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Table&of&Contents&
Current'Status'.......................................................................................................................................'3!History'................................................................................................................................................................'3!
Original'Mission'and'vision'..............................................................................................................'3!Vision'Statement'.............................................................................................................................................'3!Mission'Statement'..........................................................................................................................................'4!New'Vission'Statement'..................................................................................................................................'4!New'Mission'Statement'.................................................................................................................................'4!Corporate'Goals'...............................................................................................................................................'5!Marketing'..........................................................................................................................................................'5!Manufacturing'and'Operations'..................................................................................................................'7!Sources'of'Funds'..............................................................................................................................................'8!Allocation'of'Funds'.........................................................................................................................................'8!Cash'Management'...........................................................................................................................................'9!Depreciations'Methods'.................................................................................................................................'9!Dividends'to'Stockholders'...........................................................................................................................'9!Human'Resources'.........................................................................................................................................'10!Research'and'Development'.......................................................................................................................'11!Community'Relations'..................................................................................................................................'11!
Internal'company'appraisals'.........................................................................................................'13!Financial'Performance'................................................................................................................................'13!Financial'Soundness'.....................................................................................................................................'14!
Major'Strengths'and'Attributes'.....................................................................................................'14!Strong'brand'portfolio'................................................................................................................................'14!Strong'organic'growth'.................................................................................................................................'15!
Major'Weaknesses'or'Problems'....................................................................................................'17!Concentrated'customer'base'.....................................................................................................................'17!Small'scale'operations'.................................................................................................................................'17!
External'Environmental'Analysis'.................................................................................................'18!General'Economy'..........................................................................................................................................'18!Industry'and'competition'..........................................................................................................................'18!Growing'food'service'industry'.................................................................................................................'19!Intense'competition'.....................................................................................................................................'19!Social'Trends'..................................................................................................................................................'20!Political'Policies'............................................................................................................................................'21!Natural'Resources'.........................................................................................................................................'22!
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Fluctuations'in'raw'material'prices'........................................................................................................'23!
Strategies'for'the'Future'..................................................................................................................'23!Qualitative'.......................................................................................................................................................'24!Reduction'of'Smucker’s™''carbon'footprint'.........................................................................................'24!Reuse'Reduce'Recycle'.................................................................................................................................'24!Consolidation'..................................................................................................................................................'25!Developing'a'Sweet'Tooth'..........................................................................................................................'25!Cultural'Diversity'..........................................................................................................................................'26!Quantitative'....................................................................................................................................................'27!Cash'Flow'.........................................................................................................................................................'27!Tapping'into'Three'Foreign'Markets'in'Five'Years'...........................................................................'28!Commodities'...................................................................................................................................................'28!
Works'Cited'..........................................................................................................................................'29!
Appendix'...............................................................................................................................................'30!Financials'.........................................................................................................................................................'30!Statement'of'Cash'Flow'...............................................................................................................................'30!1.2'.......................................................................................................................................................................'33!Revenue'vs.'Earnings'...................................................................................................................................'33!Stock'Pricing'...................................................................................................................................................'34!1.3'.......................................................................................................................................................................'34!1.4'.......................................................................................................................................................................'34!Profit'per'Employee'.....................................................................................................................................'34!1.5'.......................................................................................................................................................................'35!Return'on'Equity/'Return'on'Sales'.........................................................................................................'35!1.6'.......................................................................................................................................................................'35!Return'on'Assets'............................................................................................................................................'35!1.7'.......................................................................................................................................................................'36!Revenue'vs.'Net'Income'..............................................................................................................................'36!1.8'.......................................................................................................................................................................'37!Free'Cash'Flow'Components'.....................................................................................................................'37!1.9'.......................................................................................................................................................................'38!Statement'of'Consolidated'Shareholders'Equity'................................................................................'38!1.1.1'...................................................................................................................................................................'39!Competitor'Comparison'Report'...............................................................................................................'39!2.1'.......................................................................................................................................................................'46!Manufacturing'Facilities'.............................................................................................................................'46!3.1'.......................................................................................................................................................................'46!Aerodynamic'Shipping'................................................................................................................................'46!3.2'.......................................................................................................................................................................'47!
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Natural'Gas'Powered'Vehicles'..................................................................................................................'47!3.3'.......................................................................................................................................................................'49!Solar'Energy'for'Manufacturing'...............................................................................................................'49!3.4'.......................................................................................................................................................................'49!Hub'and'Spoke'Distribution'......................................................................................................................'49!4.1'.......................................................................................................................................................................'50!Major'Policies'.................................................................................................................................................'50!
