SJM - Earnings call transcript Q2 2020 | The J. M. Smucker Company

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Operator

Good morning and welcome to The J. M. Smucker Company's Fiscal 2020 Second Quarter Earnings Conference Call. This conference is being recorded and all participants are in a listen-only mode. At the request of the Company, we will open the conference up for questions-and-answers, after the prepared remarks. two have the additional to re-queue session, yourself you if questions. limit questions Q&A during and Please

I will ahead, now Aaron Broholm, turn the conference President, Relations. call Investor Please go sir. Vice over to

Aaron Broholm

for the Good morning second earnings quarter's will Smucker, results call. financial conference give detailed us Mark our prepared results this will Vice introduction, on and fiscal and quarter our brief joining After Chair President and Mark XXXX for and an analysis you our of then thank will follow CEO overview update XXXX the an fiscal Belgya, provide and session updated outlook. remarks. strategic CFO, Q&A priorities. A of the

These actual and uncertainties. statements materially morning's During reflect website the press future release, current risks the statements our today's results due at is concerning assumptions to you on Company's this encourage performance. full about statements rely estimates corporate and may disclosure we call, forward-looking located on make differ jmsmucker.com. and forward-looking read to that expectations I and will which plans in

evaluate please to uses the internally as press Company non-GAAP results in note release. detailed Additionally, the performance

be and full with slide have and on XXXX We the slide of this year replay accessed the will website can quarterly outlook. supplementary summarizing our be fiscal archived The along results posted deck a there call.

If you have please after today's me. additional questions contact call,

the to Smucker. Mark turn over now call will I

Mark Smucker

us. you, and Thank joining you everyone Aaron. Good morning for thank

detailed results, structure into will our leadership week. that changes we Before last our with announced get I begin the we to

Belgya, on years Officer, at XX our nearly XX announced September Chief will Mark years after he First, retire as Xst, XXXX. and Financial Smucker

CFO his Senior as President will fiscal May Marshall, The seamless Xst, following current retirement on Tucker by on will completion President stay He Mark Deputy Finance. the XXXX, succeeded of Chair, CFO. become agreed and Monday a as Vice to our succeed transition transition. as will Mark until be our of current year. on begin has will Vice Tucker ensuring Vice Mark

Smucker joining the brings understanding Since financial become and forward experience has am the of management respect organization. He ago, I partnering has part him of Company. and to in deep with confidence Board, the years and years seven colleagues significant his He a Smucker the come. Tucker looking of the an to integral and

The priorities. improve second announcement the the executive agility our our designed leadership new move strategy, speed and is was on enhance to we evolution of This streamline and our execution to of accountability to deliver and financial structure ensure, with strategic decision-making structure.

of role. in includes a creation Officer The Chief change Operating the structure

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of We the leader also process sales US to new our identify started organization. a

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strategy a remain and has of evaluate team our creating deep CEO the former Ainsworth will growth as value brands businesses refine and delivering of our team of that supporting serve Nutrition we Pet alignment confident of ensure on these portfolio for Jeff will The I ensuring industry. continue to new and Smucker shareholders. executive focused leadership strategic our our advisor. business, President Further a changes the and Pet the knowledge Watters, a am

reflecting across our Let the to brands discipline share the were to prioritize business. generate our quarter me earnings are adjusted We financial projection, actions taking now to per of second softness above sales offset discuss certain of benefits able results. targeted in we

a marketing, reprioritizing facing increase growth spending. initiatives premium high increasing investments these actions reducing to focus and include in such on level, as on At platforms and food company-wide Pet consumer Uncrustables resources and focus key discretionary

$X.XX Through in X%. these prior delivered EPS representing compared year, we adjusted actions, growth diligent $X.XX the of of to

potential of earnings our strategic progress are While performance or aggregate our the not imperatives. reflect results, our pleased sales growth we making our with does toward net brands the

below including double-digit growth our for declined and highlights snacking, prior sales food. We strong key sales many the were performance to within including Snacks actions where baking Sahale PowerUps there to XX% snacking, during Jif performance quarter, brands pet with slightly excluding divested were corrective for projection, exchange, the X% the Smucker's are sales brands. year's committed improving Beginning top coffee grew and to Uncrustables, total foreign prior the US related and business year taking necessary. decisive while compared and Net line sales

We and household for and expect continue distribution for Jif grew. to in the for penetration acceleration quarter, snacking the further and XXXX brands in all third expanded quarters production In the Bustelo PowerUps. with the capacity Uncrustables Dunkin', increase Cafe increased as for we sales fourth coffee,

Pet in Mix being including impacted coffee to increased volume while premium and lower to trade largest brands grew all consumers. sales declines despite to growth for the instant planned growth mainstream, as are KCup passed segment prior total by comparable label our and year the due net we in Nutrish, food, In for Meow private delivered through costs green spend being Also, were portfolio, Milk-Bone the we including formats products.

