Sales Volume
Consumer Distribution Channel -9.2%
This sales volume decrease was driven by a 16.0% reduction in bars volume, mainly due to reduced sales to a mass merchandising retailer following an increase in bar sales due to a national brand recall in the same quarter of the previous year. Our strategic decision to reduce sales to a grocery store retailer and lost distribution at another grocery retailer further contributed to the decline in bars volume. Additionally, decreases in sales of almonds, snack nuts and trail mix caused by increased retail prices and the discontinuation of peanut butter at the same mass merchandising retailer contributed to the overall reduction in sales volume. However, these declines were partially mitigated by increased sales of walnuts and pecans at the same retailer, along with new distribution at two grocery store customers.
The sales volume decrease was primarily driven by a 33.8% reduction in Orchard Valley Harvest sales, mainly due to delayed orders from a major customer in the non-food sector.
Commercial Ingredients Distribution Channel -8.3%
This sales volume decrease was mainly driven by decreased sales volume due to competitive pricing pressures and decreased foodservice peanut butter sales.
Contract Packaging Distribution Channel +6.0%
This sales volume increase was driven by the increased granola volume processed at our Lakeville facility. Sales to a new customer and an opportunistic sale to a current customer contributed to the overall increase. These gains were significantly offset by reduced peanut sales volume to a major customer due to soft consumer demand.
Gross Profit
Gross profit increased by $6.7 million to $55.9 million. This increase was primarily due to inventory valuation adjustments that we anticipated, driven by rising commodity input costs, which may not recur next quarter. The inventory valuation adjustment was primarily driven by the transition from a lower-cost to a higher-cost crop year for walnuts and pecans. To a lesser extent, gross profit was also impacted by favorable manufacturing efficiencies. These gains were partially offset by higher commodity acquisition costs for all major tree nuts. Gross profit margin increased to 21.4% of net sales from 18.1% of net sales in the prior comparable quarter, mainly due to the factors mentioned above.
Operating Expenses, net
Gross profit increased by $6.7 million to $55.9 million. This increase was primarily due to inventory valuation adjustments that we anticipated, driven by rising commodity input costs, which may not recur next quarter. The inventory valuation adjustment was primarily driven by the transition from a lower-cost to a higher-cost crop year for walnuts and pecans. To a lesser extent, gross profit was also impacted by favorable manufacturing efficiencies. These gains were partially offset by higher commodity acquisition costs for all major tree nuts. Gross profit margin increased to 21.4% of net sales from 18.1% of net sales in the prior comparable quarter, mainly due to the factors mentioned above.
Inventory
The value of total inventories on hand at the end of the current third quarter increased $47.1 million, or 22.4%. The increase was primarily due to higher quantities and costs of finished goods, work-in-process and almonds. Additionally, higher commodity acquisition costs for walnuts and pecans contributed to the overall increase. The weighted average cost per pound of raw nut and dried fruit input stock on hand increased 33.9% year over year mainly due to higher acquisition costs for almost all tree nuts.
* Includes Fisher recipe nuts, Fisher snack nuts, Orchard Valley Harvest and Southern Style Nuts.