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Current Status
History
Jerome Monroe Smucker first pressed cider at his mill over 110 years ago in 1897. Cider soon
became apple butter with Smucker’s™ hand signed seal on every jar. Less than 20 years later
the company is incorporated and starts producing preserves and jams. In 1942, the company
begins national distribution and later that decade produces its first topping line of Spoonable Ice
Cream Toppings. Ten years later, the company introduces a reduced calorie line of toppings and
spreads and in 1959 the company goes public. Smucker’s™ acquired its first company in 1963,
Mary Ellen’s™ Jellies and Jams, and introduces ‘old fashion tomato ketchup’ as of 1965,
Smucker’s™ is listed on the NYSE. Throughout the 1970’s and into the present, Smucker’s™
continues to acquire companies specializing in toppings and spreads and in 2002 acquires the
brand Crisco™ and Jif™. Most recently Smucker’s™ has acquired White Lily™, Five Roses™,
Eagle Brand™, Carnation™, Folgers™, Millstone™, Europe’s Best™ and Knott’s Berry
Farm™ brands. (J.M. Smucker's, 2013)
Original Mission and vision
Vision Statement
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“Vision is to own and market leading food brands in North America, while maintaining a global
perspective.”- (Feeney, 2013) The J.M. Smucker Company is committed to offering consumers
quality products that help families create memorable mealtime moments. Our vision is to own
and market food brands which hold the #1 market position in their respective category, with an
emphasis on North America.” (J.M. Smucker's, 2013)
Mission Statement
“Our Basic Beliefs, Values and Our Commitment to Each Other help preserve our environment
of fairness and mutual respect that make Smucker’s™ a great place to work and grow
professionally.” (J.M. Smucker's, 2013)
New Vission Statement
The J.M Smuckers Company is committed to offering consumers around the world quality and
inventive products to help families create life long mealtime memories. Our vision is to hold the
#1 global market position for our food brands in each of their respective markets.
New Mission Statement
Our mission is to bring the everyday consumer a variety of superior products in the retail food
industry that are easily accessed and well priced. All while using green technologies
continuously in North and South America, as well as introducing our product line to Asia and the
Middle East.
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Corporate Goals !
“Smucker’s™ corporate strategy was comprised of three main components – First
Growing the market share of its existing brands, Second Introducing new products, Lastly
making strategic acquisitions.” Smucker’s™ in 2011:Expanding the Business lineup. (J.M.
Smucker's, 2013)
Marketing !
Smucker’s™ brand portfolio encompasses numerous products that represent a vision to own and
market food brands that hold the top position in their respective categories. Today, seven of their
categories in the U.S. and seven of their categories in Canada hold top market share positions.
(J.M. Smucker's, 2013)
Smucker’s™ maintains a deep hold on domestic markets due to their wide product line.
However in terms of a global market, they’re relatively limited with their market reach being
bounded to the United States, Mexico and Canada. With this being said, Smucker’s™
international subsidiaries each have their own regional distribution to select markets in over 65
countries. By use of superior products, Smucker’s™ competes in non-price competition.
Smucker’s™ U.S. retail consumer foods segment encompasses many of the industry’s most
iconic food brands. This includes category leaders such as Smucker’s™ fruit spreads and Jif™
peanut butter, as well as Crisco™ oils, Pillsbury™ baking mixes and frostings, Eagle Brand™
sweetened condensed milk, Hungry Jack™ pancake mix and syrup, and Martha White™ and
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White Lily™ flours. Smucker’s™ has established a wide-ranging presence in the coffee
marketplace. Smucker’s™ offers products in every segment with different blends, flavors, sizes,
and convenience attributes. In addition to the Folgers™, Millstone™, and Dunkin’ Donuts™
brands, Smucker’s™ also has added the leading Hispanic Café Bustelo™ and Café Pilon™
brands in the past year.
Smucker’s™ product quality initiatives focus on achieving zero product defects as well as
ensuring that product quality expectations and all product regulatory requirements are met or
exceeded (J.M. Smucker Company). Therefore, Smucker’s™ utilizes a wide-ranging pricing
structure. Smucker’s™ produces such a large variety of products it has placed a product at every
level of the market place to satisfy all tastes and preferences. Nonetheless when consumers
purchase a Smucker’s™ owned product, they are getting a premium product for “blue collar”
costs.
Smucker’s™ is a longtime member of the Association of National Advertisers’ Alliance
for Family Entertainment. Smucker’s™ implements a passive marketing approach by utilizing
their distribution network of supermarkets across the United States and Canada. They purchase
premium shelf space in distributing grocery adhere to very rigid guidelines regarding advertising
placement, content, and target audience. “Our guidelines prohibit marketing to children under
the age of 18. Although marketing programs and packaging may appeal to the entire family, our
messaging is clearly directed to adults, with advertisement placement limited to programming
and media outlets where children constitute no more than one-quarter of the audience.” (J.M.
Smucker’s™ Company). The Parents Television Council (PTC) even recognizes Smucker’s™
for having such responsible advertising practices. The PTC gave Smucker’s™ the Lifetime
Achievement Award for “Integrity in Entertainment” as well as inducted them into the
“Advertiser Accountability Hall of Fame.” (Parents Television Council, 2007)
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Manufacturing and Operations !