cat XLives XX-week highest dry food penetration. growth, In sales the food of marked businesses, Nutrish pet declines the household - achieved which now Meow we latest any mid brand, eighth excuse Natural Balance snacks cat the and me In consecutive single-digit of brand our our and segment. cat household Meow Mix each growth addition quarter the for has food cat for portfolio. in to Mix, In year-over-year period, grew the penetration

We softness is portfolio remain of been short competitive brands consumer about snacks isolated prospects dog to significantly increase for the proliferation to food from both generate premium growth the has pet brands. investing pet for are of trial. the for entering an and and food. our activity category, in There long-term excited which portfolio a Recent

While the had to brand Nutrish headwinds sales increased than and food the anticipate we the projected, competitive dog in X% this continue. less was we in premium quarter,

Nutrish year to the and targeted Also reflected for due reflection expect actions be the expect have to begun of both the brand a competitive new we innovation We improve the back on are third quarter. taking in to forecasted launches. decline reduction half we and activity shelf distribution and the in further performance performance to throughout

drive include incremental later increased the and launching actions consumer new advertising proposition trial value improving at fiscal These to loyalty this year. and investments aimed

of been weakness For brand competitive and in growth Natural Balance, sales by offerings, XX%. over the specialty continued has impacted channel. dog in in increased and mass the The quarter the grocery, food pet premium decreased continued channels e-commerce

overall performance, we confident and the which brand the we go with strategy the may actions recent new in we remain place, late expect to opportunities total the restage which growth year. our quarters. are plans, We our for over pet pet the fiscal will reevaluating in business Given refinements beyond this to leadership share further communicated previously coming

be Uncrustables the made consumers Smucker's leading area, to a of focus lead categories. a by couple I'll and from our driven are examples best categories, the quarter Snacking we imperatives the consumer-centric sandwiches. to progress I'll against how the key brands best build love turn in share everywhere. of now in remains growth

the We expect continued forecast XX% acceleration year. half for growth of and to exceed Uncrustables fiscal second the in

We expect to continue and net next the in this to million over years. we remain grow to on $XXX the few business within sales momentum track

segment improved now well, growth. double-digit three all growth throughout Further Folgers. and the momentum including takeaway continues by number Dunkin' total the led the to trends the its KCups quarter in of brand for our the four-week, period. latest KCup ahead for for perform and sales coffee, data position XX-week brands portfolio of XX-week across Consumer total share coffee continues scan category market owns In

number in mainstream a brand share our margin. share the across segment market the leading the by market the with for portfolio wide coffee dollar volume This, coffee position maintain one total combined positions to category firmly the Folgers and

strategic brands launched the our during excited underway. the quarter, second we additional about for the are Smucker's love, of to creative recently are consumers and Bustillo refreshes brands Turning brand imperative Cafe building Jif, and

campaigns, new share which trends pleased Our align spreads advertising we and the recent on brands initial and has been for Smucker's the volume and air with Jif Smucker's on Jif. with improved for feedback fruit for gains the September, since are

our brands and highlights breakthrough in We campaigns strong national in Cafe the and culture first social today's authenticity. sales strengthen platforms new multiple long-term up by its for to media advertising Bustillo, advertising quarter, also XX% growth. The support across which momentum its heritage saw campaign with positioning supported

to for campaigns We ten deploy year. this remain new track brands on fiscal

Our refreshes advertising underway XXXX the latest early campaign Dunkin' next new are Mix begin are the debuting as in remix Folgers support launched will for Meow and and November, December. and week in new brand airing Brands

of and year. of through the the half the for spend Marketing fiscal first of net quarter was sales X.X% X.X% sales net

X.X% operating our the and new investments remain increasing to the to consumer marketing the for our to our of media are compared sales in and We facing reach as year, of spend. marketing marketing quarter X% year. We prior of the spend of model declined benefits effectiveness expenses while project realizing committed the net full in

know third be available Our is to any we brands growth and with be shop We - shop therefore consumers and that and multichannel, third wherever everywhere. interact to quarter imperative on need our demand consumers time.

retail to deliver through coffee our the of the channel, online ecommerce nearly fast grow X% of play mortar continue are we food Factoring the Within growing sales. in for double-digits, retailers second accounting Pet retailers, for our in and ecommerce and X% pure sales growth, brick US to US solid sales total sales In quarter, approximately the continue e-commerce. particularly retail categories. to

channel to continue years. and prioritize growth the momentum and a investments has next for still to in over We as runway on initiatives play pure the significant to e-commerce several channel be catalyst expected the omni will and both is capitalize

