Inflation is causing pet parents to pull back on treats, says J.M. Smucker’s CFO

  • Home
  • Information
  • Aug 30, 2024

Good morning. A snack to fit your mood, a sandwich for lunch, or even giving your dog a treat, are just some of the “consumer occasions” that J.M. Smucker Company strives to supply, says CFO Tucker Marshall. In some cases, a typical consumer may reach for a Smucker product twice—or even five times—a day.

“If you have an Uncrustable, some Jif peanut butter, a cup of coffee, give your dog a biscuit, then maybe a Twinkie at the end of the day, you have nailed the Smucker company,” Marshall told me on Thursday. The company prioritizes “a very well-balanced portfolio so that we can meet any consumer where they are,” he said.

Along with its namesake jams and frozen treats, the Orrville, Ohio-based Fortune 500 company is home to brands like Café Bustelo, Dunkin’ coffee, Milk-Bone pet snacks, and Meow Mix. And thanks to its 2023 acquisition of Hostess, Twinkies are part of the brand mix too. But there is one item that is becoming the company's crown jewel: Uncrustables, the crustless frozen sandwiches with a round shape that are crimped around the edges to seal the various types of filings.

When the company reported its earnings on Wednesday for the quarter ended July 31, it reported that Uncrustables enjoyed a 24% increase in net sales year over year, driven by national advertising, distribution gains, and new merchandising investments, according to the company. The full Uncrustables portfolio is "on track" to becoming a $1 billion brand by fiscal year 2026, Marshall said.

Meanwhile, net sales were $2.1 billion, an increase of about $320 million, or 18% from the same time last year. J.M. Smucker had a quarterly profit of $2.44 per share, an increase of 10%, beating estimates.

Not everything is rosy, though, as inflation continues to cast a shadow. Soaring green coffee prices, for instance, resulted in price increases in May, with another planned for October, he said. “If you rewind over a year ago, we had an experience where we saw green coffee come down, and we actually passed along that price decline,” Marshall said.

J.M. Smucker is also seeing some weakness in categories like pet treats and sweet baked snacks, a result of inflation and reduced discretionary income, Marshall said.

“Pet parents are still treating their pets,” he said. “They're just not treating with as great of frequency as they were in the past.”

And the company is seeing “a little less snacking,” particularly snacking through the convenience channel that has impacted its top-line outlook for the year, Marshall said. An example? Consumers have typically walked into a gas station, bought a cup of coffee and maybe a sleeve of donuts, he explained. “They're now just pumping gas and leaving because of the overall inflationary pressures,” he said.

The company forecasts annual net sales to increase in the range of 8.5% to 9.5%, compared with its prior forecast of a range of 9.5% to 10.5%.

“Despite the revision, the health and the momentum of the portfolio is still strong,” Marshall said. He pointed to the momentum of products like Uncrustables, Café Bustelo, peanut butter, including the recent launch of Jif Peanut Butter & Chocolate Flavored Spread, and the company anticipates growth in its pet portfolio.

When I talked to Marshall a few months ago, he told me a scoop of Jif peanut butter and a scoop of Smucker’s Natural Strawberry spread are his go-to items for snacking. Is that still the case? “One hundred percent,” he said. “I had it last night.”

In recognition of the Labor Day holiday on Monday, the next CFO Daily will be in your inbox on Tuesday. Have a good weekend.

Sheryl Estrada
sheryl.estrada@fortune.com

The following sections of CFO Daily were curated by Greg McKenna