Smucker’s: Despite Widespread Jif Peanut Butter Recall, Net Sales Rise +6%

While a sweeping, nationwide recall of one of Smucker’s flagship product lines, Jif, may have stunted gross profits this quarter, the CPG giant reported today that net sales increased 6% to $113.6 million during Q4 FY2022.

According to Mark Smucker, President and CEO, the company continues to navigate supply chain disruptions and inflationary pressures and saw steady net sales growth across all three of its business segments – U.S. Retail, International and Away From Home. Smucker said this growth has also helped partially offset the impact of the Jif recall and of the generally challenging operating environment.

The company’s strongest performing brands account for 86% of its U.S. retail business, according to the release, compared to 57% during the same period last year. In addition to divesting its natural beverage and grain businesses earlier this year, this quarter’s report reflects the divestment of the Natural Balance and Crisco businesses, which occurred in January 2021 and December 2020, respectively.

“Our fourth quarter and full-year results demonstrate the continued execution of our strategy and momentum of the business, amid a challenging and dynamic environment,” said Smucker in a press release. “Our strong financial results reflect sustained consumer demand for at-home food and coffee and consumers’ desire for our trusted and iconic brands. During the year, we also made significant progress in strengthening our financial position, as we reduced our debt balance, while also returning cash to our shareholders through dividends and share repurchases.”

However, gross profits declined due in part to customer returns and inventory write-offs of Jif products. The company estimates it will incur approximately $125 million in losses due to the recall, taking anticipated insurance recoveries into account.

Over 50 different Jif branded products, including all formats, varieties, natural and conventional lines, sold across the U.S. and Canada were potentially contaminated with salmonella, forcing the company to initiate a voluntary recall in late April. That recall has since been expanded to include a wider range of finished products made with Jif peanut butter including a Walmart-branded fudge, Fresh Del Monte fresh cut fruit and vegetable packs sold with peanut butter packs, among a variety of other items.

“Once we learned of the issue, we voluntarily initiated the recall, with a sense of urgency and in full cooperation with regulators,” Smucker told investors during a call today. “We have an unwavering commitment to doing the right thing and our consumers’ health and safety has always been our number one priority.”

Smucker also noted the strength of its Away from Home segment, which includes Jif portion control spreads (+10% y/y), has increased momentum within its consumer food business. This segment, which largely caters to newer pandemic-related consumer habits, includes products like Uncrustables, liquid coffee and portion controlled spreads. Smuckers noted the Uncrustables brand is leading the charge, projecting that the brand will garner over a $1 billion valuation in the next five years as the company continues to invest in production capacity.

Outside of its food-related segments, a +11% increase in net sales for Smucker’s coffee portfolio also contributed to overall net sales growth this quarter. While price hikes and higher price realization have begun to take effect, profits in coffee fell due to lower volume/mix.

“Coffee habits formed during the pandemic continue and at-home consumption remains elevated,” Smucker said. “At-home consumption now represents over 70% of all coffee drinking occasions, compared to two-thirds pre pandemic. We are well positioned to benefit from these trends with a portfolio that provides consumers options ranging from value to premium offerings.”

For the full fiscal year, Smuckers expects net sales to increase at a rate of approximately 1% to 4.5% and believes EPS will range between $7.85 to $8.25. Smucker noted that the recent recall has impacted this outlook but said the company will continue to manage its cost productivity and foreseeable business disruptions.