Home The business previously Uncrustables, that for home. From been production as schools. we our on beyond additional increased focus always our constraints limited capacity Away are platform branded while about K-XX products From of Home growth With in outlets, meaningful the desire the excited capacity of Away of outside has expansion potential the consumers

and pleased our expansion Away premium expand through are Also, within business, From fiscal Home with brand further platform we coffee next our our very year. to XXXX have plans into this

Mark, here are over comments. take thoughts Before my hope a few it from turning you away to we

to decisive are line improve to top we taking First, corrective committed actions performance.

to agility execution changes the strategic and ensure and to strategy, generating Second, designed resources supporting priorities. entire we deliver improve third, focusing accountability and flow. our of enhance our are to mindset has on further with the And growth discipline recent cash financial earnings financial move embraced decision-making streamline our and leadership organization our that speed a

parts our to are increase and key our strategic portfolio making shareholder long-term deliver And are finally, over of growth we the responding time value. will against growth financial imperatives, which investments

I done our you Finally dedicated our you all to do all will drive for want and Thank to business employees. forward. you have acknowledge

to will Belgya. I Mark now over turn the call

Mark Belgya

good everyone. and Mark, you, Thank morning

Let added me on color with quarter. the some begin

Natural Excluding Smucker's net baking was label by in butter, X% as on reflecting food food price Uncrustables. flat peanut snacks. Pet brand and and the coffee by divestiture the the declines private quarter, US second for pricing for primarily, in increases offset declined gains partially in dog Volume/mix coffee were lower offset and sales Pet Balance and net FX,

Adjusted million X%. or year $XX gross prior profit the from decreased

to gross Our margin points XX XX.X%. improved basis

primarily Excluding not X%, down fully by gross was the partially baking lower business, favorable pricing, reflecting impact the lower offset mix. net by costs. of This offset volume was profit

$X $XX Adjusted the marketing operating a decrease in with the primary on reduction divested declined profit US contribution decline a $XX X%, the was from difference offset to year, and to million prior by segment the profit business million million income as of the baking gain expense. a compared sale gross

made last repayments $X months. million income, of interest reduction litigation more was expense $X.X past the over cost in the incurred debt resulting in in operating driven decreased quarter XX by Below due Other to expense income quarter year. and from the million, favorable second

to effective with of guidance rate Finally, rate of business. high tax was XX.X%, reflecting year year the XX.X% at slightly sale tax tax associated prior XX%, adjusted of the than income The expense our impact full was the income range effective previous XX%. lower baking the

in per of $X.XX in to second resulted the earnings quarter This share adjusted year, prior an $X.XX of X%. compared increase

year, sales sales to Net planned include to the compared to the with and XLives a Pet. private of label brand. Let Meow the me These discontinuation headwind quarter, now declines business. Milk-Bone were by of of turn certain results X% declined beginning segment were growth led prior Natural X% gains which the X%, Nutrish X% for while food for snacks. of cat growth offset pet drove Balance Mix, products

segment profit costs was synergy lower pricing, mix. increase by XX% The being prior volume year. favorable input increased and partially food the a marketing Pet net increased compared driven to offset from expense realization decline by and

increased the Turning by prior year. segment, green coffee price sales comparable offset pass was realization spend volume the net Coffee were trade favorable mostly reflecting through to the way lower Lower the to of net costs by of mix.

related decline in shipments the XX% decline Folgers with Cafe Brands for offset the for in new the sales and the KCup grew favorable to in volume reflecting strength impact Bustelo of profit of growth mix. net and profit. Coffee Dunkin' brand quarter The than to of neutral a more input distribution. cost increased X%, lower KCup pricing timing for Growth impact reversed each mostly segment first the brand. portfolio, the was the the lower

In sales sales net and across and lower the an X% Comparable Crisco sales growth decreased by offset US for X% of decreased Fruit baking X% the by reflecting Spreads. Jif brands, for net Consumer increase brand the Toppings business. Uncrustables, Foods, Smucker's with divested net driven

peanut not lower offset Excluding year baking from lower expenses. lower butter, reduced to by of the profits on business, marketing favorable X% cost offset costs net profit Foods the partially gain Consumer segment the declined on and volume the the prior divested selling mix and by impact price, due of SD&A and fully sale

inventory export mix X model. percentage international Mexico for we in decline, facilities as Home the closing a in of Lastly, transitioning the relating segment, to lap compared accounted and declined and net year prior Away notably Volume the X% the in From distributor point sell-off sales a prior-year. market country most to in to the a

by million. $X FX XX% net to price/cost impacted offset due an sales and SD&A negatively expenses. lower the unfavorable lower decreased impact of by Segment partially profit volume/mix relationship,

