Ainsworth buoyed lower Smucker pet food sales in Q2 FY19

Without the contribution of Ainsworth Pet Nutrition, Smucker’s net sales would have declined.

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(LightField Studios |
(LightField Studios |

In the United States, net sales of J.M. Smucker pet foods and treats increased in the second quarter of fiscal year 2019 (Q2 FY19). However, without the contribution of Ainsworth Pet Nutrition, Smucker’s net sales would have declined. J.M. Smucker released their Q2 FY19 earnings statement on November 28, 2018.

In Q2 FY19, Smucker’s pet food segment net sales increased US$177.0 million, compared to the second quarter of fiscal year 2018. This increase reflected a US$184.2 million contribution from Ainsworth. However, excluding Ainsworth, net sales declined US$7.2 million, or 1 percent, reflecting the discontinuation of certain Gravy Train products.

Excluding Ainsworth, Smucker’s pet food segment profit declined US$18.1 million due to higher raw material and freight costs.

Volume/mix was neutral, as the discontinued Gravy Train products and declines for the Milk Bone¬ģ and Natural Balance brands were mostly offset by gains for the Meow Mix and Nature‚Äôs Recipe brands. Lower net price realization reduced net sales by 1 percentage point. Segment profit increased US$1.5 million, reflecting the addition of Ainsworth.

Smucker’s pet food and pet snacks, its brands include Rachael Ray Nutrish, Meow Mix, Milk-Bone, Kibbles 'n Bits, Natural Balance, and Nature’s Recipe.

Overall, Smucker’ net sales increased US$97.9 million, or 5 percent, led by the addition of Ainsworth and the company’s growth brands.

J.M. Smucker acquisition of Ainsworth Pet Nutrition

On April 4, 2018, the J. M. Smucker Company announced that it had signed a definitive agreement to acquire Ainsworth Pet Nutrition, LLC for approximately US$1.7 billion, after an estimated tax benefit of US$200 million.

In August the San Francisco Business Times reported that J.M. Smucker will close its pet food office in San Francisco, California, USA, reported. The office was acquired from Big Heart Pet Brands when Smucker bought the company in 2015. The closure will become effective on October 31 and result in 100 layoffs.

Smucker plans to consolidate pet food offices to their corporate headquarters in Orrville, Ohio, USA, corporate spokesman Ray Hancart told the San Francisco Business Times. Smucker is discussing severance and outplacement services with soon-to-be former employees.

The closing of the San Francisco pet food offices is part of a larger restructuring by Smucker, reported the San Francisco Chronicle. Three other pet food offices will also be closed: one in Burbank, California, USA and two in Pennsylvania.

J.M. Smucker closing some Ainsworth Pet Nutrition offices

The Ainsworth Pet Nutrition offices in Sewickley, Pennsylvania, USA will be closed by J.M. Smucker, reported the Pittsburgh Post-Gazette. Layoffs will begin on August 31, continuing into 2019. Eventually 54 employees will be out of work. Smucker acquired Ainsworth earlier in 2018. Sewickley is located 12 miles to the northwest of Pittsburgh, Pennsylvania.

In April, the J. M. Smucker Company signed a definitive agreement to acquire Ainsworth Pet Nutrition, LLC for approximately US$1.7 billion.

Smucker‚Äôs Big Heart Pet Brands consolidated work done in its operations in Pittsburgh, Pennsylvania, USA, into its Orrville, Ohio, USA, headquarters, effective April 30, 2016.

J. M. Smucker pet food, treat online sales at 11 percent

J.M. Smucker executives anticipate further growth in e-commerce and shared their strategy for increasing pet food and treat sales online during the company‚Äôs investors‚Äô day presentation in October.

‚ÄúThe pet food industry has experienced a significant shift towards the e-com channel, much more than the other sectors in which we participate, and we expect to see this trend continue,‚ÄĚ said Dave Lemmon, Smucker‚Äôs president of pet food and pet snacks.

Today, e-commerce sales account for 13 percent of US$32 billion pet product category sales in the United States, according to Euromonitor figures cited by Lemmon. That percentage is forecast to grow to 25 percent of a projected US$40 billion category by 2023.

Opportunities for Smucker pet food brands in e-commerce

Currently, 11 percent of sales of J.M. Smucker pet foods and treats occur online, which trails the average of 13 percent, said Lemmon. He believes Smucker brands have room to grow in online sales.

In particular, Rachael Ray’s Nutrish pet foods offer opportunities, he said, although the brand is already growing three times faster than the category average on Chewy and Amazon.

In fiscal year 2018, online sales of Smucker’s pet food and treat brands increased 64 percent over the previous year. Milk-Bone increased even more than other products in Smucker’s portfolio, with e-commerce sales growing by 79 percent.

Smucker leads pet treat sales, plans new products in 2019

J. M. Smucker aims to further their position in the pet treat category by expanding their range of Milk-Bone dog chews, while adding premium Nature‚Äôs Menu treats and Rachael Ray Nutrish dental chews, said Dave Lemmon, Smucker‚Äôs president of pet food and pet snacks, during the company‚Äôs investors‚Äô day presentation.

‚ÄúWe are the market leader in pet snacks with our iconic Milk-Bone brand,‚ÄĚ he said.

Pet snacks now make up 26 percent of expected fiscal year 2019 net sales in the pet category for Smucker. Smucker analysts expect pet food and treat sales to grow by 34 percent year over year in net sales.

‚ÄúPet is largest and fastest growing categories in which we participate,‚ÄĚ said Lemmon.

Dog and cat treats make up a disproportionate amount of the profitability of the pet segment, he said, although dog food makes up the largest portion of net sales at 47 percent, followed by cat food at 27 percent.

New pet treats from Smucker in 2019

Smucker plans to capitalize on that profitability by introducing several new dog treats in January 2019. The company expect an incremental increase of US$100 million in net sales from those new introductions and other new pet products.

Milk-Bone currently enjoys 60 percent market share in dog biscuits, said Lemmon. Smucker hopes to press that lead by leveraging the pet parenting and humanization trends.

Pet owners, especially those who consider themselves pet parents, feel guilty about leaving pets at home for extended periods or having limited time to engage with their pets, he said. So, Smuckers new treats will take longer for a dog to devour, thus extending the amount of time the pet is kept entertained and that owners interact with the dogs.

One new dog chew, Milk-Bone Gnaw will take dogs 15 to 20 minutes to work their way through. Smucker will market these treats as rawhide alternatives, made from chicken.

Another new pet product, Milk-Bones Wonder Bones, will have a curved shape meant to provide enrichment as it wobbles. Dogs will need from four to six minutes to eat these chews.

Smucker will introduce Nature’s Recipe True Treats as an entry into the limited-ingredient pet treat segment, which is growing at seven percent annually, Lemmon said. Smucker will market these treats as containing chicken or turkey as the first ingredient. The treats will also be grain free, with no artificial flavors, colors or preservatives.

In the dental dog treat arena, Smucker will introduce Rachael Ray Nutrish Smoochies. The dental treats will feature recipes inspired by celebrity chef Rachel Ray and come in either biscuit or brush form.

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