JM Smucker bucks market trend with higher volumes despite price increases in select categories
The maker of Folgers coffee, JIF peanut butter and Uncrustables frozen sandwiches attributed a 7% year-over-year increase in net sales in its second quarter to volume growth across the portfolio as well as favorable net price realization.
For example, in coffee, the company reported net sales of Café Bustelo increased 10% in the quarter driven almost entirely by volume growth, while Folgers “had the largest share growth among all leading brands in the coffee category” with more than double the volume share of the nearest branded competitor, CEO Mark Smucker told investors in prepared comments ahead of the company’s sales and earnings call yesterday.
He explained that the lift is due in part to JM Smucker’s decision to lower prices to reflect dropping inflation that has reduced its coffee costs – a move that has not been replicated by many CPG food and beverage companies.
He also attributed the volume boost in part to the company’s increased investment in marketing.
“With competitive price points now broadly reflected on-shelf and increased marketing investments planned or the second half of the year, we anticipate continued momentum or the coffee business in the back half of the fiscal year, including low-single digit volume growth.
Sales, volume of Uncrustables surge, compensating for dip in JIF volume
JM Smucker’s gains were not limited to coffee – it also saw accelerated growth for Smucker’s Uncrustables frozen sandwiches, which continue to be a standout brand for the business.
“Net sales for Uncrustables frozen sandwiches grew 22%, driven by volume/mix growth. Total company net sales of Uncrustables sandwiches were over $200m in the quarter. We anticipate strong growth for the balance of the fiscal year, as the total brand is expected to grow net sales approximately 20% for the full year to over $800m,” Smucker said.
He attributed the lift in part to the launch of the brand’s first national advertising campaign, which debuted on Monday Night Football and included the introduction of “the Bread Brothers,” – animated spokespeople who will be active across social and streaming media as well as TV.
JIF also maintained its #1 position in volume, dollar and unit share in the quarter thanks in part to a 3% lift in net sales and previously realized price increases. However, volumes fell for JIF in the quarter. The company plans to drive additional growth next year with investments in marketing and innovation for the popular peanut butter brand.
The gains from Uncrustables helped offset declines from JIF to lift overall net sales for JM Smucker’s consumer foods group by 7% in the quarter.
JM Smucker raises full-year guidance
Optimistic about the combined benefits of higher prices, except in coffee, and higher volumes, JM Smucker raised its comparable net sales expectations for the full year to a projected increase of 8.5% to 9%.
It also increased its full-year adjusted gross profit margin expectations to approximately 37.5% to reflect its outlook for its long-term brands as well as its recent acquisition of Hostess Brands.