$XX sales. expenditures, the quarter Second cash million and million, $XX over of was represented an by the X.X% first year, free was activities phase of the Colorado completion which a of CapEx cash million operating quarter the provided increase million the a prior $XX reduction or reflecting capital flow reflecting $XXX for in Longmont increased facility. in net

down quarter. EBITDA intention billion, of We its continued Company The was paying based on quarter with times. of the approximately million leverage net of a the month XX debt deleveraging debt in finished by $X.X billion, $XX total balance our of $X.X just trailing X.X over

in approximately are half headwind expected $XX in with quarter. now sales $XX a anticipated million expected in the our net XXXX. incremental revised a be label year, sales for results. year pet basis, Ainsworth down compared decline food million third outlook Reported baking and sales prior $XXX to first recognized which X% an to includes the fiscal me down information On are provide on of X%. prior Private to net sales the be remains Let the the organic million

and our derisk competitive reflect peanut primarily butter. which were strong back year the from recognizing general Balance expectations. results, premium coffee of back half half for below second our quarter food quarter sales activity and the declines and Changes notably Nutrish of a for dog comps Natural Expected previous the guidance and sales the the brands in fourth

our over fiscal cost end $XX year profit ahead and expect our We $XX line million year, acquisition synergies synergy approximately continue by to million delivering the remain slightly as cumulative be realize to margins forecast. on overall full We're expect incremental of just the our with previous projection gross target. XX.X% to projections in commodity of

the continuing guidance actions expected Adjusted earnings guidance, SD&A $X.XX to benefit the range compared of financial declining reflecting impacted to estimated change EPS to the of prior be range the by discipline. approximately our offset per $X.XX. reduced share of include sales impact quarter partially to the in earnings expenses factors in year, that the X% taken is to Key maintain adjusted the

and range end quarter, $XXX Full sales low-single would cash an approximately flow is between looking earnings third and year be our Interest at $XXX effective net to XX.X%. million CapEx with down expense And at million, we of of now rate and tax the of per share to digits. low projected the projected is be finally, free million. expect million $XXX $XXX

inventory The balance outlook at increase reduction earnings an expected primarily in reflects our the revised year-end. and

reduction fiscal the times X.X end for and taking repay prioritize down continue an year. We to approximately the to additional to cash our of debt at $XXX expect by million leverage will year-end

reiterate me business persists toward our revised We categories, investments levels to Mark's which while drove our full challenges delivering to at while diligent future remain growth performing of comments, above. closing, much certain let the or expected making opening in guidance, revision our In towards that sales is growth. year earnings prudent

make progress in we growth the to to we addition, are value time In questions. and results. key you shareholders. this now ability the to executing underlying morning initiatives your call your to Thank confident up which in our reflected continue remain we'll Overall, for our deliver long-term on open meaningful

the you question. up Operator, if please queue first

Operator

of first question from [Operator Barclays. Instructions] Andrew Our Lazar comes

Andrew Lazar

have two the still address a new and bit and to Pet there I I drag sense of could is and this to accelerate question, off of track start how input quarters. that words, sort route into issues 'XX. 'XX think, maybe just maybe as risk Thank flexibility therefore the fully you Mark, this a outlook. Smucker's a In starting. guess the to with be right there - to providing do bit, needed revised presumably the I'm of the is would enough little you of members the just you. maybe still obviously has Hi. would a trying Company some and outlook coming want see not the other or team aggressively maybe just the momentum, fiscal characterize organic get particularly in such, now of forward guess get some we to us also broader board is full-year new on light expect that the on trends a last some enough a

Mark Smucker

first guidance extremely me delivering by Well, I that all, saying, have let and Andrew. on of priority CEO it's just as is foundational a start Thanks important.

times look missed a of put the critical with were both look - have the as the fact and this took we business we we the really that and a couple very very So - appropriate round are flexibility we hard giving judging you made a forward, that given it. we guidance this exists that as really eye and opportunities year, ourselves risks that in we sure

So we top does is do and prudent adequately opportunities reflect and believe line guidance risks. that both the

or And levels so, really are our while and to We what less to or above. our there actually performing expected sales still some challenges pet, at drove premium more - the majority isolated is revision. that's still of look at growth business

Andrew Lazar

Thank was And helpful. that know I And you. then, that...

