Challenges, opportunities abound in Uncrustables business
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ORRVILLE, OHIO — Even as the company’s Uncrustables business accounted for more than one half of the year-over-year decline in one segment and smaller losses in another, executives at J.M. Smucker Co. are bullish on the long-term profitability of the frozen sandwiches, which were introduced in 1998.
Uncrustables enjoyed 25% volume and net sales growth in the retail sector during the second quarter ended Oct. 31, versus the same period in 2013.
Commenting in a Nov. 20 conference call with analysts to discuss second-quarter earnings, Vince Byrd, president and chief operating officer, said retail Uncrustables sales did not fully absorb the loss volume associated with Smucker’s decision to exit the U.S. Department of Agriculture’s commodity peanut butter program for schools.
“The profit impact resulting from the net decline in Uncrustables volume along with start-up costs associated with the new bakery at our Scottsville (Ky.) facility caused the overall Uncrustables business to negatively impact the company’s results for the quarter,” Mr. Byrd said. “Uncrustables accounted for more than one-half of the year-over-year decline in the segment profit for the International, Foodservice and Natural Foods segment, while also contributing slightly to the decline in the Consumer Foods segment.”
But Mr. Byrd said Smucker anticipates continued growth for Uncrustables in retail channels, and, as a result, the company’s cost structure is expected to improve.
“We remain confident in the long-term profitability of our Uncrustables business,” he said. “As you know, we continued to invest in the capacity of our Scottsville facility, including the new bakery, which will support the expected growth for this product line.”
Paul Smucker Wagstaff, president of U.S. Retail Consumer Foods, added that by exiting the school business Smucker now has the capacity to “really push out on that business on the retail side.”
“We are now in the position to be able to really push that product going for it,” he said. “Will we see 25% growth rate? I’m not sure about that, but we will definitely see likely double-digit growth going forward.”