Freshpet is still working to replenish inventory for its retail customers, following the supply challenges that the Secaucus, New Jersey-based refrigerated pet food maker has faced over the past six months. CEO Billy Cyr told investors during the company’s first quarter of 2021. call for earnings May 3.
“Freshpet Kitchens are delivering the increases in production we expected and are now producing at a rate that is almost 50% higher than a year ago,” said Cyr. “This allows us to replenish the commercial inventory that we had taken in the second half of 2020 and to satisfy our customers and consumers with much better stock conditions.
“We haven’t finished stocking all SKUs for all customers, but we’re getting closer,” he added.
In February, Cyr cited “booming demand” and a labor shortage in the fourth quarter due to COVID-19 testing and shelter-in-place orders as the reasons for the shortage.
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During the call for results, Cyr said the company has beefed up staff in its manufacturing facilities and kitchens.
“We have increased our night shift salaries and recruited a flexible pool of talent both to isolate ourselves from any new COVID-related absenteeism and to further expand our capabilities,” he said. “COVID still exists in the Lehigh Valley [Pennsylvania] community where the kitchens are located, so we continue to bear some costs related to COVID. We expect this to end in the third quarter, as our entire team became eligible for vaccines on March 31, and we have strongly encouraged them to get vaccinated if they can. “
Two large winter snowstorms also contributed to Freshpet’s food shortages, Heather Pomerantz, chief financial officer, said during the earnings call.
“We lost approximately $ 3.5 million in production due to the two major snowstorms that occurred during the quarter,” Pomerantz said. “While winter snowstorms shouldn’t come as a surprise to anyone, these storms had a disproportionate impact on us due to the magnitude of the storms where we have production facilities, the fact that we did not have excess capacity and that neither we nor our customers had inventory to cushion the impact. “
Freshpet’s Q1 2021 Net sales increased 33.3 percent to $ 93.4 million from $ 70.1 million for the first quarter of 2020. Net sales for the first quarter of 2021 were driven by velocity, distribution gains and innovation.
Growth in the quarter continued to be driven by strong performance in the specialty pet chain, with large-area specialty pet consumption as measured by Nielsen up 43% in the quarter. Pomerantz said. “Our e-commerce business also performed well, growing 156% in the quarter and now represents 6.3% of sales.”
The company’s first quarter stockouts showed the company and its retail partners that the brand has become “a very important destination for pet parents,” Cyr said.
“When a store runs out of stock on Freshpet, consumers are ready to go to a second or third store to find the product, and they call us to ask where they can find it,” Cyr said. “Freshpet is really very important to our parents and their pets. And our business partners have noticed. “
Retailers are looking to expand their fresh assortments with two refrigerator locations, Cyr said.
“Before installing new refrigerators, we need to be able to supply them. It doesn’t make sense to put a lot of new refrigerators in stores if we can’t supply the refrigerators we already have, ”he said. “Due to the stockouts we experienced in the first quarter, in cooperation with our customers, we have postponed most of the new refrigerator locations in stores until later this year, early next year, when our capacity could support them. ”
The company plans to start new placements throughout this year, most of which will take place in the fourth quarter in the first half of 2022, Cyr said, adding that the brand will have the ability to support its clients who wish to expand in such a way. aggressively their Freshpet assortments. time.
“With rapidly improving retail conditions and increased capacity in place to support strong growth, we are able to deliver on our 2021 forecast and remain optimistic about our 2025 ‘Feeding Growth’ targets for 11 million homes. , $ 1.25 billion in net sales and 25 percent adjusted EBITDA margin, ”said Cyr. “We are changing the way people feed their animals forever.”
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