Mark Belgya

can and I comments on dollarize I what a had prepared Mark's bit little to just comments. add if Andrew, maybe my in

So everyone benefit for of the call. the on

you'll in before. so look negative change the for If everyone guidance, it our zero was basically recall and you at, line top one

call new really I - the minus take to our midpoint try components X.X% out. that and So and down if to three explain X. the it There's to XXX I basically get called you that points basis of and just

was of quarter basis due to points this XX expectations, that where okay. First of fell of short we all, about

relates of is de-risking you'll recall outlined, I of we activity peanut both the also that to as about some QX in just in this but to and things strong competitive it as in Pet, and related had would comps really basis in second the is component XX coffee. butter points The suggest Mark

So be would of the if of primarily will. points get the XXX And Pet. that's be you basis then premium to there sort half would it, other half us in

- basis XX got fair on go a use how derisking. amount here, of a we've about. I'll that's that So cushion, on we points Based loose that, term of

accounts probably And that $X.XX. that if translate between de-risk portion earnings just the $X.XX side, somewhere you and then to

to sales get - is So that de-risk into low the to X of just of that sort to XX number portion that explain number. end the at guidance, account the of how taken we the

Operator

from comes question JPMorgan. next your of Goldman Ken question. Our state Please

Ken Goldman

congratulations thank Thank over the to you Mark both help Mark, you years. and Belgya, your for Tucker and all

Mark Belgya

Thanks Ken.

Ken Goldman

asking in I is but leadership the at wanted at a least channel same some you, off the described to at or mostly you really, when exogenous. are change I finger in maybe making start things by Pet, are time, hear as shifts best pointed competition, that saying being

think going So as curious of should what sense little a control Smucker the forward should a bit differently, the side. get have maybe may within you maybe have done Company you done just internally, and a bit what better to a of little changes be I'm that or Pet can made some

Mark Smucker

this start. Mark Smucker. is I'll Ken,

So back would level to the there I in the go entrant, entrants, not we multiple would guess we I fast we did experience first brands not nor did I acknowledge new of say from competitive space, adequately one anticipate what but, react of is competitive enough. all would just that the we quarter, pressure that are where prior

I faster were to. we So just point should reacted that have the competitive multiple that dynamics there were fact going that really at on, finger the a would

took very challenges rather, terms or approach thoughtful planned leadership for changes Mark's to long time, the and In a broader obviously we leadership, structure. has the of holistic transition been a

and we along this had CFO announcement. And leadership the up decided a not changes knee-jerk of changes reaction, with so to was thoroughly that some these had through that sync were broader the

to again business at my the on are and to right change the eyes agility, strategy. drive then go I any sets that have level comments prepared sure back And the going end the intended intent outside we accountability day, ultimately, really of is that structure that individual of increase right make to the of really of of the the just

Ken Goldman

in us at whether you plan think and terms maybe thank maybe brand follow-up, that the the reverse that takeaway is, distribution brand. walk see, Can Okay, we little for of you the of little quick read happening accurate sales, bit sort it has that. of shrunk bit? in least a mentioned an to XXXX you a a I some of was on what's is if data that's that that up through And what then the

Mark Smucker

at Yes. have that XXXX We still expectations. perform to seen continues

the in advertising, are mentioned We comments, isn't on air industry expect the launching the again continued continue prepared pre rags of new good actually feedback had brand. there, which we nice so on we've very I As publicity on see ultimately, advertising, in focused that remain we to yet. but in the some do XXXX some that, and some to got we growth

Mark Belgya

Yes, Ken, well there up then it's I would at and introduced Away also add just also, showing e-commerce Home we there. From it

there So of aspects some growth. is other

Operator

next your state of comes Our of Please question. Spillane from Bank Bryan America. question

Bryan Spillane

of coming out to meaningfully there know, you new is which new also potential I'm is materially sense first maybe the to that would with just understand not ago? for people Andrew flexibility for the reset, a actual ago and Is asking. I but laid just goals, being be the us what really chance from year strategy would get there strategy what changed it communicated follows year that a plan up maybe just how open a or to or and management, a was you kind itself? or you be still it in, have people the question into So on think much new I guess organization trying come

Mark Smucker

our significant strategy. Smucker. in see total Mark meaningful or is I a don't shift this Bryan,

we continue still within brands those. to still our We the growth We still and believe believe which in are right ones. that play in view the categories the in three imperatives we

that what, be our subtle if across could are shifts You know categories, there possible.

the and make right prepared things Balance may a we it. brand for I at broader I are that to Natural that mentioned we look the doing take that in think, remarks, sure

those to I committed think our so very And well. all the think we how but is refine team leadership and sound against and categories business as potentially the about priorities remains fundamental of them, the to existing continue will we

Bryan Spillane

fair So execution lot is competitive adaptations competitor what's make characterize of either - to to or a some happened needing to activity activity. some

Mark Smucker

fair. That's

Bryan Spillane

- And where and some for like Belgya. towards could directed within is parts especially second with the Mark were dynamic me, Pet more be now exported. one maybe market then potentially industry to protein particularly China, right the actually that from In exported product just chicken being and sort the of pretty food

how to for trying monitoring what food on sense is Pet you'll see And a thought inflation there inputs your get business a that a you're start protein so there? for is to or the we're and likelihood potential some

