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'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 account 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 food service 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 and subsidiaries account for more than a quarter of sales. Indeed, the company's top 10 customers generate some 60% of Smucker's revenue. The company's International, Foodservice, and Natural Foods business distributes Smucker's products through retailers and food service suppliers and operators both domestically and internationally.
In fiscal 2014 Smucker spent about $125 million on advertising, down slightly from $132 million the prior year.
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 saw revenue decrease by about 5% in fiscal 2014 (ended April) to $5.6 billion as all three segments reported sales declines. The results were primarily because of pricing actions taken as a result of lower commodity costs and planned exits from some businesses in the International, Foodservice, and Natural Foods segment.
Net income, however, rose 4% to $565 million as Smucker reported lower restructuring and M&A costs from fiscal 2013. Cash from operations was flat year-over-year as higher net income was offset by an increase in cash to fund working capital.
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.
It's also consolidating plants nationwide and trading jelly production for peanut production at another facility as part of a restructuring initiative. Through 2014, the initiative delivered nearly 75% of the $70 million in annual savings originally estimated. Smucker is working to realize the remainder of the savings by the end of 2015.
Lastly, new product launches are key to the company's growth; since Fiscal 2012 it has introduced some 250 products to the market, which accounted for about $425 million in fiscal 2014 sales.
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 August 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 August 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.
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.