With all the acquisitions Smucker’s™ has made over the past few years, one would imagine that
they have plants and facilities all over the world. This assumption would be incorrect. They have
strategically placed facilities throughout the United States while having a third party take over
their Canadian coffee lines. Here is a list of current Smucker’s™ plants in the United States:
Orrville OH, Salinas CA, Memphis TN, and Scottsville KY. New Bethlehem, PN produces all
the peanut butter. Chico CA and Havre de Grace MD produce all the beverage products. Ripon
WI is responsible for many specialty items and lastly multiple coffee locations in Louisiana have
been singled down to one in New Orleans. (J.M. Smucker's, 2013) (see appendix 2.1)
With as many products Smucker’s™ offers under their name, they must find ways to
consolidate task, and a recent way they are doing that is in the example of their Orrville OH plant
where their new state of the art fruit spreads manufacturing facility will become operational in
the fiscal year, 2013. (J.M. Smucker Company, 2012)
“In support of its approach for continuous improvement, the company completed an extensive
analysis of its coffee and fruit spreads supply chain network. As a result, it will commence a
multi-project initiative to be implemented over the next three years. The initiative is a long-term
investment to optimize production capacity and lower the overall cost structure.
The company's plans include significant capital investment in its coffee and namesake fruit
spreads businesses over the next three years totaling approximately $220 million. Additionally,
approximately $190 million in restructuring charges will be incurred over the course of the plan,
of which $90 million are noncash charges.” (J.M. Smucker, 2013)
One example of Smucker’s™ restructuring plan in action is when they acquired Sara Lee™
foodservice and hot beverage business. This was accomplished in record time, only 4 months.
(J.M. Smucker's, 2013) With all the changes and improvements in technology and efficiency the
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new Sara Lee™ plant located in Orrville, is expected to reduce the workforce 40 percent over the
next 3 years. Martin Springer, Director of supply chain systems for Smucker’s™ believes as a
result of the many initiatives Smucker’s™ is striving for, manufacturing facilities will be
reduced from 22 to 18 loosing an estimated 700 full time positions or 15% of the company’s
workforce. (J.M. Smucker Company, 2012) Throughout the company, Smucker’s™ has almost
half a billion dollars invested in their facilities, buildings, and fixtures where they have over a
billion dollars invested in machinery and equipment. (J.M. Smucker Company, 2012)
Sources of Funds
Smucker’s™ primarily gets funding through its operations and the cash generated from market
sales. Smucker’s™ does supplement when needed through a revolving credit facility. To
finance the SaraLee™ merger, Smucker’s™ completed a public offering of $750 million on
October 18, 2011 using 3.5% 10-year notes redeemable at any time by Smucker’s™. (J.M.
Smucker Company, 2012)
Allocation of Funds
As of last year (2012), Smucker’s™ was showing a gross profit of 33.4% of net sales. They had
expensed 16.2% of the net sales and showed 3.2% of sales going to amortization, impairment,
restructuring costs and other operating costs. A portion of the $750 million dollar offering went
to fund the merger with SaraLee™, with the remaining amount going towards repayment of
borrowings. $1.4 million was used as discount on the offering. Smucker’s™ also did a
repurchase of common stock that accounted for $316 million of the operating capital. At the
close of 2012, Smucker’s™ had a free cash flow of $457 million. (see appendix 1.1) (Ford
Equity Research, 2013)
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Cash Management
Smucker’s™ has consistently held in excess of $200 million in cash or cash equivalents over the
last five years. In 2012, the cash on hand had a reduction but this should be attributed to
consolidation costs and acquisition costs.(see appendix 1.1) (Ford Equity Research, 2013)
Depreciations Methods
Smucker’s™ has continually used a straight-line depreciation method on their balance sheet.
Throughout 2010, 2011, 2012, due to the massive expansion into the coffee market, the
acquisition of SaraLee and the increasing income, Smucker’s™ has been accelerating the
depreciation on assets associated with mergers, acquisitions and restructuring. For example, in
2011, the Miami coffee production plant was consolidated into the New Orleans, Louisiana
plant; the 2012 merger and acquisition of SaraLee; and the restructuring plan “to optimize
production capacity and lower the overall cost structure”. (J.M. Smucker 2012 annual report)
In some instances, this accelerated depreciation can account for up to 30% of the company’s
depreciation, amortization, and impairment charges. (J.M. Smucker 2012 annual report)
Dividends to Stockholders
In 2012 there was a 15% increase in dividends paid to shareholders and there was a repurchase
of common stock valued at $305 million for more than 4 million shares.
In 2009, $1.45 a share was paid as dividends with a steady increase every year since. 2011 saw a
dividend payment of $1.92 and with the board raising the dividend payment by 15%
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shareholders would have seen a $2.20 dividend payment in 2012. (J.M. Smucker Company,
2012)(see appendix 1.9)
Human Resources
Smucker’s™ currently employs 4,850 (J.M. Smucker Company). Over the last eight years,
Smucker’s™ has been in the top 100 companies to be employed with (CNN). Like most
companies, Smucker’s™ hires from within their organization when looking to fulfill a position.
However, applicants can find positions available for hire on the company’s website. Very rarely
does Smucker’s™ employ someone without a bachelor’s degree.
Most common jobs (salary) earn $51,075 per year with benefits. The typical hourly paying job
titles average $27,400 per year with benefits as well. (CNN, 2008) Base compensation for all
salaried positions in Smucker’s™, including executive officers, is determined by reference to
individual performance and position within the salary range for the particular job classification.