Mark Belgya

right say was had I probably play to as you my don't from would but pricing into in competitors see that would would look just mix a significant the back Obviously would our take I just think comment we, is those a significant, I'm what perspective. including at that in that of I I commodities, What the push general. categories change to we the our more any in it were if in to of out script And our just described. as we expectations, outlook that kind now it other relates sure around considerations to commodity

Operator

Kaufman Pamela question. Stanley. Morgan of your question next from state comes Please Our

Pamela Kaufman

on mentioned premium competitive in in dog you're and products you comments? the food seeing premium the dynamics in Can elaborate the that pet proliferation the that category you prepared

Mark Smucker

There color actions from you as we way could Mark give in specific communicated the of just our on previously. I pretty is really just, we've characterize just what Smucker If I intensity. level previously - by can is it as terms - would communicated. what continued, some no a I consistent elaboration of this characterize it

support, some you of we that we've to As is know, have our discussed previously. taken both customer very as actions in-store, pricing relates it specific as

on-air in in our ramped Nutrish the all shooting - are and until in for presence very Obviously, committed those so we third new up things remain actually quarter actually coming probably market up won't to. show weeks, advertising which Nutrish. we remained for We the of sometime

I would prior customer a taken than bit at think from of longer, has implementation the only little change that a expect. level, quarter particularly we the is those

week, starting this we have expect customer to of fruition. QX, to level, we through isn't of it see to across although even so, now come entire really all would But market. this reflect And actions at the just the those as

Pamela Kaufman

Do And from innovation contribution the this I you then happy in innovation a year? launched with are what was of how expect you And quarter? performance generally million still contribution this year. guess the the from $XXX products

Mark Smucker

In is and in meeting takes are obviously broadly aggregate, say that an innovation general, in we feel puts I There our expectations. that. would actually

I've our think think well meeting are broadly and you example is Milk-Bone and expectations. innovation I already snacking for about spoken going XXXX those to

Pamela Kaufman

on contribution quarter from just and then for the And the full innovation Thanks. year? the in

Mark Belgya

- Yes, that in we're from to stretched point passes, particularly as we're really that more in performance, think time talked the that's but out and over is be Mark's to step time. past, bit think to million. away how going we a $XXX We've the Belgya, with are I hi, Mark pleased this little I trying

we each periodically update do will quarter. not but that, to So we look something would that's

Operator

next question. Our question Jason English comes Sachs. from of state Please Goldman your

Vivek Srivastava

the Rachael sales due on the on to witnessing Pet many building has impact of English. speaking since is sales announcement trends in grain of dog food channels X% are DCM Srivastava My is grain-free brands, declined food track Jason sales, in grain-free This around the in DCM Vivek including June. free Ray question where for concerns we worsening FDA

what you Thank to this? taking specialty see do have months been and trends in the ahead? How in you're risk you. pet What steps address from this

Mark Smucker

Yes.

the of some there also brands in know and couple across that includes ago, FDA It that quantify brands months that. it modest impact that been of look out, well. that does all include, has that brands, what I to you difficult, very includes of the if our a is. were named came as difficult a is And to not competitive all but comments So don't

that have continue offering And ingredients we we to wide that or to that make products a they variety to or sure choose you. are of consumers have what the - grain-free ability they between limited our

will we support thing and so to do believe the right portfolio. And we to is to across the portfolio a broad continue continue entire brands those and

Operator

of from question Robert Our Credit your comes Please question. next state Moskow Suisse.

Robert Moskow

some I color more give actually. just benefit, flat, indicates mentioned channel, is that benefiting in of what Division Two Can you kind this the a year? Mark loading tracking there happened Hi, channels me but thank down like are sales last on there data other e-commerce Coffee little being Belgya, X%. the is for that a being you risk the are there inventory Nielsen up think you retail a question. or

I Thanks. at then the higher end secondly, us And on more think a clarity inventory being made a year. Mark of you give balances about Can that? the you little comment

Mark Belgya

Yes.

