CoolBrands could face a "tumultuous" year amid stiff competition

28/02/05 This will be a "tumultuous" year for Canadian frozen treats maker CoolBrands International Inc., as the company recovers from the loss of a big contract and faces stiff competition, its chief executive has said.

"There is the loss of Weight Watchers and the need to replace that and build new brands, but even had we continued on with Weight Watchers, this year would have been one with exceptional competitive challenges," co-chairman and CEO David Stein said in an interview after the firm's annual general meeting. He was referring to last year's loss of a major supply contract with Weight Watchers International Inc. that accounted for one-third of the Markham, Ont.-based company's 2004 profit.

The company’s AGM marked a turning point for CoolBrands as it elected a new board with a majority of directors deemed to be independent -- a move made in the wake of criticism from the investment community about its corporate governance practices.

Mr. Stein described the rate of new product introductions by food giants Unilever NV and Nestlé SA -- the makers of the popular Klondike, Good Humor, Breyers, Popsicle and Häagen-Dazs frozen treat brands -- as "unprecedented," making it difficult to win space on retailers' shelves.

CoolBrands hopes to regain revenue by increasing its stable of healthier ice cream products. It plans to aggressively market its No Pudge! line of ice cream bars this year in an attempt to make up for the loss of the Weight Watchers Smart Ones line.

Meanwhile, Octagon Capital analyst Robert Gibson is bullish on CoolBrands stock. He said in a research note that while the company has been "decimated" by recent events, investors should start buying CoolBrands shares as they are "ready to rise again."

He initiated coverage on the shares Thursday with a "speculative buy" rating and a 12-month target of $12.

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