The J. M. Smucker Company gets its bread and butter from more than just making and marketing jelly. The company, known for manufacturing its namesake Smucker's fruit spread and for selling the Jif peanut butter brand, has expanded its product 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 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 operates in the US, where it generates more than 90% of its revenue. 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 company has a principal distribution center in Canada, Nine sales and administrative offices in the US, and one each in China, Canada, and Mexico. Its corporate headquarters are located in Orrville, Ohio, and its Canadian headquarters are located in Markham, Ontario. The headquarters of its pet food business is in San Francisco; it has additional administrative facilities in Pittsburgh, Pennsylvania, and in Burbank, California.
Smucker's operations are divided among three business segments: US Retail Coffee, US Retail Pet Foods, and US Retail Consumer Foods. The US retail market segments are distinguished by product, which combined account for more than 85% of the company's sales. (Consumer Foods and Coffee each contributed 29% of revenues in fiscal 2016.)
The International and Foodservice segment (13% of sales) 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 food service suppliers and operators, such as restaurants, educational and health care institutions, and natural foods stores.
After acquiring Big Heart, Smucker established its newest segment, US Retail Pet Foods. That unit contributed 29% of revenues in 2016.
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 Keurig Green Mountain and Keurig. Smucker also totes royalty-free licensing agreements with General Mills, National Dairy, and Nestlé to make and sell, respectively, Pillsbury flour and baking mixes, Borden canned milk, and Carnation canned milk.
Sales and Marketing
Products are sold through direct sales and brokers to a broad range of retailers. Wal-Mart and subsidiaries account for more than 30% of sales. Indeed, the company's top 10 customers generates some 70% of Smucker's 2016 revenues. The company's International and Foodservice business distributes Smucker's products through retailers and food service suppliers and operators both domestically and internationally.
In the US retail market segments, the company's products are primarily sold through direct sales and brokers to food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, military commissaries, natural foods stores and distributors, and pet specialty stores. Its International and Foodservice products are distributed through retail channels and foodservice distributors and operators (e.g., restaurants, lodging, schools and universities, health care operators).
In fiscal 2016 Smucker's net sales increased by 37% due to higher sales from US Retail Pet foods driven by distribution gains for the Natural Balance brand and growth in Milk-Bone dog snacks.
Net income grew by 100% due to increased sales.
In fiscal 2016 the company's net cash provided by the operating activities increased by 99%.
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. 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. Products launched in 2015 included Café Bustelo K-Cup pods and Jif To Go Dippers; pipeline products range from Dunkin' Donuts K-Cup pods to Milk-Bone Good Morning dog vitamin treats.
In response to ongoing declines in the green coffee futures market, Smucker lowered the prices of most of its US packaged coffee products (with the exception of its K-Cup pods) in 2015. It slashed prices by an average of 6%; the move was intended to bring coffee sales volumes back up.
With the 2015 acquisition of Big Heart Pet Brands, the company instantly became a player in the growing pet food and snacks market. The company plans to pay down debt it took to finance that purchase over the next three to five years.
That year, the company sold its US canned milk brands and operations to Eagle Family Foods, a subsidiary of funds affiliated with Kelso & Company. The transaction included canned milk products that were primarily sold in US retail and food service channels under the Eagle Brand and Magnolia brands, along with other branded and private label trade names.
Mergers and Acquisitions
In early 2015, Smucker purchased Big Heart Pet Brands in a cash and stock transaction valued at $5.8 billion (including $2.6 billion of debt). Smucker gained a huge product portfolio with the deal, adding such notable names as Mew Mix, Milk-Bone, Kibbles 'n Bits, Natural Balance, and Milo's Kitchen, among others, to its own list of brands.
In 2014, the company bought Sahale Snacks, a maker of nut and fruit mixes. The Seattle-based company rings up an estimated $50 million in annual sales from warehouse clubs, convenience stores, and supermarkets. In 2013, Smucker purchased privately held $45 million-in-sales Enray to strengthen its natural foods business. Enray, which is based in California, is a supplier of organic grains, beans, and seeds.