So Rob, is this Mark Belgya.

was so comments scripted in coffee mention was nice actually and the our company increase of terms think saw did in So is X% I our actually quarter. total I up e-commerce coffee, about of e-commerce this a sales

some a bit we you're could probably is coming out quarter QX, shipment had of that got recall ahead the things. strong of they part and QX There was other new commentary QX our what last that and So distribution a all be little takeaway, believe seeing. the a of of you'll softer reasons, coffee

KCups. in particularly that, of all on delivered we so And

away. as could that take you're seeing explain So it little relates bit, a to what

On - the inventory running our our now, little inventory, right higher. balances balance a are

working are numbers said as we're are our a earnings I at a and think take least the come softness just little of the now, stand inventory right in where a reduction We little with know or of with bit generation. though inventory teams increase those in and in out now, cash thus numbers at added the cash balances that but bit of down I sales. work the will free some. where to Some flow, I as down is we looking

Mark Smucker

elaborate Rob, And that positive. I come just Mark that's through Smucker. scan this on - not the stuff clarity in might give might some on data is

a the quarter good had were pleased were coffee we brand. portfolio, we across every - we very across and broadly So

you doing that's very if our only growing the very in growing fastest falls Canister look so and of but it did the premium not example, And not - is up at well the data Dunkin, well, three, in the mainstream scan which is reason Dunkin', brand, for that is the the all Dunkin' segment. is growing showing Canister, number it Bustelo KCups, because

in butter periods. you you deflation. Dunkin' significant both is as peanut And and then we've - the - in in we know, And experienced growing and so Folgers it XX-week if faster of X-week, both specifically, take Starbucks coffee aggregate, all have than XX-week

up said, both the the it business. quarter seen was the that in that the growth and actually playing that the deflation, so and it's role have we volume - But Folgers to on to, is volume we we've fact despite want that able been we've our maintain profitability

So a us nice story the for coffee success very is overall quarter. in

Robert Moskow

think more Do be just cost was the be to because think one as Marketing that more of to X.X% sales, I sneak could projects? of X% a you'll you in. to guidance this year. I discretionary percent below maybe And

Mark Belgya

No.

Mark Smucker

guess dollars. questions, really is line No. even go now of would in one of back that draw the further it's our been I the - step sort I in Rob a earlier our for of brands. our asked like and I to sort investing sand would we've because strategy, for goes this know maybe one We to our marketing that,

were that in we event look X.X% in for So still hold unlikely spend sales would year. the to end from in in will our the X% to that dollar we the - and events, to rest guidance, of change the marketing the range

Robert Moskow

thank from think back I'll in I - judging for but I'll Mark raise get half, that. over maybe it. you back years. your the the I'll so giggles, on spending the to Belgya, marketing help you much my So Appreciate

Operator

question. from next of Bernstein. Our Please comes Alexia your question Howard state

Alexia Howard

you to so everyone, much and thank morning, Tucker, and congratulations Good to Mark.

flow question was causing the guidance. have cash what's sales guidance. that earnings share per the around It the that free more guidance though the just was free mechanics than little guidance bought So bit looks flow down in I revision of cash wondering or that the is first downwards. I a around as

mean about been second And a guess, are earnings growth the algorithm that visibility is factors here. and I this you. previously. is the into deteriorating were wondering, from of what question validity Thank Obviously, past then has quarters. that now growth the earnings I'm a what there major and at for visibility are guide my really of long-term point couple in downs they the the of couple also does harder to than predict

Mark Belgya

Mark is this Alexia, Belgya.

know, it the it's out predominantly terms - two inventory. finalized, areas the bit components would capital. I - that But of maybe off. the are calculation when think you more any number of say flow, there the that, of won't that working ultimate April as certain just that the but sheet would cash other be only that is in balance I So nothing a figured or on be There's little and in all components until there's I dramatically out XXth earnings on called and probably free items

and step of just the - terms question, in please second and jump take back In just your let Mark me here. a

you have some strong So, approach in the the of generally, pet, of finishes if prudent with rest had taken we through of the consider feel guidance our that just fiscal, thought I the of think premium to competitive forecasting in year. terms for a that we where have will last particularly de-risking activity, we some

don't earnings have as on we anything expect expect and That growth a expected so. different QX through get ability commented of do but year, we more beginning we that albeit slightly and would to our recognized a think we bit might that that, as QX in to to the down fast feel being there's in I of as not originally appropriately I dramatically challenge be be would do

our almost have know, help is you the management alleviate to we that of our incurred softness that, cost our protect line intent stand that ability good that now, of parlays into of right and guidance. sort think said I two quarters in we've as the program, some about And, where to the how and pretty our as guidance. earnings continue to that last quarter, now, hit top we we on help estimate feel

Mark Smucker

add with down, reconciling steps the I we this that providing forecast We're guess, businesses us, into comment leaders, appropriate not in spoke only visibility in visibility. the as making the a appropriate forecasting operational manner but with we're individual on the which and level taking Mark of that the financial just to senior prudent is, are not pleased better reflection one and of sure guide comment although making of I that would we're forecasting our Yes, would earlier. I is also derisking sure and terms the

Operator

comes of state question Laurent Please question. from your next Grandet Our Guggenheim.

