ORRVILLE, Ohio — The acquisition of Ainsworth Pet Nutrition, LLC in 2018 is beginning to pay off for The J.M. Smucker Company, which presented its fourth quarter and fiscal 2019 earnings June 6, as well as an outlook for fiscal 2020. The company’s quarterly and fiscal year sales both increased 7% from the previous year.
Overall net sales for the company in the fourth quarter totaled $1.9 billion, and revenue for the 2019 fiscal year topped $7.8 billion, in part due to the successful integration of Ainsworth Pet Nutrition brands.
“We continue to position our business for growth and execute on key priorities during the quarter and are pleased that we are beginning to see results from the initiatives and the investments we have made over the past few years,” said President and CEO Mark Smucker.
The company reported the Ainsworth acquisition contributed $200.8 million to the company’s revenue growth in the fourth quarter 2019. It was partially offset by a $75 million loss following the divestiture of Smucker’s US baking business.
“We successfully integrated Ainsworth, extending our leadership in pet foods, while our key growth brands delivered double-digit sales growth, demonstrating the power of our brands when supported by ongoing product innovation,” Smucker said.
Excluding the acquisition, segment profit declined 5% due to the impact of price and cost and increased marketing, offset slightly by lower selling and distribution, the company said.
The company’s pet food business continues to be its fastest growing segment with the most sales. Revenue for all Smucker’s pet food brands was up by 35% in the fourth quarter, totaling $721.2 million, and up 32% throughout the year, totaling $2.9 billion.
Broken down, premium pet food brands led the category with 34% of sales, pet snacks followed with 27%, then mainstream cat food at 23% and mainstream dog food at 17% during the 2019 fiscal year.
Pet food accounted for 37% of fiscal 2019 sales for Smucker’s, followed by its coffee segment at 27% and retail consumer foods segment at 22%.
Smucker also mentioned the company’s two largest businesses, pet food and coffee, are driving e-commerce and online subscription sales.
“The e-commerce channel now accounts for nearly 4% of total U.S. retail sales, with expectations to reach 5% next year,” Smucker added.
Smucker’s high growth brands, including Nutrish, Dunkin’ and Café Bustelo, grew 16% over the fourth quarter.
Sales of Nutrish and Nature’s Recipe brands grew 20% and 9% respectively over the fourth quarter, “despite increased competitive noise for premium offerings within the mass channel,” Smucker reported.
Sales of super premium brand Natural Balance continue to drag. Vice Chair and CFO Mark Belgya commented, “…continued gains in Meow Mix and Nature’s Recipe were offset by declines for Natural Balance and Pup-Peroni.”
Dave Lemmon, president of Smucker’s pet segment, remained confident in the company’s pet food strategy.
“Our strategy is playing out. We had strong momentum in the fourth quarter and for the year. Fourth quarter was up 20% on Nutrish… and for the year we were up 25%,” Lemmon said.
Lemmon also mentioned the company plans to bring “incremental innovation” to market over the 2020 fiscal year.
During the Q&A session following the presentation, John Baumgartner of Wells Fargo asked Lemmon whether sales declines in some Nutrish brands are expected to hinder expansion of the overall brand in the future.
“Our innovation across dog, cat and treats is just coming to market and we are going to bolster that brand with additional innovation in the months ahead,” Lemmon responded. “And finally, I would say that we are going to be stepping up our marketing behind Nutrish next year to support the brand moving forward.”
Smucker added, “The breadth of our brands and the strength of our position in the category is going to allow us to continue to compete effectively. There will always be noise. But quite frankly, I think, we obviously remain confident in our strategy and our ability to continue to grow our pet business.”
Looking ahead at fiscal 2020, The J.M. Smucker Company projects 1-2% revenue growth and a $0.20 increase in adjusted earnings per share to total $8.65.
“As we transition to fiscal year 2020, our organization is committed to delivering on its growth imperatives to lead in the best categories, build brands consumers love, and be everywhere our consumers want us to be,” Smucker said. “Disciplined investment in our brands across pet food, coffee, and snacking leaves us well-positioned to drive sustainable financial growth and enhance shareholder value for the long term.”
Read more about corporate strategy, financial performance, mergers and acquisitions on our Business page.