The J. M. Smucker Company gets its bread and butter from more than just making and marketing jelly. The company's known for manufacturing its namesake Smucker's fruit spread and for selling the Jif peanut butter brand. But Smucker has expanded its products portfolio to include Folgers, the #1-coffee brand in the US, as well as market leaders in espresso (Café Bustelo) and premium java (Dunkin' Donuts, licensed). Other top-shelf lines are Hungry Jack and Pillsbury baking mixes and frostings, Eagle and Carnation canned milk, and Crisco shortening and oils, among others. Smucker's brands are sold to consumers through retail outlets in the US and Canada, with some products exported.
Smucker's operations are divided among three business segments: US Retail Coffee, US Retail Consumer Foods, and International, Foodservice, and Natural Foods. The US retail market segments are distinguished by product (coffee and foods), which combined accounted for more than 75% of the company's sales. The International, Foodservice, and Natural Foods segment comprises Smucker's portfolio of brands that are distributed both at home and abroad through retailers (grocery stores, mass merchandisers, club stores, and drug stores), as well as through foodservice suppliers and operators, such as restaurants, educational and healthcare institutions, and natural foods stores
Sales and Marketing
Products are sold through direct sales and brokers to a broad range of retailers. Wal-Mart has accounted for about 26% of the company's sales during fiscal years 2013, 2012, and 2011. Indeed, the company's top 10 customers generated some 63% of Smucker's revenue in fiscal 2013. The company's International, Foodservice, and Natural Foods business distributes Smucker's products through retailers and foodservice suppliers and operators both domestically and internationally.
In fiscal 2013 Smucker spent $131.6 million on advertising.
Smucker's operates in the US, where it generates 91% of its revenue, through nearly 20 locations. It has an international presence, as well, through its extended reach into Canada, Mexico, and China. The company has established a small customer base along with some manufacturing facilities in Canada, and a limited export market.
The incremental impact of buying Sara Lee's foodservice business and a favorable sales mix helped Smucker post 7% rises in its fiscal 2013 sales, from $5.5 billion in 2012 to $5.9 billion in 2013. Volume growth in its coffee brands, include K-Cups, provided Smucker with a favorable sales mix. Net price realization was 1% lower during the same reporting period, as the impact of coffee price declines taken in fiscal 2013 and 2012 more than offset the net impact of pricing actions taken on peanut butter.
As part of the company’s long-term growth objectives, it is working to increase sales by 6% and earnings per share by more than 8% annually on average. While the sales contribution from acquisitions will vary from year to year, it expects organic growth, including new products, to add up to 4% per year and acquisitions to contribute the remainder over the long term.
It's also consolidating plants nationwide and trading jelly production for peanut production at another facility as part of a restructuring initiative. Through 2013, the initiative delivered almost two-thirds of the $70 million in annual savings originally estimated. Smucker is working to realize the remainder of the savings by the end of 2015.
Mergers and Acquisitions
Smucker's strategy focuses on growth through owning and marketing the #1 brand name food products in North America, with potential for worldwide appeal. Acquisitions and manufacturing and distribution agreements underpin these ends. Spying a rise in premium coffee consumption, in 2008 the company rocketed to the top tier of US coffee purveyors with its purchase of The Folger Coffee Company from Procter & Gamble. The $3.7 billion deal gave Smucker operations in Cincinnati, New Orleans, Kansas City, and Sherman, Texas, as well as some 1,250 employees. The Folger's deal also catapulted coffee products to Smucker's largest business segment, generating more than 48% of 2013 sales vs. 25% in 2009. Following the deal for Folger, Smucker took over Rowland Coffee Roasters, owner of the leading Hispanic brands Café Bustelo and Café Pilon, for $360 million in 2011. Smucker also purchased Sara Lee's North American Foodservice coffee and tea operations in 2012 for $420.6 million. As part of the deal, the two companies have a licensing agreement in which Sara Lee will receive $50 million over 10 years. Smucker's long-term agreements include one with Dunkin' Donuts to manufacture and market its namesake coffee brand; the pact is effective until 2034. In the single-serve coffee market, Smucker holds sway through a manufacturing and distribution deal with Green Mountain Coffee Roasters and Keurig. Smucker also totes royalty-free licensing agreements with General Mills, National Dairy Holdings, and Nestlé to make and sell, respectively, Pillsbury flour and baking mixes, Borden canned milk, and Carnation canned milk.
Seeking a sustained and significant presence in China, Smucker in 2012 acquired a 25% interest in Guilin Seamild Biologic Technology Development Co. Seamild, as it's known, is a family-owned manufacturer and seller of oatmeal based in Guangxi province. Smucker paid about $35.9 million for its interest in Seamild, which is anticipated to provide a window on Chinese consumers and best marketing practices.