Coffee and snacks maker sees earnings decline amid ongoing pandemic uncertainty, supply chain disruption and higher commodity costs
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J.M. Smucker said it continues to navigate a period of significant supply chain volatility, disruption, and cost inflation', | Photo credit: Raysonho (CC0)
Reporting is financial results for the quarter to 31 July 2021, J.M. Smucker said net sales decreased six percent, or $113.8m, to $1.9bn, compared to the same period in 2020.
The company’s US retail coffee business, which includes the Folgers, Dunkin’ and Café Bustelo Brands, saw sales decrease 5% to $543.2m, with profits down 17% to $151.3m.
Nevertheless, US consumers had “sustained at-home coffee habits formed during the pandemic,” with at-home coffee currently “representing around 75% of all coffee drinking occasions, compared to two-thirds pre-pandemic,” said J.M. Smucker President and CEO, Mark Smucker, in an earnings call.
Café Bustelo and Dunkin brands were “the two fastest growing brands in the J.M. Smucker’s coffee category, with retail sales growing 12% and 9% respectively in the quarter versus the prior year,” Smucker added.
The results indicate the fragility of the global economic recovery from the Covid-19 pandemic. J.M. Smucker cited ‘pandemic and related implications’ alongside 'cost inflation and volatility in supply chains’ as key factors behind the earnings decline.
“Our industry continues to navigate a period of significant supply chain volatility, disruption, and cost inflation. In the near-term, we expect to experience higher raw material and logistics cost increases. However, we are optimistic in managing these challenges and remain confident in the momentum of our business,” said Smucker in a separate press release.
Coffee’s complex international supply chain has proved vulnerable to a global shortage of shipping containers and logistics challenges as world trade regains momentum following 18 months of Covid-19 disruption. Moreover, Brazil’s 2021/22 coffee harvest has seen a volume decline of 20-30% due to harsh frosts, resulting in the highest global commodity coffee prices seen since 2014.
Looking to the year ahead, J.M. Smucker said it anticipated the ‘pandemic and related implications’ to continue to cause cost inflation and supply chain volatility. Changes in consumer ‘mobility’ and purchasing behaviour could also adversely impact financial performance, the company added.