Smucker CFO Weighs Additional Price Hikes if Inflation Exceeds Forecasts
By Nina Trentmann
J.M. Smucker Co. is looking at another round of potential price
increases on top of hikes planned for July if inflation outpaces
the food maker's current forecasts.
Smucker is facing higher costs for ingredients such as coffee,
peanuts, soybeans and animal fats, as well as for packaging and
transportation, making it necessary to pass some of these on to
consumers, Chief Financial Officer Tucker Marshall said.
The Orrville, Ohio-based company, which owns brands such as Jif
peanut butter, Folgers coffee and Meow Mix cat food, earlier this
month said it would raise prices for products sold through U.S.
retailers that represent 90% of sales. It already is discussing
with grocers and retailers how to execute the raises scheduled for
July, Mr. Marshall said. In addition, Smucker is working to save
$50 million a year in costs through fiscal 2024.
Campbell Soup Co., General Mills Inc. and other packaged-food
companies also plan to charge customers more to offset higher
inflation, which in May rose to its highest annual rate in nearly
"Right now, we feel we have the right equation," Smucker's Mr.
Marshall said. But the company might have to revisit its strategy
should it encounter heightened inflation beyond what it is
currently planning for, Mr. Marshall said.
Smucker in that case could take additional cost saving actions
or raise prices again, Mr. Marshall said. He declined to comment on
the level of inflation that would trigger new increases or cost
cuts on top of the ones the company announced already.
U.S. consumer prices rose 5% last month from a year ago,
according to data released Thursday. The jump followed a 4.2% rise
for the year ended in April.
Smucker, which is seeing its input costs rise by high-single
digit to low double-digit percentage figures, expects inflation
will go up further in the coming months. "We have planned for a
level of inflation that will spike and then come down," Mr.
Economists largely project that heightened inflation will be a
transitory issue, but companies still have to plan for other
scenarios, such as prolonged periods with higher price
Smucker, which booked net sales of $1.92 billion in its latest
quarter, down 8% from the prior-year period, is looking at
alternative ways of transporting commodities and products, Mr.
Marshall said. While green coffee mostly arrives by ocean freight,
food starches and peanuts come via truck and rail.
Smucker is taking steps to reduce costs by spending less on
marketing, brokerage fees and improving efficiency in its supply
chain and production, he said. The company expects these and other
measures to contribute $50 million in annual savings during its
fiscal years 2022, 2023 and 2024.
Smucker's strategy to offset inflation and bring down costs
mirrors what other food and beverage companies are doing, said
Rebecca Scheuneman, an equity research analyst at Morningstar Inc.
"Everybody is experiencing this inflation and using a combination
of cost savings and higher prices to pass it through," she
Smucker in recent years offered promotional discounts during
phases of lower inflation to pass along reduced commodity prices to
consumers, said Chris Growe, a managing director at investment bank
Stifel Financial Corp.
Now, that picture has changed. "Most companies are going to
retailers with a price increase and a word of caution -- more may
be coming," Mr. Growe said, referring to the potential for further
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
June 10, 2021 13:18 ET (17:18 GMT)
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