NEW YORK — A new facility is expected to benefit Hill’s Pet Nutrition by 2024, specifically supporting innovation in wet pet food under its Science Diet and Prescription Diet brands, despite expectations of continued inflation for cost of raw and packaging material in the coming year.
Parent company Colgate-Palmolive on January 26 shared its fourth-quarter and full-year results for the three- and 12-month periods ended December 31, 2023, along with its recent performance and future plans for the pet nutrition.
Net sales for Hill’s Pet Nutrition in the fourth quarter were $1.11 billion, up 5.1% from $1.06 billion in the fourth quarter of fiscal 2022. Fourth quarter operating income was $231 million for the segment , down slightly from $233 million in fiscal 2022.
Organic sales increased 4.5%, pricing increased 8.5%, and organic volume decreased 4% in the quarter. Volume declines in the fourth quarter were impacted by lower private label pet food volumes, the company explained.
For the full year, Hill’s Pet Nutrition reported net sales of $4.29 billion, up 15.5% from $3.71 billion in fiscal 2022. Operating income was $806 million, down 5.2% from $850 million year-over-year . Organic sales for the segment increased 10.5% for fiscal 2023, price increased 11%, and organic volume decreased 0.5% or flat.
Operating income for Hill’s Pet Nutrition segment represented 20.7% of net sales in the fourth quarter, down 130 basis points year over year.
“While the pet food category has slowed, we are still gaining share in the pet specialty channel behind the strength of our science-driven portfolio and our investment behind brand development, with an increase in advertising spending on the Hill by more than 100 basis points on a percentage-to-sales basis for the fourth quarter and year,” the company shared.
According to Colgate-Palmolive, Hill’s Pet Nutrition accounts for 23% of the company’s total sales. Sales growth was largely led by business in the United States and Europe. The company continued to be impacted by high costs for raw and packaging materials, which in part contributed to the decline in operating income as a percentage of net sales, the company said.
In 2024, the company expects commodity prices to rise in the last six months of the year.
Start-up costs associated with the company’s new manufacturing facility in Tonganoxie, Kan., as well as increased advertising investment, also contributed to the decline in operating income.
“With the opening of our Tonganoxie plant last year, we have significant changes planned for our Science Diet and Prescription Diet wet food portfolios,” the company shared. “Our enhanced science-based offering includes alternative forms and packages such as stews, mousses, pouches and multi-packs that have gained additional shelf space in the pet specialty channel.”
Overall, Colgate-Palmolive reported net and organic sales growth of 7.0% in the fourth quarter and 8.5% in the full fiscal year 2023.
“Over the past two years, we have been particularly focused on maintaining our strong organic sales growth, while rebuilding our margins and improving our cash flow performance,” said Noel Wallace, chairman, chief executive officer and president of Colgate-Palmolive, on the company’s fourth-quarter and full-year earnings call on Jan. 26. “We hit all three of those goals this year while still investing behind advertising to strengthen our brands and building and scaling capabilities to deliver future growth.”
Based on its performance in fiscal 2023, the company shared guidance for the full year 2024, including net sales growth between 1% and 4%, and organic sales growth between 3% and 5%.
Read more recent news from Hill’s Pet Nutrition here.
