Bloomberg TalksJM Smucker Co President and CEO Mark Smucker speaks on his company's portfolio outlook and retail expectations with Bloomberg's Guy Johnson and Alix Steel.
Let's look more about a company that makes spreadable marshmallows, amongst so many other things. James CEO Marx Swucker joins us now. Mark, great to see you, Thanks for taking the time. Look, Simone's just kind of laid out what is happening here. What would you add to that. What trends do you think are showing up in your numbers, showing up in your results. That tell us about what is happening with the consumer and the trends that we need to be watching for.
You know, the consumer. There are some consumers out there that are seeking value right because there has been you know, a fair amount of inflation. Our portfolio specifically is performing exceptionally well. We've got almost eighty percent of our brands are growing or maintaining share, and a volume perspective that's closer to eighty seven percent, So our base business is very strong. We've seen good performance in coffee, great performance in our Incrustable's business that's the frozen PB and Jay sandwiches, and then our pet snacks and cat food are also performing very well, mid single to low double digits, so great performance. Consumers continue to look for value. We play in all segments in our categories from value to premium. So our portfolio is performing very well.
Hey, Mark, any consumer trends that you've noticed in terms of where do you have less pricing ability and where are sales a little weaker?
Now, Yeah, we have actually taken price increases over the last you call it eighteen months, but in the last six months there hasn't been a lot of movement. In fact, our coffee pricing has come down. We've seen the commodity come down, and therefore we have actually passed a long price declines to the consumer. And so we're seeing again making sure that our portfolio meets the needs of the consumer all the way from value to premium, and it's been working.
So Mark, if that continues, if input costs continue to be reduced, would you expect therefore disinflation prices? I think less slowly to turn to deflation. Eye price is actually falling.
I think it's too early to say that broadly, and it's hard, you know, as a I'm not an economist, so I don't have a crystal ball. But what we really need to focus on as a company is making sure that as we pass along pricing that we're judicious and prudent and that we're only a passing along what is justified. And again, we haven't seen a lot of change in pricing other than coffee pricing giving us a little bit of relief in these last couple quarters.
So currently it's maybe not going up more. Is maybe our takeaway from you. Let's go to the AZEMPIC story of a GOV story, the weight loss drug story. You've said you're not seeing an impact yet. Where are you looking to potentially see an impact?
You know, we watched this very carefully. You know, we just acquired Hostess. We play across multiple snacking categories consumers because we're very focused on what they need. We have a very robust insights team and we study this all the time. We see that consumers continue to snack multiple occasions per day. Sometimes that might be a sweet coffee beverage in the afternoon, other times it might be a sweet bag good. So even in our portfolio, whether that's encrustables or our Hostess products, we are making sure that we're offering options like individually individual portions, bite size options, making sure that we're innovating and that as we listen to consumers, the products that we bring out are meeting those needs of the consumer as they evolve.
Mark, I want to talk more about Hostess in just a moment, but just sticking with this theme of the of snacking on people's behavior, how much of this is pandemic behavior that is stuck.
Well, you know a lot of folks have remained eating at home. They eat at home more than they have If you think about coffee occasions, seventy percent of cups of coffee consumed are still consumed at home. So although consumers have returned to eating out, and there are definitely some trends in that direction, consumers continue to consume products at home, even the coffee that they used to drink out. They're trying to make those beverages at home because it's more affordable in many cases.
So going to host us for a moment for those who don't know Twinkies host Us cupcakes. There are concerns on the market about the increased debt level that you had to take on in order to pay for that. What are some of your plans and timelines to reduce that leverage.
So the price that we paid, you know, is generally in line with market valuations, and so we're really excited about this brand. You know, we are going to focus on debt pay down. We would like to get back to about three times leverage over the next two to three years. We're very confident in this portfolio continuing to generate cash and shareholder value, so we don't see that being an issue and it will allow us to de lever quickly and ultimately, you know, obviously continue to pay dividends and ultimately we'll get back to some share repurchases.
Mark, how are you thinking about how the brands fit together as well? Is there any cannibalization Probably a poor choice of words here in terms of kind of how the brands fit together, one peanut butter versus another pedu like, et cetera, et cetera. How's it working in terms of managing the integration of that Hostess acquisition.
Yeah, we're not seeing a lot of cannibalization. You know, even if you think about peanut butter and jelly and folks are moving to a convenient form of that. In terms of uncrustables, there's any given moment, a consumer might be choosing a PB and J sandwich, but in another moment they may choose a Hostess product just like you have. So we have not seen any significant cannibalization and we continue to focus on the different occasions or parts of the day where consumers are going to reach for these products.
In terms of the merger, again with Hosts, to go back for just a moment, is there anything that you're considering spinning off or selling or divest as you've started to take this next step in the business.
You know, as you may have seen, we have been on a very significant portfolio reshape journally journey, which is why our portfolio is very focused right now, and in aggregate, we continue to grow. You know, we recently divested our dog food business, We divested our pickle business in Canada, and we recently divested our snack nests business, which is a very small business, and prior to that, divested things like our Crisco oils business. So all of that was in service of focus and making sure that our portfolio is totally optimized for growth, and it has paid dividends because we've grown in basically fourteen of the last fourteen quarters.
So nothing else on the divestiture block as of now.
Mark.
We always consider what's in our portfolio, but we're very happy with where our portfolio sits at this point in time.
All Right, Mark, thanks so much.
We appreciate it.
We very much appreciate having you on. Mark Smucker, CEO of Schmucker, adjoining us
