The J. M. Smucker Company (NYSE:SJM) Q2 2023 Earnings Call Transcript

Robert Moskow : Just looking through our Nielsen tracking data, it looked like there was actually a pretty significant slowdown in your single-serve coffee sales. Are you — is that a good reflection of what’s going on? And if so, can you talk about the drivers for it?

Mark Smucker : Sure, Rob. This is Mark. I think when you look at the total coffee category coming back to this notion of ensuring that we’re addressing all of the needs of consumers. We did see a little bit of a shift, as you highlight on K-Cup. We watch consumer behavior very closely. There may have been some folks brewing more drip coffee. We don’t necessarily view that as a sustainable trend. Obviously, brewer penetration in the Keurig brewers has grown significantly over the last several quarters. So we would expect over time that would continue to benefit us. There was a little bit of a deceleration in premium coffee, and that would be across the segment as opposed to our brands specifically. And so, again, price gaps in the premium coffee space have continued to close. And so we would expect over the subsequent quarters to continue to see growth for our Dunkin’ business as well as our single-serve business.

Robert Moskow : Okay. And just a follow-up. You’ve said actually, I think, for several months that you are prepared for an environment where coffee costs fall and you’re taking more steps in advance to prepare for it. Can you be more specific as to maybe something you’re doing differently this time so that the flow-through is more seamless?

Mark Smucker : Well, the first thing that we tried to remind everyone is that we haven’t seen record coffee costs, like we saw a decade or so ago. And so the environment as we’ve managed through it has been — the playbook has remained the same. We continue to execute against those same activities that we always would, whether that’s being very prudent about passing through the pricing, being thinking about promotional activity in a normalized way. So in other words, not out of the ordinary. And then very importantly, and maybe most significantly, continuing to invest in our brands even in a period of inflation. And so just always taking the approach, Rob, of balancing pricing, volume mix and our — the ways in which we support our brands, both with the consumer and customer we’ve got to continue to take a balanced approach, and that has served us well, and we believe that it will continue to do so.

Operator: Our next question today is coming from Chris Growe from Stifel.

Christopher Growe : I just had a question for you first on — a bit of a follow-up on an earlier question on inflation. Is there any nuance to how much inflation you realized in the second quarter? Is that pretty well in line with what you expect for the year? And if I could just add to that, is pricing offsetting cost inflation on a dollar basis in the second quarter? Have you gotten to that point yet?

Tucker Marshall : So Chris, what we would say is, is that the second quarter did have a higher level of inflation primarily due to the impact of green coffee. We, in the green coffee space, recovered on a dollar-for-dollar basis that cost inflation, and we put the predominance of our pricing actions in place prior to the beginning of our fiscal year so that we believe that we are recovering our inflation as we come through the fiscal year.