Following strong sales in the rest of fiscal year 2020, General Mills’ Blue Buffalo experienced a similar sales trajectory during the COVID-19 pandemic to that of many other pet food brands. General Mills executives shared financial data for the company’s pet food division in FY20 during their quarterly earnings call on July 1. For all of FY20, General Mills’ pet segment net sales increased 18% to US$1.69 billion. As the deadly pandemic hit, General Mills’ pet segment grew 37% to US$555 million compared to the previous year. However, the fourth quarter of FY21 will likely be relatively lower due to a calendar difference. In FY21, General Mills executive have a strategy for promoting treats while introducing new products.
Blue Buffalo retail sales in FY20 and plans for FY21
Blue Buffalo retail sales increased double digits in FY20 considering all channels, likewise gaining market share, Jeff Harmening, chairman and chief executive officer said in the call.
“Our consistent, strong investment behind brand awareness and pet parent education, combined with our successful expansion into additional Food, Drug, and Mass, or FDM, retail outlets, contributed to a nearly two-point increase in household penetration,” he said. “We remain delighted to have BLUE in the General Mills portfolio and we’re excited about the growth opportunities that lie ahead for the brand…
“We started the year knowing that improving growth in North America Retail segment and delivering another strong year in Pet were going to be critical to accelerating our overall organic sales growth, and both our teams came through with great results.”
General Mills’ fourth quarter sales felt the effects of the COVID-19 pandemic. Like other pet food sales during the pandemic, a spike in sales accompanied the first stages of pet owners’ preparations to shelter in place.
“The pet segment experienced increased demand early in the fourth quarter from stock-up purchasing, which partially unwound by the end of the quarter,” he said.
As Blue Buffalo enters fiscal year 2021, treats may play a roll in driving continued sales.
“In pet, we will continue to invest behind our BLUE brand to drive increased household penetration through compare and decide advertising, and we’re launching new advertising to strengthen awareness for our treat portfolio…” he said. “We’ll continue to benefit from new products like Cat Bursts that launched in the past three months, and we look forward to an exciting second-half innovation line-up focused on expanding our portfolio of wet food and treats.”
Blue Buffalo financial performance in FY20
Fourth-quarter net sales for General Mills’ pet segment increased 37% to US$555 million, largely due to an extra month of results as the segment’s calendar was aligned to the company’s May fiscal year end. A significant increase in pound volume was partially offset by unfavorable net price realization and mix, which reflected the comparison against the year-ago period that included significant net sales growth for the premium-priced Wilderness sub-line as it was expanded to national distribution in the food, drug, and mass channels. Segment operating profit increased 23% to US$135 million, primarily driven by higher volume, partially offset by unfavorable net price realization and mix and higher SG&A expenses. For the full year, Pet segment net sales increased 18% to US$1.69 billion, driven by positive contributions from volume growth and positive net price realization and mix. All-channel retail sales increased double digits for the full year. Segment operating profit of US$391 million was up 46%, primarily driven by higher net sales and a US$53 million onetime purchase accounting inventory adjustment in the year-ago period, partially offset by higher SG&A expenses.
“Organic net sales for our Pet segment increased 37% in the quarter, including the impact of an extra month of results in this year’s quarter as we shifted the segment’s calendar from an April to a May fiscal year end to align with our corporate calendar and other segments,” said Kofi Bruce, General Mills chief financial officer. “Pet’s fourth quarter net sales performance compared against a 38% pro forma growth in last year’s Q4, driven by significant distribution expansion in Food, Drug and Mass. Fiscal ‘20 all-channel retail sales were up double digits, led by significant growth in FDM. For the full year, Pet segment organic net sales increased 18%. On the bottom line, fourth quarter segment operating profit grew 23%, driven by net sales growth, partially offset by higher SG&A expenses. Full-year segment operating profit grew 46%, including strong underlying growth as well as the comparison against a $53 million purchase accounting inventory adjustment a year ago.
“One consideration we know with certainty is that calendar differences, namely the comparison against the 53rd week and the extra month of pet results in Q4 of Fiscal ‘20 will reduce full year Fiscal ‘21 net sales growth by approximately 2.5 points,” he said. “Between the calendar differences and the significant surge in demand we saw last quarter, we expect FY21 fourth quarter net sales to be down materially year over year.”