Smucker’s™ human resources department develop the salary ranges and classifications with
assistance from independent consultants to ensure that the overall salary structure and benefit
package remains competitive.
Smucker’s™ goal with regard to salaries and total compensation is to provide a structure that is
competitive with other comparably sized manufacturing companies
(SEC). Smucker’s™ targets its salary ranges at approximately the median of comparably sized
manufacturing companies, and the revised ranges approved by the Executive
Compensation Committee are consistent with that target goal. (Smuckers, 2005)
New hires usually spend a few years in entry-level positions to learn the skills necessary to
advancement. Year ending performance evaluations are conducted between employees and
supervisors.
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Research and Development
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Smucker’s™ Market Development has introduced over 60 items in 2012 and expects to
introduce an additional 90 products in 2013. This includes single serve K cups for coffee, frozen
handhelds, the Jif™ and Smucker™ brands, a complete new line of flavored coffees for Dunkin
Doughnuts™ and ice cream toppings such as root beer and pink lemonade flavors. They will
also be introducing the Folgers brand into the liquid concentrate coffee segment for foodservice.
Smucker’s™ Market Development research has shown the efficiency and effectiveness of digital
marketing to be very positive. Combining traditional marketing with mobile and online
campaigns, Smucker’s™ is increasing their position in the Hispanic market.
There have been categories in China that have been identified as markets Smucker’s™ would
like to participate in. With the acquisition of minority interest in SeaMild, SeaMild’s facility in
Northern China will aid in expansion into the region. This will also aid in building an
understanding of the Chinese market and the Chinese consumers. (Feeney, 2013)
Community Relations !
“Our commitment to doing the right things and doing things right extends beyond the workplace
to the communities where we live and work. We strive to be a company that is an integral part of
the community by contributing our financial resources as well as our time, talent, energy, and
enthusiasm.” (J.M. Smucker's Company, 2012) Community Relations is something that has been
a part of Smucker’s™ since the beginning. Just a few of Smucker’s™ national sponsorships
include the following:
• Boys and Girls Club
A portion of Smucker’s™ Stars on Ice tour benefits the Boys and Girls Clubs of
America, with a special focus on literacy efforts. Throughout the tour, skating stars make
Corbin Brown� 4/7/13 12:00 PMComment [1]: There!is!no!citation!for!where!the!info!for!economy,!competition,!and!social!trends.!!Did!we!come!up!with!all!of!this!by!ourselves????!
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personal appearances at local clubs where they provide complimentary tickets and donate
books.
• Feeding America
For the past 20 years, Smucker’s™ has made product and monetary donations to this
nationwide network of charitable food banks to help relieve hunger.
• United Way
In addition to holding annual employee campaigns across our U.S. locations,
Smucker’s™ donated $1 million to the Greater New Orleans chapter in support of the
organization’s “No Place Like Home” project to help families affected by Hurricane
Katrina move into permanent homes.
• American Red Cross
We provide monetary and product support to the organization’s disaster relief efforts.
(J.M. Smucker's, 2013)
Smucker’s is known for helping organizations, projects, and programs that contribute to the
well being of their communities, and they plan to continue this way for as long as they are in
business. Smucker’s™ truly strives to make a difference in the community affected by their
products. Smuckers™ trying to shift the focus from school buildings to kids educations as well
as shifting responsibility from just schools to the surrounding community. (J.M. Smucker's
Company, 2012) For example Smucker’s™ is the main sponsor for The Heartland Point,
(Smuckers, 2005) in Orrville Ohio, simply put it is a community-connecting place that which
opened in 2005. In the short amount of time they have been open, The Heartland Point has
already received many awards and accolades for all of its great work in the community.
Smucker’s™ has a history of making a difference in a positive way in each of the communities
they operate in. Adopting a school, joining literacy efforts, and junior achievement programs are
just a few ways that Smucker’s™ tries to make a positive mark in their bettering of their local
communities. (J.M. Smucker's Company, 2012)
Smucker’s™ is involved in helping the local community; one current example is the partnership
with the National Parks Conservation Association (NPCA) where Smucker’s™ has already
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donated $100,000, and helping to donate another 100,000 matching their consumers dollar for
dollar by April 30, 2013.
“As a leading manufacturer and marketer of food and beverage products, Smucker’s™ is
committed to supporting a supply chain that is always mindful of its Economic, Social, and
Environmental impacts. We approach product sourcing in a manner that is consistent with our
Basic Beliefs of Quality, People, Ethics, Growth, and Independence. As a result, we strive to
source our products with a comprehensive view that accommodates both responsible sourcing
practices and marketplace business dynamics.” (J.M. Smucker's Company, 2012)
These same high standards must be visible in Smucker’s™ suppliers as well.
Smucker’s™ specifically states in all of their supplier contracts that the individual suppliers
cannot employ children, participate in human trafficking, participate in prison labor, as well as
bonded labor, and indentured labor. One other part of being a Smuckers™ supplier is always
being available for internal scheduled quality assurance audits. (J.M. Smucker's, 2013)
Internal company appraisals
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Financial Performance !
