Americans' increasingly picky tastes are affecting not just the bowls on their tables, but those on the floor: Kibbles 'n Bits sales are suffering.
J.M. Smucker Co., which makes pet food in addition to its namesake jams and other products, said Tuesday sales for its U.S. pet food division fell 6 percent as Kibbles 'n Bits was hurt by growing popularity of more-premium brands. The company has conceded that people are looking for pet foods with better ingredients, reflecting trends in what pet owners are feeding themselves.
Kibbles 'n Bits sales posted a double-digit percentage decline for the three months ended July 31, the company said. Meow Mix saw a mid-single digit percentage decline.
That comes even though J.M. Smucker has noted the growth potential for the broader category, with the nation's pet population rising as more millennials and baby boomers adopt pets. The problem is that people are also increasingly looking to feed those cats and dogs food with higher protein levels and simple ingredient lists.
"We're seeing more humanization of pets, and consumers looking at more premium products," Barry Dunaway, president of pet foods and snacks at J.M. Smucker, said during a conference call. He said he believes there's "still a place for our value brands like Kibbles 'n Bits and Gravy Train."
That's even though Kibbles 'n Bits' market share in the dog food category declined to 1.9 percent last year, down from 3 percent in 2011, according to market researcher Euromonitor. Bigger players in the pet food market include Blue Buffalo Pet Products, as well as Mars Inc., which makes Pedigree and Iams, and Nestle, which makes Purina Friskies and Purina Fancy Feast.
During the call with analysts, one noted that Smucker's competitors have adopted natural or grain-free offshoots for their core brands. Dunaway agreed that was "clearly a trend in the mainstream" and that Smucker was looking at ways to enter the "mass premium" segment.
To compete, Smucker acquired Natural Balance early last year and has been expanding its distribution.
One bright spot in pet food trends for Smucker: The surge in people's snacking habits is also apparently prompting them to give their pets more treats, too. Smucker even said earlier this year that retailers are increasingly looking at pet snacks as a new category separate from regular food, and are allocating more space to it. That helped lift sales of Smucker's pet snacks for the latest quarter, including Milk Bone, Pup-Peroni and Canine Carry Outs.
Despite the sales decline, Smucker said the pet food unit's profitability rose as it cuts costs and benefited from lower and marketing commodity costs.
For the quarter, the company's U.S. retail consumer food segment also saw a sales decline as it divested its canned milk business, and lowered prices for brands including Jif peanut butter. Its coffee unit's sales also fell, also reflecting lower prices as commodity costs declined.
J.M. Smucker Co. earned $170 million, or $1.46 per share, for the quarter. Adjusted earnings were $1.86 per share, topping the $1.75 per share Wall Street expected, according to Zacks Investment Research. Total revenue was $1.82 billion, which fell short of the $1.88 billion analysts expected.
For the full year, the company now forecasts comparable sales to be flat to down 1 percent. It previously forecast a 1 percent increase.
Shares of Smucker, based in Orville, Ohio, were down 8 percent at $143.22.