Perhaps it's telling that while my friends consumed most of a giant pot of chili with yesterday's big game, the pot of pasta prepared to accompany it went nearly untouched. These are tough times for pasta makers, and while Monterey Pasta (NASDAQ:PSTA) says its reduced-carb product line (introduced in December) is off to a good start, the company still faces many stiff challenges.
Today, the company announced that its second-largest customer's retail division discontinued its private label pasta program, which Monterey supplied. The company didn't say which company was the culprit, though based on company SEC filings, it was presumably Wal-Mart's (NYSE:WMT) Sam's Club. (Costco (NASDAQ:COST) has been Monterey's top customer in recent years.)
Monterey hopes to make up some of the lost sales by sending more of its low-carb products, reportedly making inroads at retailers such as Kroger (NYSE:KR) and Albertson's (NYSE:ABS), to the customer in question. But this is part of a larger story we discussed in September. Monterey's top two customers composed more than 70% of sales in 2002 and for some 80% in of total sales in 2000.
Now, its No.1 and No. 2 are paring back, and Monterey is having trouble maintaining shelf space in both retailers' stores. What's more, today's news reverses some optimism the company reported along these lines in December. While Monterey is battling to get sales growth going again, it's unfortunately being assailed on all sides.
Costco is one of Tom Gardner's recommendations for Motley Fool Stock Advisor .
Dave Marino-Nachison can be reached via email.
