.

As of our 2022 ESG report published in August 2023, our associate demographics in the U.S.

(based on self-reported data from our associates) were:

Health and Safety

The safety of our team members is a top priority.

We strive to provide a safe working environment by having policies, procedures, and training programs in place to ensure that our associates understand and meet safety guidelines.

Utz and our associates are dedicated to providing a safe environment by continuously improving our Safety Culture and Performance through commitment, investment, and training.

We believe that a safe and healthy workplace is essential and that the safety, health and well-being of our associates is one of our most important responsibilities.

Our approach to operational health and safety is based on creating a culture of collective learning to build systems that safeguard all of our associates.

Our health and safety approach is the foundation for keeping our associates and workplaces safe and secure, and is aligned with Occupational Safety and Health Association's ("OSHA") 1910 standards and meet all regulatory requirements.

We also look to International Organization for Standardization and other respected standards to inform our approach.

The pillars of our health and safety approach are as follows:

• Associate engagement:

Leading indicators are used to both encourage and measure regular safety related activities throughout the organization;

Safety training relevant to each work group’s operation is distributed throughout the organization monthly, quarterly and/or annually;

Safety trainings relevant to each work group’s operation are distributed throughout the organization monthly, quarterly and/or annually;

• Compliance:

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• Short term disability to provide partial wage protection for up to 13 weeks;

• Employee Stock Purchase Plan;

• Participation in the Employee Stock Purchase Plan;

• Wellness and disease management programs, health advocacy partner and associates assistance programs;

• Health & Wellness Center – free to all Hanover-based associates and dependents covered under the health plan;

• 401(k) plan with generous company match and profit sharing.

• 401(k) plan with competitive company match and profit sharing.

Employee Headcount

As of January 1, 2023, we employed approximately 3,550 full-time associates and 250 part-time associates.

As of December 31, 2023, we employed approximately 3,400 full-time associates and 254 part-time associates.

Over the last several years, we have meaningfully reduced our number of full-time associates and our selling, distribution and administrative expenses through our business transformation initiatives, particularly our DSD shift from RSPs to IOs and the associated restructuring of our sales management and corporate organization structure (see “— Supply Chain — Distribution” and "Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability —Independent Operator Conversions ” for more information).

We expect to continue working on our ongoing transition from RSPs toward IOs in 2023.

Additionally, we historically have reduced associate count and operating expenses in relation to integration initiatives associated with our acquisitions.

Additionally, we have reduced the number of associates and operating expenses through several network optimization initiatives that reduced our plant footprint by three plants in fiscal year 2023 and consolidated certain of our transportation and warehousing operations.

In the first quarter of fiscal year 2024, we further reduced our number of full-time associates and our selling, distribution and administrative expenses through our business transformation initiatives, including the Our Home Transaction.

Sustainability

We recognize the importance of Environmental, Social and Governance ("ESG") issues for all stakeholders.

As a newly public company, we are in the early stages of building our ESG strategy and are using leading ESG and sustainability frameworks and guiding principles, such as the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD) and the U.N.

We use leading ESG and sustainability frameworks and guiding principles, such as the Sustainability Accounting Standards Board ("SASB"), the Task Force on Climate-related Financial Disclosures ("TCFD") and the U.N.

Sustainable Development Goals ("SDGs"), as well as stakeholder engagement to inform our ESG program.

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By collaborating with stakeholders, including associates, consumers, business partners, suppliers, stockholders and customers, we are taking the necessary steps to become a more sustainable company.

We believe that in our stakeholders’ best interests, we place safety-focused, sustainability-minded, and transparent best practices at the heart of our operations.

With this stakeholder framework, in 2020 we formed Utz’s inaugural ESG Committee, composed of subject matter experts from across our operations, including facilities management, packaging innovation, human resources, corporate governance, legal affairs, and communications.

We released our inaugural 2021 Environment, Social, and Governance (ESG) Report in July 2022, which outlines Utz’s strategic priorities for ESG matters and the continued growth of our sustainability program.

We believe that it is in our stakeholders’ best interests that we place safety-focused, sustainability-minded, and transparent best practices at the heart of our operations.

With this stakeholder framework, in 2020 we formed our ESG Committee, composed of subject matter experts from across our operations, including facilities management, packaging innovation, human resources, corporate governance, legal affairs and communications.

We released our 2022 ESG Report in August 2023, which outlines our strategic priorities for ESG matters and the continued growth of our sustainability program.

To learn more about our sustainability goals, progress and initiatives, access the ESG Report by clicking “ESG” on our Investor Relations website at www.investors.utzsnacks.com.

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trademark registrations, which protect certain rights in the following brands:

Utz, ON THE BORDER, Zapp’s, Golden Flake, Good Health, Boulder Canyon, Hawaiian, TORTIYAHS!, Tim’s Cascade, Snyder of Berlin, “Dirty”, Kitchen Cooked, Bachman , Jax , and R.W.

Garcia , among others.

Utz, ON THE BORDER, Zapp’s, Golden Flake, Boulder Canyon, Hawaiian, TORTIYAHS!, Tim’s Cascade, Snyder of Berlin, “Dirty”, Kitchen Cooked, Bachman and Jax , among others.

Depending upon the jurisdiction, trademarks are valid as long as they are used in the regular course of trade and/or their registrations are properly maintained.

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” Moreover, future litigation may be necessary to defend ourselves, our partners, and our customers by determining the scope, enforceability, and validity of third-party proprietary rights or to establish our proprietary rights.

We also license certain third-party brand names for use on our products, including the TGI Friday’s, HeluvaGood, Grillo’s Pickles, Yellowbird, and Mike's Hot Honey.

We also license certain third-party brand names for use on our products, including the TGI Friday’s, HeluvaGood, Grillo’s Pickles, and Mike's Hot Honey.

We use these trademarks in connection with production and distribution of snack products to be sold under the trademarked labels.

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Environmental Protection Agency ("EPA");

and the Occupational Safety and Health Administration ("OSHA") and similar state and local agencies.

and the OSHA and similar state and local agencies.

Under various statutes, these agencies, among other things, prescribe the requirements and establish the standards for quality and safety and regulate marketing and advertising to consumers.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business