Boulder Brands Inc (BDBD), General Mills, Inc. (GIS): The Gluten-Free Craze Is Sweeping America

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America loves its fad diets, and now many consumers have latched on to gluten-free living. How many people are buying gluten-free products? Up to 3 million people need a gluten-free diet, but some estimates suggest that up to 35 million people are going gluten-free, not for health issues but as a new weight-loss plan.

Gluten-free eating isn't a lifestyle choice for many people, it's a daily requirement to combat celiac disease. Shopping for gluten-free products is now easier thanks to the USDA's decision that standardizes labeling on products that claim they're gluten-free.

Boulder Brands IncAbout 5% of products labeled as gluten-free won’t meet the new USDA standard. That was one concern voiced by the executive vice president at Boulder Brands Inc (NASDAQ:BDBD), who announced the company’s delight about the new standard. It’s been clear for a few years that large-scale food companies want to enter the segment in a bigger way.

The USDA is careful to weigh regulation changes before jumping and this decision took six years. The change in gluten-free labeling, a win for some companies in the niche-food industry, is a tacit acceptance that one size does not fit all and more regulation is needed to ensure consumers' health safety.

Boulder Brands is a staple in gluten-free

Boulder Brands Inc (NASDAQ:BDBD)' Glutino and Udi's are two food lines that fall well below the new requirement that limits gluten-free products to less than 20 parts per million of gluten (.002% of gluten). The company provides the most well-known brands and some of the most extensive offerings in gluten-free foods. It’s no wonder that bigger companies want part of the market, as they’ve watched the success of Boulder Brands in recent years.

The company reported second quarter net sales of $110.7 million, up 45.7% from same quarter 2012, when net sales were $76 million. With strong growth from both Glutino and Earth Balance, and having acquired Udi’s in July 2012, Boulder Brands Inc (NASDAQ:BDBD)reported an increase in organic net sales of 11.9%, compared with second quarter 2012. This figure assumes that Boulder owned Udi’s for the whole second quarter of 2012.

Boulder Brands Inc (NASDAQ:BDBD) will see continued increases in revenue, as the gluten-free industry is beginning a strong ascent in popularity. Market research in the fall of 2012 reported that the gluten-free market in the United States was worth $4.2 billion in 2012, and predicted that figure will reach $6.6 billion by 2017.

Big companies

The new USDA policy is an important part of the recent trend among large food providers geared toward refocusing products on specific health needs. There’s good reason for smaller companies like Boulder Brands Inc (NASDAQ:BDBD) to worry about increasing competition.

General Mills, Inc. (NYSE:GIS) already offers Betty Crocker gluten-free brownie mix, among others, and Bisquick Gluten-Free Pancake and Baking Mix. General Mills isn't known for jumping into small-production segments without cause. The big positive for revenue in gluten-free foods is the high price tag for each item. For example, one loaf of Udi's gluten-free white sandwich bread averages around $6.25, and most products cost about two to three times regular product prices. Many big companies, including Heinz and General Mills, Inc. (NYSE:GIS), list all their gluten-free products on a special page within their website, a nod to rising attention from consumers.

At General Mills, Inc. (NYSE:GIS), net sales were up by 8% to $4.43 billion, with new businesses adding 6 points of net sales growth. Outside of new businesses, net sales went up by 2%. The company’s 2014 plan includes a number of new gluten-free products, including more mixes from Betty Crocker and Vanilla Chex. The company reformulated several Chex varieties to gluten-free several years ago, including Honey Nut, Chocolate, Cinnamon, Rice, and Corn Chex.

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