Diamond Foods: A diamond in the rough (economy)

Bagging a key competitor in the snack food aisle, streamlining costs and playing to consumers’ at-home meal needs has put Diamond Foods Inc. (Nasdaq:DMND) on track to achieve or surpass its lofty future goals despite an unstable economy.

The Stockton, Calif.-based producer of culinary nuts and snack foods completed a $190 million purchase of the Pop Secret microwaveable popcorn brand from General Mills on Sept. 16 just days before reporting record fourth-quarter and fiscal 2008 earnings. The acquisition was aided by a new five-year, $250 million credit facility led by Bank of America.

Experts say Pop Secret, which is worth $85 million to $90 million in annual sales, is an ideal complement to Diamond’s current snack food portfolio.

“Pop Secret gets them into another tangential category where they can leverage existing sales infrastructure given similar buying complexes at retail,” Mark Argento, research analyst for Craig-Hallum Capital Group, said in an email to SmallCapInvestor. “It should generate good financial leverage over time.”

Diamond said Pop Secret is the second-largest brand in its category, commanding a 25% share in U.S. grocery stores, and its established line of 100-calorie packs plays right into Diamond’s marketing strategy aimed toward healthier snack options.

“Pop Secret fits our acquisition criteria, and we plan to invest behind the brand to position it for long-term success,” Michael J. Mendes, Diamond’s chief executive officer, said in a statement. But Mendes also was quick to say that it’s too early to tell exactly how Pop Secret will fit into those long-term plans, and the company’s . . .

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