J.M. Smucker: 'We are emerging from the pandemic a much stronger company'
Excluding the divestitures of Crisco in October 2020 and its Natural Balance pet food business in December 2020, net sales declined 3%, partially offset by continued elevated at-home consumption.
For the full year ending April 30, 2021, net sales were up 3% to $8bn.
“We believe the business is at an inflection point, and we’re delivering against our strategic and executional plans. We are emerging from the pandemic, a much stronger company,” said president and CEO Mark Smucker on an earnings call with analysts.
"Consumers remained loyal to our brands as we maintained the one million net new households gained in the prior year while dollars per buyer increased 10%."
Shedding a few of its major brands over the past few years has allowed the company to redirect focus to brands and segments that are more in line with its long-term strategy.
"Acquisitions will remain a part of our strategic growth, and we will be prudent when pursuing them. We are more lean, agile, and focused on delivery with excellence and winning in the marketplace," noted Smucker.
As away from consumption picks up, a few of J.M. Smucker's product lines are uniquely positioned to take advantage of the consumer shift in behavior such as its Smuckers Uncrustables line of frozen sandwiches, which registered its 28th consecutive quarter of growth, said Smucker on the call.
"The Uncrustables brand delivered nearly $130m of net sales this quarter. The brand delivered over $400m of net sales this year, and is on track to exceed our $500m target in fiscal year 2023," he said.
Turning to its coffee portfolio, which includes Folgers, Café Bustelo, and Dunkin brands, Smucker said that it will continue to drive the momentum it gained during the height of the pandemic.
"In the last 52 weeks, retail sales of our brands grew 17%. This was over twice the category average. Café Bustelo and Dunkin are two fastest growing brands in the category. Over the last 52 weeks, Café Bustelo retail sales grew 21% and Dunkin grew 15%."
The Folgers brand gained 3 million new households at the height of the pandemic, noted Smucker.
"We will continue to build off this momentum with initiatives to reinvigorate the iconic brand rolling out in the second half of FY22. As new coffee habits form during the pandemic, we anticipate retaining a substantial portion of these new consumers for the long-term."
Pet food priorities
In pet food, net sales decreased 6% for the quarter but demonstrated growth on a two-year basis. Smucker said the company remains optimistic about its pet food business as consumer behaviors continue to evolve.
"The pandemic did impact how consumers shop for their pets, such as accelerated growth in e-commerce channels. Also, the total US pet population grew by an estimated high single digit percentage this past year with new pet parents showing a willingness to spend more for their pets compared to historical trends," he said.
"[For FY22] We expect top line growth on a comparable basis," he said.
The pandemic and related implications, along with cost inflation and volatility in supply chains, continue to impact financial results and cause uncertainty and risk for the fiscal year 2022 outlook, notes J.M. Smucker.
While the degree and impact of further disruptions to its supply chain remain uncertain, the company projects a net sales decline between 2% and 3% for FY22, which incorporates the impact of $355.6m of expenses related to the divested Crisco and Natural Balance businesses.
In a note to investors this morning, analysts at Bernstein noted: “Like other packaged food companies, Smucker's is still benefiting from elevated food at home consumption.
"The big question for the sector is how much of this will prove more structural based largely on the increased incidence of working from home even after the pandemic. And surging input costs also create another major source of uncertainty as competitor pricing actions and consumer price elasticity remain to be determined as pricing is taken.”