The J.M. Smucker Company:
PEST and Industry Analyses
By: Kati Wilkerson


Incorporated 1912 - Orrville, OH by Jerome M. Smucker
2010 Sales: $4.6 Billion


Industry: Packaged and Processed Goods





80% coming from U.S. Markets
Sector: Consumer Goods
Products: fruit spreads, retail packaged coffee, peanut
butter, shortening and oils, ice cream toppings,
sweetened condensed milk, and health and natural
foods beverages
Acquired U.S. Brands: Crisco, Dunkin’ Donuts, Eagle
Brand, Folgers, Hungry Jack, Jif, Martha White,
Millstone, Pillsbury, Kava, Nature’s Peak, Knott’s Berry
Farm, Santa Cruz Organic, and many more
Acquired Foreign (Canadian) Brands: Bick’s, Double
Fruit, Europe’s Best, Golden Temple, Robin Hood, and
Shirriff
Target Market: Working mothers of the middle class

CEOs: Timothy P. Smucker and Richard K. Smucker

Employs 4,850 full-time employees

Market Share: 17.31%  9/52

Operates in U.S., Canada, and Australia with consumers in 65
countries

Competes in the U.S. Retail Coffee Market, U.S. Retail Consumer
Market, U.S. Retail Oils and Baking Market, and Special Markets

Products sold via direct sales and brokers to food retailers, food
wholesalers, drug stores, club stores, mass merchandisers, discount
and dollar stores, military commissaries, health and natural food
stores, restaurants, schools and universities, and healthcare operators

Key Competitors: ConAgra Foods, Inc.; Kraft Foods, Inc.; Unilever;
Nestle; General Mills, Inc.
U.S. Retail Coffee
19%
37%
20%
U.S. Retail Consumer
U.S. Retail Oils and Baking
24%
Special
Factor
Trend
Evaluation
Impact Rank in
(Threat = T;
Opportunity = O)
(1 = low;
5 = high)
Terms of
Importance
Political
Food safety regulations
NAFTA regulations
Trade Regulations
T/O
O
T
1
2
4
11
10
7
Economical
Volatility in commodity
market prices
Foreign exchange risk
Natural disasters
Union unrest
T
T
T/O
T
4
3
5
4
4
9
2
5
Social
Changes in customer
coffee preference
Transition to healthier
foods
Increasing employment of
women
T/O
4
3
O
5
1
O
3
8
O
3
6
Technological Technological advances in
“going green”
Food
Safety
Regulations
Regulations by
FDA could
increase costs
for R & D
Having natural
products, rules &
regulations
easily met
NAFTA
Regulations
Free trade
between U.S. &
Canada
Easier to
conduct business
with Canadian
brands
Volatility in
Commodity
Market Prices
Increasing costs of raw
materials (farmed
produce & crude oil)
Higher prices
encourage consumers
to buy generic
Foreign
Exchange
Risk
International
operations and assets
in foreign currency
Currency fluctuations
could negatively
impact foreign
investments
Draughts, flooding,
etc.
Cause poor quality
goods, low
production, and
destruction of
produce
32% of employees of
10 facilities are
covered by union
contracts
Results of collective
bargaining, the
financial situation,
the business itself,
and operations
severely affected
Natural
Disasters
Union Unrest:
Strikes & Work
Stoppages
Change in
Consumer
Coffee
Preferences
Coffee represents
significant portion of
sales
Transition to
Healthier
Foods
Opportunity: offers
100% natural foods
Increasing #
of Women in
Work Force
Women are holding
high employment
numbers
Lost market share if
consumers change
preferences
Products are
working-mother
“friendly – save time
for moms on-the-go
Opportunity:
differentiate coffee
brands from
competitors to make
its brands preferred
Technologic
Advances:
“Going Green”
Brands, including
Santa Cruz Organic,
utilize
environmentally
friendly means of
energy
Appeals to consumers
concerned with the
environment
Factor
Evaluation
Intensity of Rivalry
Strong Force
Buyer Power
Strong Force
Supplier Power
Benign
Threat of Substitute Products
Strong Force
Threat of New Entrants
Benign
Industry
Participants
Large
Similar costs
Highly
Committed
Participants
Seek market
leadership
Compete on
same/similar
dimensions
High Entry
& Exit
Barriers
Favorable
Cost
Strategies
New entrants not
likely
Participants
distribute coupons
Exiting industry
requires liquidation
of assets
•Not what participants
want
Vendors have
specials on
participant products
•Determines which brand is
chosen
Factor
Trait of Buyer Power
Number of Buyers
Many
Volume of purchase relative to
size of single vendor
Small
Nature of Vendor’s Product
Standardized or lacking
differentiation
Buyers and switching costs
Low Costs
Threat of backward integration
by vendor
Weak
Buyers recognize strong bargaining power, overall,
thus causing lower profitability in the industry.
Factor
Trait of Supplier Power
Concentration of Industry
Moderate to Fairly High
Dependency on Industry for
Revenues
High
Switching Costs for Industry
Participants
High
Availability of Substitutes
Moderate
Differentiated Products
Low
Ability for Forward Integration
Moderate
Suppliers do not recognize high levels of bargaining power,
giving some level of power to industry participants.
 With
rising costs of raw materials, the prices
of products in the industry are likely to
increase, causing the consumer to:





Do without;
Buy a different, less expensive product that has the
same effect
Buy generic brands; or
Make similar products themselves (this requires
time and resources), which could be the less
attractive alternative to consumers;
Purchase other grocery items in place of those of
industry participants
Nature of Barrier
Extent of Barrier
1. Supply-side economies of scale
High: most companies enjoy large economies of
scale
2. Demand-side benefits of scale
High: consumers recognize the larger brands and
generally purchase based on who the know
3. Capital requirements
High: all major players have invested in several
subsidiaries
4. Incumbency advantages
independent of size
High: major players have claimed their resources,
limiting availability; brands are established and
well-known
5. Customer-switching costs
Moderate: companies switching suppliers could be
severely costly; customers switching brands
wouldn’t prove to be dramatically cost efficient
6. Unequal access to distribution
channels
High: major players have claimed their
distributors, limiting availability for new entrants
7. Restrictive Government Policy
Low: the government’s involvement is low in the
industry, aside from government regulating
agencies
Threat of new entrants is low.

Buyer Power:



Consumer demand is the driver for sales; without
demand, profits will cease
Switching costs are low, having adverse effects on the
industry
Threat of Substitute Products:

Because products in the industry aren’t necessities,
consumers could easily do without or utilize their
resources in other ways


Consumers have the ultimate power in the industry
Intensity of Rivalry:


Industry participants are large and distinguished
Competitors in the industry are fighting for market share
and leadership
 Overall,
the Packaged and Processed Goods
Industry is an industry that does relatively
well, achieving a semi-attractive rating:
Products within the industry will always be in
demand
 Buyers have significant power, posing a threat to the
industry
 Rivalry intensity is contingent on consumer
preference for product, price, and availability

 While
new entrants are unlikely, participant
growth and expansion are highly likely, posing
an opportunity for industry participants




Aim to differentiate products to reduce buyer power,
and increase power in the industry
Substitutes are difficult to avoid, so participants
should attempt to emerge into other markets to
increase ability to reduce the threat of substitutes by
gaining “substitute market share”
Continue to transition products into healthier options
for consumers
In the event of natural disasters, have a fall-back
plan


In the event of indirect natural disasters, make products
readily available to the affected region
Differentiate products to better suit consumer
preferences
 Consider
other alternatives to cutting costs
to combat increasing commodity prices
 Keep in mind the rules and regulations of the
FDA when performing R&D of new and
existing products
 Perform focus groups to determine customer
preferences