Laurent Grandet

I'd new on like first to my the organization. focus question

you. And COO So, please the the exact be split yours as could do would please? that I and in reason see, role are sales you process thinking comment of - you what you appointed where role where I mean, fill you're leaders? and Pet well the when why also, on power are you as and new you mean, new as can Thank US are this food in the

Mark Belgya

Thank Laurent. Sure, question. you for the

as business. but I terms basis, also feel need just across really this spend but well the success, operate I making results businesses did matters for answer on to needs I my and organization Officer for that I the delivering obviously prepared day-to-day will strategic all long a help to remarks, The on will help the time the a more to term. So, do Chief which Operating remain of right for obviously businesses little and on the today, building obviously choices in strategic in and really of focus making decisions the the

today. we I the about good place feel in team very have that

and the quite level. everybody priorities, that making aligned I COO on decision help frankly strategic is specific think very business will execution as just and at much think I the

Laurent Grandet

the in terms in well of for timing process - on terms as two of roles? role, the as and And other this

Mark Belgya

We've those those those time. in we're take begun those things Well, It's can are and a the when them, - actually underway. roles, search to for will we search. say for hard fill

right the culture. that can. experience, to want level of right moving also both fast the developing level But of and has operating terms of people in sure make appropriate the but we we are as leadership that as right individual - we We experience the find

on timeframe, and as moving a to commit say won't we I it we're as So suffice it we're but quickly to can.

Laurent Grandet

more Pet food. it's the on question more One

to I million prepared during you $XX in label is you also mean, are loss the is just more your you label be about move and going mean, And a in remarks, lost you think So, about in sales. you mentioned could we $XX of big these planning that? call, mentioned, away million it it the business that private private from third how Thank forward? should How much. I business very quarter.

Mark Belgya

or know a strategic where businesses as label engage company, we makes where in we philosophically, generate generally we can So sense profitability. private and only it growth

so most cases, parts decisions that in not generating were were were to the of And exited, conscious those where have return. - those business appropriate we exit the

will how so we areas we be those of label. we a benefit, how engage partnership where where prudent private label do strategically engaged private on in of with abandon is our some customers to - terms there remain Pet we and and It we not So but specific is will in businesses. it, strategic

Operator

next Morningstar. question Scheuneman your comes of Please from question. state Rebecca Our

Rebecca Scheuneman

kind start best So of the leadership process analysis? at you changes with could how you practices if work or talk it that. And and I'd to internal was you hear about kind I industry the like like of about just as process. Did through the look an to the well. across of just more

Mark Smucker

best the to sure. at look did We industry sure. across be Yes, practices

externally did through ongoing very we went external couple process, a even Tucker would evaluation the an actually have a tell search, relationship for thorough a one are We and with outside that with being the partners, using rigorous firm you firm. search process search I do search CFO the we

how to make practices, of sure time And looking each steps role. we filling terms necessary in we and put the are so taking are taking just also to even approach in the in both at wanting talent that making every case, and but best those sure roles looking we at a that are right prudent we're appropriate

Rebecca Scheuneman

the wondering And wondering changes could if about into something that just changes you is, for you're the I some possibly elaborate you're align about of then for entering strategy, my considering. strategy was seem mass, that's to you in mentioned food, Natural and the your drug possible had you're and considering comments be question just would last prepared looking - some considering and are your I'm if at that example, you with Balance everywhere

Mark Smucker

the re-stage. give colors, that pleased about talked sure not a be more - you'll answer, I'm we but is do I what would Sure. can't with I so say you I much previously

and including it really move very whole host is forward I We things exercise. it continue relatively a mean, includes it does with is, to the re-stage a consumer it packaging because is deep time, take alignment, communication, of broad that

be end of think we that - have the is fiscal would the end very what of I year. towards the said re-stage the previously

but But, strategic our on to really review more, like beyond brand, hold through you're a process. suggesting, consider own want that, a broader we of off gone we things we anything that the will include have could communicating internal until

Operator

turn the now conference will I you. back Thank call management to conclude. to

Mark Smucker

would but very be business, you The changes actions, all softness takes are you we that, specific the financial we focus, in away decisive well, performing it I our the that because ultimately we've listening. that whether yield that obviously is our for the taken leadership that that guess they of take all some seen questions, Thank We results. away couple really are everyone hope we to discipline, I premium of investing are business our appreciate many very and are and isolated in categories, winning. starting a where deflation areas dog in have hope to marketplace,

call everybody will that Company all And on of the business to Thank fantastic we course so our you to a the we thank will we do to goal work very And to - to want wish you. employees continue a just for Thanksgiving. have is our and commitment aggregate. commitment in grow happy and their the

Operator

this and now gentlemen, for disconnect. participating have Thank you All call our for all concludes nice Ladies a today. and parties day. conference may

The J. M. Smucker Company (SJM) 22 Nov 192020 Q2 Earnings call transcript