Net sales down for Freshpet in 2021 due to supply chain setbacks

SECAUCUS, NJ – Freshpet, Inc. updated its full-year 2021 net sales and EBITDA guidance to reflect ongoing supply chain challenges that limit the company’s ability to meet growing demand.

Net sales are now expected to be between $425 million and $430 million for the full year, down from a previous forecast of $445 million in net sales. Adjusted EBITDA for 2021 is expected to be approximately $42 million, also lower than the company’s previous forecast of about $50 million.

The company was bullish when it lifted its Q2 2021 net sales guidance to represent a 40% increase over 2020 sales. Now, the company expects a 34% increase over last year’s net sales. Full-year EBIDTA is likely to decline 10% from 2020.

These new estimates indicate a net sales shortfall of $15 million to $20 million, and an $8 million decrease in EBIDTA, compared to the company’s previous full-year forecast for 2021. Freshpet attributed this to bag production loss and production delays, which caused trade Defer inventory replenishment and lost volume contributions throughout the year.

The fresh pet food company shared an investor presentation on December 17 that details several of the supply chain issues it has faced this year and will continue to face through 2022.

“Supply chain issues continue to create new challenges for our business, this time with the provision of parts for key packaging components,” said Billy Sear, CEO of Freshpet. “While we have since resolved this issue, it caused a temporary production drop, which in turn led to a revision of our full-year forecasts that we update today.

“We continue to move forward, encouraged by improving retail conditions and continued demand from our customers – consumption growth is on track with our expectations and household penetration may accelerate – both of which are key metrics supporting our long-term goals. As we look to 2022, we are encouraged by our current capacity run rate. , which shows the progress we are making to establish a broader and more efficient manufacturing footprint.”

In its third-quarter earnings presentation, Freshpet cited several operational setbacks and supply chain disruptions that limited production. These setbacks included downtime for maintenance and facility upgrades, disruptions along the equipment supply chain, labor shortages for Freshpet’s joint manufacturing partner in pet therapy, and the effects of inclement weather.

Component, packaging, labor and shipping inflation also posed challenges in the third quarter that Freshpet expects to continue to bleed into the fourth quarter. The company has shared its adjusted gross margin for the full year 2021 and is now expected to be lower than the 48.3% it reported in 2020. To adjust for this, the company plans to increase product prices by 4.8% at the end of this year and will take into account additional price increases in the first quarter from 2022 if inflated costs continue.

The company has been refilling commercial inventory since earlier this year, refilling nearly $8 million in the second quarter and another $8.5 million in the third. The company said it is on track with capacity products through 2025, which will support the production challenges it faces this year. Freshpet reports that retail availability is improving, and out-of-stock inventory has been on a downward trend since early October 2021. Year-round stock outs have restricted household penetration, but the company reported that household penetration growth is returning to pre-pandemic levels more than weeks ago. past four thanks to distribution improvements and retail availability. The company’s purchase rate also continues to grow, “even though inventory is out of stock.”

By 2025, Freshpet expects to have production capacity to support $1.96 billion in net sales, following the second phase of expansion of its Ennis, Texas facility. The company participated in the Ennis facility on schedule to begin operations in the second quarter of 2022.

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