Determine “what women want” in terms of
products for their families
 Continue
making transitions to “going green”
The J.M. Smucker Company:
Competitor and Market Analyses
 ConAgra
Foods, Inc.
 Kraft Foods, Inc.
 Unilever
 Nestlé
 General Mills, Inc.
Competitor
Location
Market Segments
Competing Brands
Smucker’s
Strong presence in
North America,
competing globally
U.S. retail coffee;
U.S. retail consumer; U.S. retail oils
& baking; & Special
Crisco, Dunkin’ Donuts, Eagle
Brand, Folgers, Hungry Jack,
Jif, Martha White, Millstone,
Pillsbury, Kava, Nature’s Peak,
Robin Hood
ConAgra
World-wide
presence
Consumer & Commercial Foods
Pam, Fleischmann’s, Blue
Bonnet, Parkay, Peter Pan,
Swiss Miss
Kraft
World-wide
presence
U.S. beverages, cheese, convenient
meals, grocery & snacks; Canada &
N.A. food service; Kraft Europe; &
Kraft developing markets
A1, Capri Sun, Claussen, Crystal
Light, Maxwell House, Gevalia,
Good Seasons, Kool-Aid,
Lunchables, Nabisco, Sure-Jell,
Yuban
Unilever
Global giant
Savoury, dressings and spreads; ice
cream and beverages; personal
care; home care products
Lipton, Blue Band, Rama,
Country Crock, Knorr,
Hellman’s
Nestlé
Global giant
Powdered & liquid beverages;
water; milk products and ice
cream; nutrition; prepared dishes
and cooking aids; confectionary;
pet care; pharmaceutical; Emerging
markets
Nescafe, Thomy,
Carnation, Juicy Juice,
Nestea, Minor’s
U.S. Retail; International; Bakeries
& Foodservice; Emerging &
developing markets
Betty Crocker, Bisquick, Gold
Medal, Jus-Rol, Pillsbury,
Cascadian Farm
General Mills World-wide
presence
Competitor
Net
Income*
Net Sales*
(consumer
goods)
Growth
from
2009 (%)
Full-Time
Employees
Market
Rank
2010
R&D
Expense
(& % of
Sales)
Smucker’s
$494 M
$4.6 B
22.5
4,850
8/52
$21 M
.457%
ConAgra
$745 M
$12.1 B
-2.79
24,400
5/52
$77.9 M
.644%
Kraft
$4.1 B
$14.4 B
7.25
127,000
N/A
$583 M
4.05%
Unilever
$2.6 B
€22.8 M
$32.1 M
8.38
165,000
1/52
N/A
71.1 B
$77.26 B
6.44
281,000
N/A
N/A
$2.74 B
0.67
33,000
3/52
$218 M
7.96%
Nestlé
General
Mills
37.5 B
$40.8 B
CFH
$1.53 B
CFH
* from 2010 annual reports
Smucker's
ConAgra
U.S. Retail
Coffee
19%
37%
20%
24%
U.S. Retail
Consumer
U.S. Retail
Oils &
Baking
Consumer
Foods
34%
66%
Commercial
Foods
Special
Smucker’s experiences most of its
sales in the U.S. coffee retail market
ConAgra experiences most of its sales
in the consumer foods market
Kraft
Unilever
U.S.
beverages,
etc.
28%
24%
39%
Canada &
N.A. food
service
Kraft
Europe
9%
Kraft
developing
markets
Kraft experiences most of its sales in the
U.S. beverages, cheese, convenient
meals, grocery & snacks market
Savoury,
dressings, &
spreads
18%
31%
32%
19%
Ice cream&
beverages
Personal
Care
Home care
products
Unilever experiences most of its sales in
the savoury, dressings, & spreads
market
Netslé
General Mills
Beverages
Water
26%
6%
14%
Nutrition
14%
4%
9%
12%
8%
Milk & ice
cream
Prep'd dishes &
cooking aids
Confectionary
7%
12%
U.S. retail
18%
International
70%
Bakeries &
food service
Pet care
Pharmaceutical
Nestlé experiences most of its sales
in emerging markets
General Mills experiences most of its
sales in the U.S. retail market
Market Share
High
Low
?
Smucker’s
Low
Market Growth
High
$ Cows
Kraft
ConAgra
Unilever
Nestlé
General Mills
Dogs
Market Share
High
Low
?
Nestlé
Low
Market Growth
High
$ Cows
Kraft
Smucker’s
Dogs
General Mills
ConAgra
Unilever
Market Share
High
Low
?
Smucker’s
Unilever
Low
Market Growth
High
$ Cows
ConAgra
General Mills
Kraft
Nestlé
Dogs
Market Share
High
Low
?
Smucker’s
Low
Market Growth
High
$
Cows
General Mills
ConAgra
Unilever
Nestlé
Kraft
Dogs
Market Share
High
Low
?
Smucker’s
Low
Market Growth
High
$
Cows
ConAgra
Nestlé General Mills
Kraft
Unilever
Dogs
Beverages
Ingredients
Spreads
Baking mixes
Juices:
Flour:
Fruits:
Pancake Mix:
- Nestlé
Coffee:
- Smucker’s
Tea:
- General Mills
Evaporated Milk: Mayonnaise:
- Nestlé
Oils:
- Unilever
- Smucker’s
- Smucker’s
- General Mills
Instant Potatoes:
- Unilever
- Smucker’s
Peanut Butter:
Cake, Muffin, etc.
Mix:
- Smucker’s
- Smucker’s
Smucker’s enjoys the leading position within the Spreads and
Baking Mixes strategic business groups, while they also hold the
lead in Coffee and Oils segments.
Competitor
Core Competences
Strategies
Smucker’s
Quality, people, ethics, growth, and
independence
•Own & market food brands that hold
#1 market position in their category
•Expanding portfolio
•Embracing a global perspective
ConAgra
Establishing a demand-driven supply chain;
reducing complexity; achieving plant
optimization; extracting value from SAP
implementation; insight-based approach;
platform innovation; making higher-quality,
and more nutritious food
• Divesting commodity-based and
lower-margin businesses
•Innovate and reduce costs to drive
sales growth
Kraft
Product quality; brand recognition; brand
loyalty; service; marketing; advertising;
price; and performance-driven, values-led
organization
•Growth in developing markets
• Global Snacks powerhouse iconic
heritage brands and culture
Unilever
N/A
N/A
Nestlé
Unmatched product and brand portfolio; R
& D capability; geographic presence; and
people, culture, values, and attitude
•Nutrition, water and rural
development
General Mills
Innovation; brand building; leading
customer growth; international expansion;
and margin expansion
• Brand-building with innovative
merchandising and consumer-based
marketing
- Building global platforms
Factor
Consumer Markets
Characteristics of People
Female; 28-50 years old; middle, to
upper-middle class; at least 2 family
members (one being a child); family in
developing stages; living in urban or
suburban areas; time-sensitive, busy
lifestyles
Purchase / Use Situation
Single purchase; brand loyalty is high;
Use: consumption; Purchasing behavior:
best quality for best price; Importance
of purchase: low; Choice criteria:
nutrition, price, quality, availability
User’s Needs & Preferences
for Product Characteristics
Differentiation from consumer
perspective needed; Price preference:
low; Brand preference based on
environmental concerns, taste, price,
availability, quality
Factor
Industrial / Organizational Markets
Characteristics of
Organizations
Food industry: Restaurants, bakeries, etc.;
Globally based (with large focus in the U.S.);
Large organizations with many locations; No
significant technology; Moderate levels of
profitability
Purchase / Use Situation
Ingredient use - compliment to products;
Importance of purchase: high; High volume
purchases; Weekly – monthly purchases;
Purchase through mass distributors; Choice
criteria: best price/quality based on size of
purchase
User’s Needs & Preferences
for Product Characteristics
Proper consistency; Not much assistance needed
from suppliers; Brand preferences based on
price, quality, availability; Best quality for
lowest price; No service requirements needed –
unless recalls on products
 Brand
Loyalty
 Coupon Availability
 Vendor Relations
 Marketing

