Decreased pandemic-era pantry-stocking and rising raw material and transportation costs are expected to see food giant J.M. Smucker’s sales slip 2 to 3 percent this year, the company told investors Thursday (June 3), noting that slower uptake of the back-to-work trend has helped its coffee sales.
In announcing its fourth-quarter results for the three months ending April 30, Smucker’s said profits for U.S. retail coffee fell 9 percent from a year ago, though the company spoke to strength in the category, which includes Folgers, Café Bustelo and Dunkin’s at-home packaged coffee.
“The tailwinds that are going to continue to help us … and what you’re seeing across industries, is that folks are not going back to work in the way they once did,” President and Chief Executive Officer Mark Smucker said on a call with analysts. He added that the consequent increase in breakfast and lunch at home, relative to pre-pandemic, will continue to boost coffee sales.
In fact, PYMNTS Pandenomics® research from our March The New Digital Consumer COVID Data Compendium finds that among 39 percent of consumers have shifted from working in offices to working from home since the onset of the pandemic. Of this group, the vast majority — 83 percent — want to continue to do so at least somewhat as often as they do now.
As The J.M. Smucker Co. saw coffee sales dip, competitor Nestlé saw sales soar in its most recent quarter. The disparity may largely be a function of timing. While The J.M. Smucker Co.’s most recent quarter ended April 30, Nestlé’s encompassed the first three months of 2021, leaving The J.M. Smucker Co. with a more difficult 2020 comparison.
Where Nestle’s year-over-year comparisons only included the very start of the pandemic, The J.M. Smucker Co.’s included the first seven-or-so weeks of COVID-19 grocery stockpiling. As of May 2020, Statista reports, Folger’s was far and away the best-selling ground coffee brand in the United States, selling more than double the next runner-up.
“We anticipate seeing a minor deceleration year-over-year, but still staying at pretty strong margins in coffee on a full-year basis,” Chief Financial Officer Tucker Marshall said on the call. He added, “We likely will see a pretty substantial margin decline in coffee in the first quarter with a nice rebound in the second, third and fourth quarters.”
Between the company’s budget-friendly coffee options, its higher-end products, its ground coffees and its capsules, Smucker said, “We feel very good about where the total portfolio is positioned.”
Speaking to tends in the retail coffee space, he noted, “There’s been continued premiumization, and then, of course, the shift to single-serve or K-Cup.”
Retail coffee sales accounted for 30 percent of the company’s FY2021 net sales, according to a presentation shared with analysts, 47 percent of which came from “Mainstream Roast & Ground” coffee, 30 percent from K-Cups, 16 percent from Premium, and 8 percent from Instant Coffee.
Overall, the company saw net sales decrease 8 percent in the quarter to $171.8 million but increase 3 percent for the full year to $8.0 billion. While most categories saw net sales decline for the quarter, the Away From Home segment grew 7 percent, and the company expects to see the category continue to grow as newly vaccinated consumers return to their lives out and about.
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