Eric S. Tinoco
Smuckers Case
Strategic Management
1. What is J. M. Smucker Company’s corporate strategy? What common strategy elements are shared
across its brands? Did it make sense for Smuckers to expand its business lineup beyond jams, jellies, and
preserves? Why or why not?
Co-CEO Richard Smucker articulated Smuckers corporate strategy when he said, “Our strategy is to
own and market Number 1 brands, sold in the center of the store, in North America. The real money
in supermarkets is made in the middle of the store, where processed foods and well-known brands
reign supreme.” To accomplish this goal, Smuckers between 2002 and 2008 acquired Jif and Crisco
from P&G, Pillsbury and Hungry Jack from International Multifoods, White Lily Foods Company,
Folgers from P&G and a few others.
Between 2004 and 2006 the company divested Brazilian, Australian, and Canadian businesses that it
considered to have “low strategic priority. The series of acquisitions gave Smucker the number one
brands of coffee, jams and jellies, peanut butter, and cooking oil in North America in 2010.
Yes, expanding its businesses lineup beyond its existing products made sense because Smuckers
management proved to be successful in blending the manufacturing operations of its acquisitions with
the operations of its various business segments.
2. What is your evaluation of Smucker’s business lineup and its acquisitions since 2002? How attractive
is the processed foods industry? How strongly positioned are the company’s brands in each segment of
the industry? What does a 9-cell industry attractiveness/business strength matrix displaying J. M.
Smucker’s business units look like?
Smuckers lineup of businesses and brands exhibit good strategic fit. Smuckers list of acquisitions and
brands reads off like an all star team, Pillsbury, Smuckers, Jif, Folgers, Dunkin Donuts, Hungry Jack,
Crisco. Smuckers has been careful to purchase only well established and successful brands and
focused on leading brand names. Smuckers has decided it is better to acquire already established
brands than to build a new brand from scratch. Smuckers brands are positioned as the leading brands
in many of the processed foods segments in which they compete. Folgers is the leading coffee, Crisco
is the leading cooking oil, Smuckers leads in fruit spreads, Knudsen leads in health and natural
beverages, and Jif leads in peanut butter.
This acqusition strategy allowed the company’s sales to increase from $632 million in 2000 to $4.6
billion in 2010 while its profits over the same 10 year period increased from $36 million to $494
million. Its stock price provided shareholders with a 309% total return between 2000 and 2010.
Folgers brands, such as Folgers, Smuckers Dunkin Donuts, and its various other brands occupy the
number 1 space in each segment of the industry.
3. Does J. M. Smucker’s lineup of businesses and brands exhibit good strategic fit? What value-chain
matchups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see?
Smuckers has been focused on center of the store products and wishes to be number one ineach of
the categories in which it competes. With that strategy as a seller of processed foodsSmuckers has
done well to expand and grow its product lines and increase its presence insupermarkets in North
America. Peanut butter goes hand in hand with jams, cooking oil goeswith baking mixes, Folgers
coffee is a good way to expand from the breakfast table to theworkplace and syrups and topping go
well with pancake and waffle mixes. Value chain matchups which should give Smuckers cost savings
include Peanut butter and oils, Fruit spreads andfruit toppings, syrups and juices, Baking mixes and
frostings with flour and baking ingredients.Smuckers as a food processor can also benefit by giving its
food processing experience to newlyacquired business units and vice versa. Processing techniques,
packaging and shipping savings,consolidation of operations to fewer locations, combined shipments
and storage of products allof these offer savings along with economies of scale which gives Smuckers
bargaining powerwith suppliers and supermarkets.
4. Does Smucker’s lineup of businesses and brands exhibit good financial resource fit? Does it appear
that J. M. Smuckers Company’s businesses are cash hogs or cash cows? What do the company’s cash
flow characteristics disclose about its ability to make new acquisitions or major investments in the
current business lineup?
Smucker has focused on expanding its portfolio of brands, boosting revenues, and being #1 brand in
any given category. Smucker’s market share and sales growth was due mainly to the introduction of
new products and the extension of brands into new categories such as Pillsbury sugar-free cake mixes
and frosting, Smucker’s Orchard’s finest premium fruit preserves, Jif to Go lunchboxes snacks, and
Smucker’s Snack in Waffles. Smuckers also expanded its lineup of coffee brands by entering into a
licensing agreement with Dunkin’ Donuts. Ultimately, Smucker achieved this growth through product
innovation, acquisition, licensing arrangements, marketing support and investment in their supply
chain.
5. What strategic actions should the Smucker family undertake to further improve the company’s
financial and market performance? What resource allocation priorities are needed to best allow for
organic growth? What strategic actions are necessary to better prepare the company for further
consolidation in the retail grocery industry and processed foods industry? Should J. M. Smuckers
undertake restructuring to eliminate certain businesses? Should the company make additional
acquisitions to expand its line of packaged foods? What types of food categories would offer attractive
fits with its current business lineup?
As we have seen, Smucker’s has implemented the right strategy since 2002 in order to expand its
market share and increase revenues. It has utilized market penetration strategies such as increasing
advertising, obtaining better stores or shelf position for their products or innovative distribution
tactics. In addition, the company has been busy utilizing market development strategies to target new
products or services to their existing customers. As a result, in FY 2011, despite the effects of the
economic downturn in the U.S., its revenues were unchanged from the same period in fiscal 2010, but
operating income had grown 5%, and operating profit margin had improved from 17.6% during the
first quarter of fiscal 2010 to 18.7% in the first quarter of fiscal 2011. Smucker’s strong performance
during early 2011 and since 2006 had provided more than $1.3 billion in free cash flow that the
company is planning to use to fund share repurchase plan, additional dividend payments, and new
acquisitions. However, the U.S. Retail consumer Market business unit and U.S. retail Oils and Baking
market declined 4% and 11%, respectively, between the first quarter of fiscal 2010 and 2011. Smucker
should develop growth strategies to improve the market performance of the U.S. Retail Consumer
market business and the U.S. Retail Oils and Banking market, by establishing strategic development
goals to increase market share and revenues. As well as define the reasons of the decline on sales by
identifying target markets, sectors, and niches. Instead of focusing on beating the completion Smukers
should focus on making the competition irrelevant by creating a leap in the value. For example,
Smuckers has just recently leveraged digital media across social networks like Facebook, Twitter and
Pinterest, and even launched a mobile e-commerce site. All of these efforts have been a smart way to
target important demographic groups, especially younger consumers.
In the past year, the company has worked to expand its brands by launching 70 new items including
new K-Cups and Smucker’s Natural Foods. Though, competing in existing market space, with existing
customers, only makes competition more challenging. However, to increase profit and value on the
organic products, Smuckers should focus on the economies of scales and bargaining power by
identifying the market share of preference, share of voice, and distribution. In a similar way, what
parts of the organic business could be more efficiently and effectively or what market share variables
of the marketing mix can change or increase.
In addition, Smucker should acquire additional acquisitions to expand its line of package foods to
increase value, market share and profits. In August 22, 2013, Smuckers acquired an important
acquisition of Enray, Inc. This acquisition would provide added scale for the company’s existing
natural foods business by adding an on trend line of organic. Enray, Inc. is a manufacturer and
marketer of premium organic, gluten free ancient grain products, including sprouted and nonsprouted grains, pasta, and cookies. Smuckers believes that this is a great growth potential and
opportunity for distribution. As a result, Smucker’s supply chain and innovation now has a larger go-to
market organization in the natural channel.