Television ads, newspaper articles/ads, social
media (Facebook, Linked-In)
 Acquisitions
and Divestitures
 Economical / Environmental Advances

Smucker’s Key Competitors:





ConAgra Foods, Inc.
Kraft Foods, Inc.
Unilever
Nestlé
General Mills, Inc.
Consumer goods companies have similar
strategies: focusing on innovation and becoming
more prevalent in developing markets
 Competitive Methods: consumer loyalty, coupon
distribution, vendor relations (specials),
marketing, acquisitions and divestitures,
advances in environmental friendliness

 Market
Segmentation: working mothers of
the middle – upper-middle class;
businesses requiring the products within
the industry required for business
performance
 Smucker’s
recognizes market leadership in
the U.S. Retail Coffee Market, U.S. Retail Oils
& Baking Market

Room for growth in Special Markets and overall
market share
The J.M. Smucker Company:
Internal and SWOT Analyses and
Competitive Positioning

Marketing and Manufacturing Company






Prides itself on acquisition of large brands
Focuses products on bringing families together at
mealtime
Driven to make products healthier
Basic Beliefs:






Focused in U.S. markets
Sells its products in over 65 countries
Quality
People
Ethics
Growth
Independence
Hold the belief that building trust and confidence with
constituents in the company, brands, & products
$1,800
Sales:
$1,600
$1,400
U.S. Retail
Coffee
U.S. Retail
Consumer
U.S. Retail Oils
& Baking
Special
$1,200
$1,000
$800
$600
$400
$200
120.00%
$0
2006 2007 2008 2009 2010
Growth:
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
-20.00%
U.S. Retail
Coffee
U.S. Retail
Consumer
U.S. Retail
Oils & Baking
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2006
2007
2008
2009
2010
Division
2009 Sales
2010 Sales
(in Millions)
(in Millions)
U.S. Retail Coffee
$855.6
$1,700.5
U.S. Retail Consumer
$1,103.6
$1,125.3
U.S. Retail Oils & Baking
$995.5
$905.7
Special
$803.6
$873.8
2009 Sales
21%
27%
23%
U.S. Retail Coffee
U.S. Retail Consumer
29%
2010 Sales
U.S. Retail Oils &
Baking
Special
19%
37%
20%
24%
Country
U.S.
Canada
Other
International
(Domestic)
Sales
(in $ Million)
4,167
385.9
52.4
Growth from
2009 (%)
24.3
8.3
8.5
% of Sales
8% 1%
U.S.
Canada
91%
Other
International
 Agriculture



