JM Smucker confident it can meet demand ‘uptick’ as COVID-19 surges, despite tight inventory

25-Nov-2020 - Last updated on 25-Nov-2020 at 17:58 GMT

Source: JM Smucker Co

As cases of COVID-19 resurge nationwide, retailers are bracing for another round of potential stockpiling and increased consumer demand by ordering more product – a trend that could strain production at plants already operating at capacity, suggests JM Smucker Co. CEO Mark Smucker.

During the company’s second quarter earnings call Nov 24, he told analysts that the company is “adequately maintaining production to meet customer demand” thanks to “outstanding work our teams are doing to maintain high levels of production.”

But, he added, “we are producing at/or near capacity at many of our plants,” and “we have experienced an uptick in customer orders over the past two weeks with the resurgence in COVID cases.”

He assured investors that Smucker will “continue to monitor potential supply chain limitations and are taking proactive measures to minimize any potential disruptions that may be caused by a shortage of materials, reliable transportation or increased demand.”

For example, he noted, Smucker is on track to add capacity at it s Longmont facility in early calendar year 2021 and it has accelerated future capacity plans, which he added gives him confidence that the company will be able to continue strong growth moving forward.

Uptick follows strong quarter

The uptick in consumer demand comes on the heels of a strong quarter for the company’s consumer segment, which saw net sales increase 12% with growth across all major brands, according to CFO Tucker Marshall.

“Sales for the Smucker’s brand grew 11%, led by 16% growth for Uncrustables frozen sandwiches, which marks the sixth consecutive quarter of double-digit growth,” he said, adding, “the Jif brand [also] grew 12%, reflecting a list price increased, reduced promotional activity and increased volume for peanut butter.”

Overall, these contributed to a 48% increase in profit for the segment, he added.

These successes also contributed to the company’s decision to raise its guidance for fiscal 2021 with net sales now anticipated to increase 1-2% compared to the prior year and full year gross profit margin to reach a range of 37.5% to 38%, Marshall noted.

Smucker to bring back marketing, promotions

Despite potentially tight capacity, Smucker is resuming marketing and promotions that were previously paused during the early days of the pandemic so as not to place additional pressure on supply chains.

Smucker explained the investment is necessary to engage with and keep consumers who are new or returning to the company’s brands during the pandemic.

“We have experienced a significant uptick in households and our brands have been in some cases rediscovered by consumers and to really engage with those consumers is critical,” he said.

He explained that the company is able to support brands through increased marketing despite “reasonably tight” inventory levels because the industry as a whole is better prepared for next wave of COVID-19 cases and their impact on consumer shopping patterns in that it has better communication and collaboration between trading partners.

Nonetheless, he said, “we continue to manage on a literally daily basis to make sure that all those links are working well together, and it has to do with communication and just staying on top of it.”