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J.M. Smucker sees net sales rise on boost from price hikes

Shares of J.M. Smucker Company traded slightly lower on Tuesday, despite reporting fourth quarter earnings that topped analyst estimates. J.M. Smucker CEO Mark Smucker joined Yahoo Finance Live to discuss the company's results, the performance of some of its brands, and how inflation is impacting the business.

Video Transcript

- All right, well, we're watching shares of J.M. Smucker after the company saw growth in all three of its business segments, with net sales growing nearly 10% on a boost from price increases. Now the maker of JIF peanut butter forecast smaller than expected decline in annual revenue amid strong demand for its ready-to-eat meals. CEO Mark Smucker joins us now alongside Yahoo Finance's Brooke DiPalma. Thank you for joining us this morning.

Now we are seeing the stock price under a bit of pressure at the moment here. What do you think they're honing in on, Mark?

MARK SMUCKER: Well, I think you're just seeing the entire sector being affected by some of the macroeconomic environments. I think at the end of the day, we're incredibly proud of our results. We've had 13 quarters consecutive of beating expectations, and we're poised for further growth as we just began our new fiscal year. We've executed our strategy exceptionally well where we've made some divestitures which have allowed us to focus on our growing brands like Uncrustables obviously, Dunkin', Café Bustelo, and notably our Milk-Bone dog biscuits which are all growing very, very healthily as we move forward into this new fiscal.

BROOKE DIPALMA: Good morning, Mark. Brooke here. Let's break down those Milk-Bone sales. We saw sales grow 20% this quarter. Break down for us who exactly the audience is there. And are you seeing perhaps higher income customers trade into the Milk-Bone's brand?

MARK SMUCKER: Yeah, sure. Actually, the Milk-Bone brand is a great example of a brand where we play across the entire spectrum of value. So we have our base core mainstream biscuits which are very affordable, all the way up to our high-end dental chews, long-lasting chews, and then all different versions of our biscuits which are stacked or dipped in various ways. And so, just a very broad portfolio that highlights how we are going to market across our other brands as well, allowing the consumer to access products that they love, brands they love at various price points.

BROOKE DIPALMA: And Meow Mix, the demand there is actually outpaced production. Break down for us how you're exactly addressing this and when we can expect supply to meet that demand.

MARK SMUCKER: Well, you know, I'm so proud of our employees because, throughout the pandemic, we faced a number of supply chain challenges that we overcame. This is no different. We are seeing demand for Meow Mix very strong, and the demand is actually outpacing supply. So we are right now investing in both infrastructure and labor to ensure that we meet that demand.

We would expect to come out of this over the next six or so months or slightly beyond that, perhaps, but we are working to make sure that our supply meets demand on Meow Mix. It's just a fantastic brand.

- And Mark, something that powers humans, of course, coffee. Got to talk about the coffee play here, especially with Folgers. Talk about that competitive pricing and how do you think that positions you when you think of consumers really trying to tighten their belts, preparing for a recession, perhaps not wanting to spend as much, or trading down with other products, say, like a Starbucks.

MARK SMUCKER: Sure. We have three brands, Folgers, Dunkin', and Bustelo, three of the top eight brands in the category. Folgers is the number one brand. Again, here we play across the value spectrum, offering products that consumers can't afford. But even our Dunkin' brand, which is the more premium brand, has actually returned to growth this quarter. And so we would expect to see that momentum.

Pricing is competitive. We're seeing the pricing in the category more normalized, and that allows us to compete effectively and continue to grow all three brands which are showing solid performance.

BROOKE DIPALMA: And let's make way into that Dunkin' brand debate. You're looking to make a bid for Gen Z here. You're launching a liquid coffee concentrate in July. You're saying that is something that Gen Z really enjoys. Break down for us how exactly you plan to launch this and why exactly you think now is the right time, and what sort of response you're hoping to get from this investment.

MARK SMUCKER: Totally. So 71% of cups consumed of coffee are consumed at home. And as the leader in coffee, over the years, we have effectively transitioned our portfolio to where the growth is. So you think about K-cups, premium coffee, there was a shift there. Consumer behavior is now consuming a lot of liquid coffee. They're making customized drinks at home in the morning.

Millennials and Gen Z are doing a lot of this. And so launching the Dunkin' Concentrate is a perfect way to get into that market. And then, later in the year or in the next fiscal year, we'll be launching liquid coffee for Bustelo as well. So both of those brands will be playing in that space, and just another example of us shifting to where the consumer needs is.

- And we've been talking a lot over the past year about snacking, about how people just aren't willing to put to pull back on their snacks. It's like your one precious thing to hold on to. Talk about that consumable market there and what have been the strongest growth drivers for you.

MARK SMUCKER: Well, Uncrustables, as you know, peanut butter and jelly sandwich is the number one lunch sandwich in America. And that product is a rocket ship. We're building our third manufacturing facility to make more PB and J sandwiches. It meets the consumer need of being portable, on the go, convenient, and no mess. And it actually has no prep other than allowing it to thaw.

So it's something that parents love to give their kids. You can see you were talking about golf previously. The golfers are obviously eating it. And even during the March Madness, we were fortunate enough to have many of the commentators, including Charles Barkley, profess their love for Uncrustables. So it is a universal product that is loved by all Americans.

BROOKE DIPALMA: Mark, really quickly here. We're hearing that sugar inflation has finally caught up. Ingredients cost about 70% of your total goods. What are you seeing as far as inflation impact on your ingredients so far this year?

MARK SMUCKER: To be honest, you know, it does come back to making sure, first and foremost, that our products are meeting the value needs of our consumers, which they are. We do view that we are still in an inflationary environment. It is nothing like some of the inflationary environments that we had over a decade ago, so we think that it's manageable, and we continue to work to manage our own costs.

And as we've passed along some of the price increases, we've done that in a very prudent and thoughtful manner working with our retail customers to continue to provide value to the end consumer.

- Mark Smucker there. Thank you for taking the time to join us this morning. J.M. Smucker Company CEO, alongside Yahoo Finance's Brooke DiPalma, thank you so much.

MARK SMUCKER: Thank you.