Past successes boost confidence at Smucker
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BOSTON — The J.M. Smucker Co. will increase focus and resources to a few key areas over the next several years: expanding in single-serve coffee, accelerating growth of the Smucker’s and Jif brands, and building up the company’s presence in frozen handheld.
“Expected avenues to achieve these objectives include growing our brands and categories in which we currently participate, extending our brands into new categories and ultimately achieving this growth through product innovation, acquisition, licensing arrangements, marketing support and investment in our supply chain,” Vince Byrd, president and chief operating officer of the Orrville, Ohio-based company, said during a Sept. 3 presentation at the Barclays Back to School Conference in Boston. “Our confidence in achieving these growth objectives stems from our past successes along with the current initiatives that are under way.”
Capturing coffee share
In single-serve coffee, Smucker has centered on the fast-growing K-Cup category, which now represents about 26% of the $8 billion at-home coffee category, up from about 6% as recently as 2011. Mr. Byrd said Smucker has strengthened its relationship with Green Mountain Coffee Roasters since becoming the company’s first nationally branded partner back in 2010.
“In three years, K-Cups have grown to represent 12% of our U.S. retail coffee sales, and we have contributed to the success in growing the overall Keurig system,” he said. “In 2013, K-Cups added nearly $290 million to our top line, accounting for roughly half of the total company new product sales. While growth rates are moderating, given the increased competition in the segment, we anticipate our K-Cup sales to grow approximately 15% this fiscal year and remain pleased with our positioning.”
Mr. Byrd said expanding the product line has supported growth in single-serve coffee. With the recent introduction of two new varieties, Smucker now markets 12 K-Cups in the United States and 8 in Canada.
New avenues for Smucker, Jif
Turning to the company’s Smucker and Jif brands, Mr. Byrd said the latter’s growth has been spurred by the introduction of Jif Natural and Jif To Go. He said Jif Natural continues to be one of the company’s fastest-growing product lines with 2013 volume increasing nearly 30%. The brand now holds a 22% share of the natural peanut butter segment, and when the brand is combined with the company’s other natural peanut butter brands, Smucker now holds nearly a 50% share of the natural segment, Mr. Byrd explained.
“Jif Natural has driven our overall category growth and helped solidify our leadership in peanut butter,” he said. “Jif To Go has delivered on our objective of providing convenience. While currently smaller in scale, new flavors and dedicated marketing support have resulted in volume growth of nearly 60% this past year and the product has great upside.”
Smucker also has benefitted from taking the Jif brand beyond peanut butter. The company followed the launch of two Jif hazelnut spreads in May 2012 by introducing Jif almond and cashew butter spreads this summer. To ensure an efficient supply chain, the company plans to invest approximately $30 million to $40 million over the remainder of the current fiscal year to expand its manufacturing footprint, Mr. Byrd said.
“Overall, we are very optimistic about the potential growth of Jif,” he said. “Our teams will continue to innovate around new flavors, forms and packaging while also seeking new platforms, all part of the plan to build Jif into a billion-dollar brand.”
Mr. Byrd said the company has a similar strategy in place for growing the Smucker’s brand.
“Our Smucker’s brand team is evaluating opportunities to extend the brand into categories beyond food spreads, toppings and syrup,” he said. “In addition, we may seek opportunities to leverage the brand’s equity through cobranding or other licensing opportunities. This summer, we launched a line of Smucker’s natural food spreads. With four flavors, this great tasting, sugar-sweetened product provides another way to further expand our leadership position within the fruit spreads category.”
Uncrustables sales soar
A final focus area for Smucker revolves around the company’s frozen handheld business. With Uncrustables frozen sandwiches having delivered three consecutive quarters of 20% volume growth in retail channels, Mr. Byrd said the business represents “an exciting opportunity for us.”
He said much of Smucker’s focus this fiscal year will center on adding capacity at the company’s Scottsdale, Ky., plant. The company has invested $80 million in the expansion. Once complete, the facility is expected to be able to provide the necessary capacity to deliver on current growth plans, which include new flavors and varieties, he said. The expansion also will allow Smucker to pursue channels beyond the current retail and school markets, he added.
“Accelerating Uncrustables sales will go far in achieving our long-term goals for frozen handheld,” Mr. Byrd said. “However, we recognize that acquisitions will also likely be required. This combination of organic growth and acquisition aligns with our overall corporate strategy and is a great way to build the scale we need in the freezer section.”