(Raw Materials):
Fruit
Grains
Dairy
 Oil:

Transportation of products
 Foreign

Exchange
Hedge against currency exchange risk
 Diversified

Portfolio of Brands
Folgers, Dunkin’ Donuts, Crisco, Pillsbury, Eagle
Brand, Hungry Jack, Jif, Millstone, Martha White, etc.

Current Assets:
Cash generated from operations ($283,570)
Trade Receivables ($238,867)
 Inventories:





Property, Plant, & Equipment:





Finished Products ($413,269)
Raw Materials ($241,670)
Land ($62,982)
Buildings & Fixtures ($308,358)
Machinery & Equipment ($997,374)
Construction in Progress ($31,426)
Noncurrent Assets:
Goodwill ($2,807,730)
 Intangible Assets ($3,026,515)
 Other ($5,892,910)

18%
55%
Current
27%
Property, Plant, &
Equipment
Noncurrent
Strengths
Weaknesses
• Ownership of industry-leading brands
• Diverse portfolio
• Aggressive acquisition of major brands
• Leader in U.S. markets
• Low market share
• Low global presence
• Smaller scale of operations compared to
competitors
• Target market is too concentrated
Opportunities
Threats
• NAFTA regulations
• Food safety regulations
• Natural disasters
• Changes in consumer preferences
• Transition to healthier foods
• Increasing full-time employment of
women
• Technological advances in “going green”
•
•
•
•
•
•
•
Food safety regulations
Volatility in commodity market prices
Foreign exchange risk
Natural disasters
Union unrest
Changes in consumer preferences
High intensity of rivalry
Market Share
High
?
High
Market Growth
Smucker’s
Low
Low
$ Cows
Dogs
Market Share
High
Low
High
?
Market Growth
Millstone
Eagle Brand
Hungry Jack
Low
Dunkin’ Donuts
Crisco
$Martha
Cows
White
Jif Pillsbury
Folgers
Dogs
Smucker’s key primary activities are its operations,
outbound logistics, and marketing and sales.
Inbound
Logistics
Relationship with
Suppliers
Operations
Transform supplies
into products
Ready products for
consumer
consumption
Outbound
Logistics
Activities for
collecting, storing,
& distributing
Ready products for
product distribution
Marketing
& Sales
Service
Inform consumers
of products,
provide coupons
Consumer
support
Receiving, storing, &
disseminating supplies
Make products more
appealing than
competitors’
Adjusting product
& services based on
consumer’s needs
“The Company’s strategic vision is to own and
market food brands which hold the number
one market position in their category, with
an emphasis on North America while
embracing a global perspective.”
Variety-Based
Needs-Based
Provides variety of flavors of
products
Markets and manufactures products
based on consumer preferences
Provides variety of brands
Making products healthier
Providing products at affordable prices:
issuance of coupons, vendor deals
Broad
Narrow
Competitive Scope
Competitive Advantage
Low Cost
Higher Cost
Overall Cost
Leadership
Differentiation
Low Cost Leadership:
Smucker’s competes by
providing consumers with
low-cost goods, while
providing consumers with
coupons and vendor
specials
Differentiation
Focus
Broad Competitive
Scope: Smucker’s owns
a variety of brands,
providing consumers
with an array of
products
Cost Focus
 Acquire
large house-hold brand names
 Build family moments by providing products
that bring families together at mealtime
 Provide low-cost products for its consumers
 Provide the healthier products consumers
prefer
 Utilize advances in technology in making
products more environmentally friendly
Smucker’s provides
its products to its
consumers at low
costs.
Smucker’s provides
its consumers with
high quality
products
Smucker’s has a low
cost base &
reinvests in its
product quality &
low-cost products

Smucker’s Business Model:
Focused on U.S. markets
 Diverse portfolio of brands
 Products focused on bringing families together at
mealtime
 Driven to make products healthier


Profit over the past 5 years has increased

Its coffee segment has proven to be its most
profitable
Sales are primarily in the U.S., while
international growth is increasing
 Generic and grand strategies focused on the
consumer
