Simply Good Foods increases prices to cover rising ingredients costs - Supply Chain Dive

Dive Brief:

• The Simply Good Foods Company has covered about 75% of its exposure to rising ingredient costs over the next year by raising prices and taking other actions, CFO Todd Cunfer said on a Q1 earnings call.
• The seller of Atkins and Quest Nutrition products has faced inflation "from the high single digits to the low double digits for our total business," Cunfer said. Raw materials, packaging and logistics costs continue to rise, leading the company to anticipate "significant supply chain inflation" through FY2022.
• President and CEO Joe Scalzo said the company is considering "all options available to us to protect our cost structure, including further pricing action" as supply chain cost inflation lingers into FY2023. Further expansion through M&A is on the table.

Dive Insight:

Commodities costs soared last year, prompting food producers to scramble to cover their margins.

The FAO Food Price Index, which measures monthly changes in international food commodities prices, reached a 10-year high in 2021. The index dipped slightly in December, but still finished the year up 28.1% YoY, FAO said.

Food prices have not been this high since 2011

The FAO Food Price Index reached a 10-year high in 2021.

"Pricing and cost savings programs are in place to help offset these costs," Cunfer said.

Market conditions are leading the company to evaluate M&A opportunities with "consumer brands that are complementary to our portfolio," Scalzo said. "Those are out there, and you just … have to chase them to see if you can get a business at a decent value."

That search is occuring in a "pretty busy environment with a lot of opportunity," Scalzo said. "Sellers have frothy expectations and buyers need to be aware."

Simply Good Foods wants to identify candidates of decent size with a clear consumer target and explore "our ability to more effectively market that brand to that consumer target in order to grow it," the CEO said.

It's not alone in looking to buy during a volatile time. Dole, which merged with Ireland-based Total Produce last year to create the world's largest fresh produce company, is also exploring acquisitions and other "sourcing efficiencies" to expand its offerings.

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