SECAUCUS, N.J. — Freshpet, Inc. has updated its full-year 2021 net sales and EBITDA guidance to reflect continued supply chain challenges that are limiting the company’s ability to meet growing demand.
Net sales are now expected between $425 million and $430 million for the full year, down from its previous projection of approximately $445 million in net sales. Adjusted EBITDA for 2021 is projected at roughly $42 million, also down from the company’s previous prediction of roughly $50 million.
The company was hopeful when it raised its net sales guidance in the second quarter of 2021 to represent a more than 40% increase over 2020 sales. Now, the company expects a 34% increase over last year's net sales figure. Full-year EBIDTA will likely be down 10% from 2020.
These new estimates indicate a net sales shortfall between $15 million and $20 million, and an $8 million drop in EBIDTA, compared to the company’s previous full-year projections for 2021. Freshpet attributed this to lost bag production and production delays, which have caused trade inventory refill deferrals and lost volume contributions throughout the year.
The fresh pet food company shared an investor presentation Dec. 17 detailing various supply chain issues it has been facing this year and will continue to face into 2022.
“Supply chain issues continue to cause new challenges for our business, this time with parts supplies for key packaging components,” said Billy Cyr, chief executive officer of Freshpet. “While we’ve since solved this issue, it nonetheless caused a temporary decrease in production, which in turn is resulting in the revision to our full year expectations that we are updating today.
“We continue to forge ahead, emboldened by the improving retail conditions and the consistent demand from our customers — consumption growth is on track with our expectations and household penetration has reaccelerated — both key metrics that underpin our long-term goals. As we look toward 2022, we are encouraged by our current capacity run-rate, which demonstrates the progress we are making to establish a broader and more efficient manufacturing footprint.”
In its third-quarter earnings presentation, Freshpet pointed to various operational setbacks and supply chain disruptions that limited production. These setbacks included downtime for maintenance and facility upgrades, disruptions along its equipment supply chain, labor shortages for Freshpet’s pet treat co-manufacturing partner, and inclement weather impacts.
Ingredient, packaging, labor and freight inflation also posed challenges in the third quarter that Freshpet expects will bleed over into the fourth quarter. The company shared its full-year 2021 adjusted gross margin is now expected to be lower than the 48.3% it reported in 2020. To adjust for this, the company plans to increase product prices by 4.8% at the end of this year and will consider additional price increases in the first quarter of 2022 if inflated costs continue.
The company has been working to refill trade inventory since earlier this year, refilling roughly $8 million in the second quarter and another $8.5 million in the third quarter. The company said it is on track with capacity products through 2025, which will support production challenges faced this year. Freshpet reported retail availability is improving, and out-of-stocks have been on a downward trend since early October 2021. Yearlong out-of-stocks have restrained household penetration, but the company stated household penetration growth is returning to pre-pandemic levels over the last four weeks thanks to distribution improvements and retail availability. Buying rate for the company also continues to grow, “despite out-of-stocks.”
By 2025, Freshpet expects to have production capacity to support $1.96 billion in net sales, following Phase 2 of its Ennis, Texas facility expansion. The Ennis facility is on schedule to begin operations in the second quarter of 2022, the company shared.
Read more about supply chain topics affecting the industry on our Operations page.