Over the last five year Smuckers has seen an steady growth in their financial performance. The
net return on sales has increased 3% over the last five years with a peak in 2010 of a return level
of 11.3%. In 2009 the level returned to 9.4% a solid 2.7% increase. The return on equity has
stayed at a consistant level between 9% and 10.6%. Currently the level is at 10.6%.(Ford Equity
Research, 2013) (see appendix 1.5) Smuckers return on total assets was above 6% until 2009
when they started acquiring several different companies and new product lines. From 2009 to
2012 there was no positive return on assets, but in 2013 there is already a 6.6% return. (see
(appendix 1.6) (hoovers.com, 2013)
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Financial Soundness
J. M. Smucker’s™ current ratio over the last five three has consistently stay above 2.5 and for
the last 10 years the ratio has stayed at or above 2.8 except for 2005 and 2009 where it was still
above 2.3. Last quarter’s acid test was a .95 and 2012 was .94, which could be contributed to the
merger with Sara Lee. Over the last 10 years, the acid test has been above 1.0 except for 2005
and 2009 and the previously mentioned years. The debt to equity ratio has consistently
remained at or below .26 except for a peak in 2008 and has peaked again at .39 in 2012 and the
first quarter of 2013. While this may indicate a problem, Smucker’s™ is in a capital-intensive
industry and ratios above 2.0 would be normal. A .39 ratio would be considered high but
acquisitions and mergers from 2012 could be the cause of this.
After evaluation of the indexes it can be concluded that J.M. Smucker’s™ is a viable company
with a strong financial history. During the acquisition of Folgers and SaraLee the numbers were
a bit extreme but after the acquisition of Folgers the number went back to their previous levels.
It can be expected that in the next twelve months, the ratios will all fall back to previous SaraLee
acquisition levels. (J.M. Smucker Company, 2012)
Major Strengths and Attributes
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Strong brand portfolio !
The company has well-established brands, which enjoy a high level of recognition among
customers. Its family of brands includes Smucker’s™, Jif™, Crisco™, Pillsbury ™, Eagle
Brand ™, R.W. Knudsen Family™, Hungry Jack™, White Lily™, and Martha White™ in the
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US, along with Robin Hood™, Five Roses™, Carnation™, Europe’s Best™, and Bick's™ in
Canada. In addition to these brands, J.M. Smucker™ markets products under numerous other
brands, including Dickinson's™, Laura Scudder's™, Adams™, Double Fruit™ (Canada), and
Santa Cruz Organic™. The company's Pillsbury™ brand is one the most well-known and
respected brands. Furthermore, in the US retail consumer market segment, Jif™ brand has been a
strong brand in the peanut butter category for over 20 years. The company maintains a strong
position in the natural peanut butter category with the brands Smucker’s™, Adam’s™, Laura
Scudder’s™ and Jif™ brands. (MarketLine)
In the US retail cooking oils and baking market segment, Crisco™ holds the leading brand
position in the shortening category. The company’s fruit spread brands, including Smucker’s™,
Dickinson’s™ and Knott’s Berry Farm; hold strong positions in the fruit spreads category. In the
sweetened condensed category, the company is the branded market leader with its Eagle™ and
Magnolia™ brands. The company, in May 2011, added leading Hispanic brands Cafe Bustelo™
and Cafe Pilon™ to its portfolio. A portfolio of strong brands helps J.M. Smucker™ expand its
market share and increase its customer base. (MarketLine)
Strong organic growth
The company made a number of strategic acquisitions in the recent past. In January 2012, the
company acquired the majority of North American foodservice coffee and hot beverage business
from US package-food company Sara Lee ™ Corporation. Sara Lee’s™ liquid coffee
concentrate brand Douwe Egbert’s, along with a variety of roast and ground coffee, cappuccino,
tea, and cocoa products were added to the company’s product portfolio. In addition, the
companies entered into a long-term innovation partnership to collaborate on liquid coffee
technology for the foodservice market. This acquisition strengthens the company’s foodservice
business.
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In May 2011, J.M. Smucker™ acquired the coffee brands and business operations of Rowland
Coffee Roasters™. Rowland’s™ leading Hispanic brands, Cafe Bustelo™ and Cafe Pilon™
brands, were added to the company’s portfolio. Although the company holds leadership position
in majority of its markets, it still has competition from a substantial number of small producers
that operate in the unorganized sector and have cost advantages. By consolidating such smaller
producers, J.M. Smucker™ can diversify into newer product segments and also sustain its
market leadership position in the longer term. (MarketLine)
In 2010, the company entered into a multiyear manufacturing and distribution agreement with
Green Mountain Coffee Roasters. In November 2008, Smucker’s™ acquired The Folgers™
Coffee from The Procter & Gamble™ Co. Folgers™ is the leading producer of retail packaged
coffee products in the US. As part of the merger, the company also acquired the Millstone™
coffee brand and the licensing rights to manufacture and distribute Dunkin’ Donuts™ coffee
products through retail channels. The Folgers™ merger added $856 million in sales and $241
million in segment profit for J.M. Smucker. Prior to this, J.M. Smucker™ acquired, a privately
owned company headquartered in Montreal, Quebec. Europe’s Best™ is the number one brand
of premium, all natural, frozen fruit in Canada. In the same year, J.M. Smucker™ also acquired
the Knott's Berry Farm™ food brand from ConAgra™ Foods. Knott's Berry Farm™ produces
and markets jams, jellies, preserves, and gift boxes in the retail and foodservice channels.
