This was supposed to be a monster year for Smart Balance (Nasdaq: SMBL).

The marketer of the popular heart-healthy buttery spreads had its sights set on a national rollout of enhanced milk to break outside of the tub. Other Smart Balance introductions -- cream cheese, popcorn, and even peanut butter -- weren't greeted with the same kind of supermarket shopper enthusiasm as its flagship spreads.

Milk could have been a game-changer. It's a weekly purchase in many homes -- unlike spreads that can sometimes sit in the fridge for several weeks.

Unfortunately, Smart Balance may have once again overestimated the portability of its brand.

This morning's second-quarter report may have clocked in ahead of watered-down expectations, but it's not going to turn heads for those who approached the company as a growth story with a killer brand.

Net sales actually dipped 4% to $55.6 million, dragged down by a 6% decline in case shipments for its spreads and an 11% plunge in its other grocery categories. Smart Balance's profit of $0.02 a share matched last year's second-quarter earnings.

The drop in spreads isn't unexpected. Unilever's (NYSE: UL) Promise has been tackling Smart Balance head-on in its marketing recently. Discounting and couponing are daggers for premium brands. Surprisingly, Smart Balance actually gained market share in the category, as trend-tracker Nielsen reports that retail sales in the overall spreads category fell by 12% in dollar terms and 7% in unit terms.

However, the real downer for Smart Balance is that it has failed to gain traction in milk. ConAgra's (NYSE: CAG) Healthy Choice and Kraft Foods' (NYSE: KFT) SnackWells have been able to broaden their reach, but Smart Balance has struggled to expand outside of spreads -- even if it's aiming within the refrigerated aisle.

There is certainly an argument to be made for Smart Balance as an acquisition target at this point, especially if Unilever wants to snuff out its biggest threat. Grocery store titans General Mills (NYSE: GIS) and HJ Heinz (NYSE: HNZ) probably wouldn't mind some skin in this premium niche -- if ConAgra or Kraft doesn't beat them to it. However, until Smart Balance is able to make some serious inroads outside of its spreads category, its upside will be limited beyond the buyout scenario.

And there's the rub: Smart Balance would love to be spreading itself across its product lines showing it was relevant in more than just spreads.

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