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Milk Bone and Meow Mix are lone bright spots for the J.M. Smucker Co.
J.M. Smucker, owner of Milk-Bone and Meow Mix, had a great Q1 of 2023 in its pet foods segment. The rest of the company? Not so great.
For the 2023 first quarter J.M. Smucker, owner of pet brands Milk-Bone and Meow Mix posted a wildly successful quarter in its pet foods segment. Net sales increased 13 percent to $729 million, while segment profit improved by 51% from the prior year. “We are well positioned,” CEO Mark Smucker said in Tuesday’s earnings call, “to benefit from some shifting within the category as our brands provide offerings across the value spectrum, including premium, mainstream, and value products.”
The rest of J.M. Smucker’s business wasn’t as successful. Retail Coffee, represented by Dunkin’ at home and Folgers brands, saw a 10% sales increase, with declining profit. Overall, the company grew sales by just 1%--primarily weighed down by a 9% negative impact related to the Jif peanut butter recall. The company plans on cutting its overall total SKU count by 30% and focusing primarily on profitability in the future.
J.M. Smucker is benefiting from a booming pet industry.
In 2021, the American Pet Products Association reported that Americans spent $124 billion on their pets—an increase of 36% from just four years before. Digging a bit deeper, $50 billion was spent on food and treats, with $2.7 billion captured by J.M. Smucker.
The pet industry is unique in that it is essentially recession-proof. People are always willing to spend money on feeding and pampering their pets. Except for the PetCo brand, it's also largely immune from private labels. Private label share makes up about 12% of volume, compared to 21% for the grocery business.
Pet food is a big business, with America’s largest consumer goods manufacturers spending millions to capture share. Colgate recently announced plans to invest $700 million for three manufacturing facilities.
Here’s Bloomberg’s Daniela Sirori-Cortina describing the major players:
Mars Inc.-owned Pedigree is in almost 26% of US households, according to Numerator, compared to around 8% for Colgate’s brand. Large companies have been snapping up competitors, with Mars acquiring pet-food brand Nom Nom this year and General Mills buying Tyson Foods Inc.’s pet treats business for $1.2 billion in 2021. Colgate is also going against a slew of startups pitching natural and organic alternatives that appeal to younger consumers.
As you probably noticed, Smucker’s isn’t mentioned in the summary. The $2.7 billion in annual sales would place the company with just 5% of the total market. It's the bright spot for the company this quarter. Sales grew 13%, with profit totaling $120m--that's an increase of 50% since last year. Meanwhile, profit declined in both coffee and consumer foods.