(MarketLine)
The company continues to strengthen its product portfolio by way of acquisitions. The strong
inorganic growth enables J.M. Smucker™ to increase its presence in newer markets and
segments, which, in turn, enhances its topline growth. (MarketLine)
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Major Weaknesses or Problems
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Concentrated customer base !
The company's sales are largely dependent upon a limited number of customers. For instance, the
company's largest customer, Wal-Mart™ Stores and its subsidiaries, accounted for
approximately, 26%, 27% and 24%, of net sales in FY2011, FY2010 and FY2009, respectively.
These sales are primarily included in the US retail market segments. Moreover, in FY2011, the
company’s top 10 customers accounted for 55% of the net sales. Thus, any change in the
preferences and spending pattern of the consumer base, may harm the company's sales. Any
significant change in the company’s relationship with Wal-Mart™, including changes in product
prices, sales volume, or contractual terms may impact financial results. (MarketLine)
Small scale operations
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The company has small-scale operations when compared to its competitors in the market. Many
of its competitors, such as Kraft Foods and ConAgra Foods are much larger in size in terms of
revenues.(MarketLine)
In the financial year ended December 2011, Kraft Foods™ recorded revenues of $54.4 billion,
significantly higher than J.M. Smucker™. Similarly, ConAgra Foods™ recorded revenues of
$12.3 billion during the financial year ended May 2011. J.M. Smucker™, in contrast, recorded
revenues of $4.8 billion in FY2011. Moreover, Kraft Foods™ has operations in more than 80
countries with a portfolio including twelve brands with annual revenues exceeding $1 billion
each. Though ConAgra Foods™ ‘operations are principally in the US, it has diversified
operations including a dehydrated garlic, onion, capsicum and fresh vegetable operation, a
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trading and merchandising business, packaged meat and cheese operations, a poultry business,
beef and pork businesses, and various other businesses. The company's small scale of operations
could turn out to be a disadvantage in the fiercely competitive market. Lack of scale also reduces
the bargaining power of J. M. Smucker™. (MarketLine) (hoovers.com, 2013)
External Environmental Analysis
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General Economy !
Due to the down turn in the economy many people are saving money by buying products that are
not name brand. Many people are also avoiding foods they do not see as necessities. For
Smuckers this is a possible problem. Many of the Smuckers products are not what people
consider necessities. Also many consumers may avoid their products due to the price.
It would seem that Smuckers, however, has not had a problem with that. Their sales numbers
have stayed consistent, actually increasing over the years. Currently their net income is
equivalent to their sales. (hoovers.com, 2013)
Smuckers has also acquired many other brands, allowing them to make sales from many
different places. The diversity of products, alongside their brand recognition may have helped
Smuckers stay successful during the economic downturn.
Industry and competition !
The three main competitors Smuckers has are ConAgra foods, Unilever, and Mondelez
International Inc. ConAgra Foods and Mondelez International both have significantly higher
sales than Smuckers in the year 2012. Smuckers, however, had a net profit margin that was
!
! 19!
greater than either competitor. Unilever was beneath all three companies in both sales and profit
margin. (hoovers.com, 2013) Unilever brings a particular threat to the table. Unilever products
are sold in 190 countries throughout the world. While this does not hurt Smuckers in anyway, in
the future Unilever may become a much larger threat as other countries’ economies improve.
ConAgra foods purchased Ralcorp very recently this year. This has now made ConAgra the
largest purveyor of private-labeled food brands in the nation. It is yet to be seen how great of a
threat ConAgra becomes in the future and how this will affect Smuckers. (hoovers.com,
2013) (See Appendix 1.1.1)
Growing food service industry !
The global food services industry is expected to register strong growth in the coming period. As
per MarketLine’s report, the global profit food service market generated total revenues of $832.4
billion in 2011, representing a CAGR of 4.8% for the period spanning 2007–11. The industry is
projected to reach a value of $1,077.3 billion in 2016, an increase of 29.4% since 2011. In the
US, more than half of food expenditure happens outside the home. Through the special markets
segment, the company distributes its products to retail channels, and foodservice distributors and
operators (including restaurants, schools and universities, healthcare operators). Therefore, J.M.
Smucker™ is well positioned to tap the growing food service industry. ( MarketLine)
Intense competition !
J.M. Smucker™ faces significant competition across all its product categories. The company
competes with well-established branded companies like B&G Foods™, ConAgra™ Foods, Del
Monte™ Foods, Ralcorp™ Holding and Kraft™ Foods. Most of these competitors have
significantly greater resources and brand recognition. Further, J.M. Smucker™ also faces
significant competition for the private label products. The key distinguishing factors for the
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! 20!
company’s products include quality, price, packaging, new product introductions, nutritional
value, convenience, customer service, advertising, and promotion. The company also faces
competition to obtain shelf space for its branded products with retailers. Intense price as well as
product competition could adversely affect the company's business operations and erode its
market share. Stringent regulations as a manufacturer and distributor of food products, the
company is subject to a number of food-related regulations relating to health and sanitation.
Several federal agencies including the Federal Food, Drug and Cosmetic Act and the regulations
promulgated by the US Food and Drug Administration (FDA) specify critical standards for the
manufacture, processing, formulation, packaging, labeling and advertising of the products.
Failure to comply with these standards could result in penalties and seizure of marketing and
sales licenses. These regulations also result in additional compliance costs, which reflect in
reducing margins. Risk associated with the food industry as the company operates in the food
industry it is subject to certain risks including food spoilage and contamination, product
tampering, product recall and consumer product liability claims. In the case of product
contamination or tampering, the company might recall some of its products. Increasing recalls
would result in significant loss due to the cost involved in recalling the products. J.M.
Smucker™ would suffer losses from a product liability judgment against it. Furthermore, the
company’s operations could be affected by genuine and fictitious claims regarding the
company’s and competitors’ products. This would result in loss of consumer confidence and
adversely affect the consumer demand. Thus, the risks related to food industry could lead to
dampened consumer demand, higher costs and lower margins for the company. (MarketLine)
Social Trends
Until now Smuckers has relied on Brand recognition, and a loyal consumer base. Looking
towards the future, however, they will have to adapt to the new social trends. Trends that the
public seem to respond to include changes in dietary preferences, healthier foods, and convince
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! 21!
of the product. For both dietary and health conditions the social trend has been toward natural,
organic foods. Smuckers has acquired a few brands, as well as releasing a few of their own
products to adapt to the trend. These new products, however, can potentially hurt their core
product sales. Another trend Smuckers should be aware of is convenience. Consumers are now
buying prepared and fresh meals on the outer shelves of grocery stores. Smuckers products tend
to be placed on shelves in the middle of the store. This prevents consumers from noticing
Smuckers products when they shop. This trend also keeps people from buying products that go
into making meals, because they buy fully prepared meals. (hoovers.com, 2013)
Political Policies
The Company encourages its employees to participate on their own time in such political
activities, as they desire. A decision to contribute personal time or money must be purely
voluntary, however, and the rules set forth below must be observed with regard to the
Company’s involvement.
(1) It is illegal for a corporation to contribute services (except through a political action
committee) or corporate funds for partisan political purposes anywhere in the United States.
Accordingly, Company funds are not to be expended for any political candidate or party activity,
nor may any employee’s individual contributions be reimbursed out of Company funds.
Company involvement in lobbying activities or in nonpartisan, issue campaigns must be
reviewed in advance with the legal department and approved at corporate headquarters.
(2) While political contributions of corporate funds or services are not illegal in many foreign
countries (and in fact may be both legal and customary) they are generally against Company
policy. No such contributions may be made by or on behalf of the Company without the prior
approval of the legal department.
(3) Neither the Company, nor an employee on his or her own behalf or on the Company’s behalf,
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! 22!
shall offer or provide any payment, gift, or other item of value, either directly or indirectly, to
any official or employee of any government (whether domestic or foreign) or to any political
leader or party in exchange for or in an attempt to procure governmental action favorable to the
Company.
(4) Neither the Company, nor an employee on his or her own behalf or on the Company’s behalf,
shall make any payment or gift or otherwise give anything of value to any government or
governmental agency to procure or attempt to procure government business. This prohibition
includes, without limitation, consulting or other fees to third parties where there is reason to
believe that all or part of such fees will be distributed to, or for the benefit of, governmental
officials to procure business or other action favorable to the Company.
(5) The Company recognizes that in some foreign countries governmental clerical personnel
(such as immigration, customs, and licensing personnel) will not perform their normal functions
unless they are paid additional compensation to do so. Such payments may be made, in foreign
countries only, provided that they are nominal in amount, are consistent with local custom, and
are recorded accurately on the official books and records of the Company.
Natural Resources
!
Smuckers should be aware of rising commodities prices throughout the world. With the change
in the price of raw materials operating profit margins could be hurt. In the creation and mixture
of the products Smuckers uses raw materials such as corn, sugar, fruit, wheat and peanuts.
During their manufacturing, packaging and transportation Smuckers uses materials such as gas,
oil and plastics. Smuckers, however, uses “forwars and futures” contracts to balance out price
increases. This means that they determine a price for these materials for the future. (wikinvest,
2013)
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! 23!
Fluctuations in raw material prices
!
The company is vulnerable to price fluctuations of raw materials such as flour and vegetable oils
(some of the basic ingredients for the frozen foods industry). Global food commodity prices have
risen sharply in 2011, causing prices of processed foods to rise accordingly during the year.
According to the Food and Agriculture Organization (FAO) of the United Nations (UN), prices
of staples like cereals have increased by 35% over 2010, while the overall food price index of
FAO increased by 23% during the same period. Furthermore, the UN expects these price rises to
continue into the next decade till 2020 as factors like as higher energy and fertilizer costs are
likely to affect farmers and thus food prices. A direct impact of staple food prices increase was
felt by the processed food industry in several countries during the past year, leading to either an
increase in prices of processed foods or declining profit margins of food manufacturers. Any
increase in the food prices will affect the company’s cost of raw materials and needs to be offset
by either price increases or additional investments on promotions and advertising. In future,
companies like J.M. Smucker™, which are already investing heavily on various marketing
activities, might have to additionally pass on the price increase to its customers to avoid any
adverse impact on its operating margins. (MarketLine)
Strategies for the Future
The Future of Smucker’s™
As we look toward the future and a new world for the Smucker’s™ brand with exciting changes
to the market view and interaction for Smucker’s™ and their brand affiliates. In the next few
!
! 24!
paragraphs we are going to introduce changes that we believe will act as spring board to propel
Smucker’s™ into the future and greater sales margins.
We have broken the future proposals into two categories, qualitative and quantitative proposals.
Qualitative
Reduction of Smucker’s™ carbon footprint
!
We have found that by reducing the carbon footprint of a large-scale company can produce a
more environmentally friendly image and also be sales booster. We recommend adding natural
gas trucks to the fleet, creating aerodynamic trailers for shipping and utilizing solar panels at
manufacturing facilities to offset electricity consumption. To make the trucks more aerodynamic,
deflective shields should be placed along the outside of the wheel wells to lessen drag created by
the arc of the wheel well pushing against the wind. Also to add deflectors to the cab of the truck
itself, the amount of saved fuel estimated at 7.4% to 8.4% according to AeroFlex™. AeroFlex™
a company that creates aerodynamic skirts and kits for tractor-trailers has multiple choices for
kits and pledge that over time and with a large fleet aerodynamically upgrades could result in
substantial fuel and shipping savings. (See Appendix 3.1, 3.2, 3.3)
Reuse Reduce Recycle
To save on the cost of repeatedly purchasing cardboard boxes and all the supplies that goes with
the shipping process. A reusable box system is recommended; a system that eliminates tape and
the repeated buying and recycling of boxes would be preferred. The design of the shipping
containers should be reevaluated if the size and shape of these containers can be adjusted to fit
!
! 25!
the inner part of the trailer better then space can be utilized to the fullest extent. Boxes can be
made out of a hardy plastic; we recommend measuring the desired items to ship and adding soft
padded slots for bottles and jars.
Consolidation
Consolidation of shipments to and from factories would cut down on general fuel cost and
rerouting of trucks would lessen multiple trips to and from the same factory. By using a Hub and
Spoke system for new factories the amount of trips could be cut down and supplies can be better
regulated to and from the factory. The Hub and Spoke system would lay out a new type of
communication system for manufacturing and shipping divisions, such as knowing the truck
arrival and departure times by route to better estimate the speed of production and staging of
packages. (See Appendix 3.4)
Developing a Sweet Tooth
The cookie and candy markets have a large amount of competition in the child arena, and
keeping consistent with Smucker’s™ pledge to never market directly to children it is
recommended that Smucker’s™ began to manufacture high end chocolates. Chocolates such as
Lindt™, Girrideli™ or Ferrero Roche™ which promote a brand name tied to elegance and
luxurious and meant for pricey pallets but delivered at a mid level price. Adults want to feel like
they are buying a great quality item for a deal. “With a name like Smucker’s™, it has to be
good,” this well established phrase from which describes that quality of Smucker’s™ products
could work well in the world of connoisseur chocolates.
Cookies that carter to adults is another growing market that could prove profitable for
Smucker’s™. Creating a cookie that satisfies more adult tastes is something that we believe
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! 26!
Smucker’s™ should pursue, starting with a design akin to Pepperidge Farms. Milano cookies are
very popular but at the price and quantities of each pack parents are inclined to purchase these
for their kids but moreover themselves.
Packaging the adult cookie and chocolate markets are very different from their children counter
parts. The use of royal colors such as, gold, purple, silver, red, and white are especially
prevalent. Making the packaging metallic and shiny akin to jewelry texture seems to be popular
among existing adult chocolate brands. Cookies on the other hand seem to lean a softer feel for
the packaging though some are packaged the same as the chocolates but for the most part a
homemade and soft feel prevails in the cookie market.
Cultural Diversity
!
Cultural diversity among employees is a growing trend among companies as large as
Smucker’s™, Starbucks™, and Matel™. This diversity in the workplace has already been seen
at Smucker’s™ when outside the box thinking gave birth to “Goober Jellies” a very profitable
product for Smucker’s™ that was born on the factory floor. Our team believes that if that same
type of open mindedness and cultural diversity is expounded upon it will push this company to
greater heights. Some ways to encourage cultural diversity in Smucker’s™ would be to hold
international events for employees, allow them to learn about other cultures and experience
different sights, smells, and sounds at these events to broaden their thinking and inspire them.
Hold events to allow employees at any level to come and interact with customers on a face to
face level. Another way to add diversity into Smucker’s™ workplace would be to hire ex-
patriots from countries that the company is looking to move into or acquire businesses in.
Corbin Brown� 3/17/13 1:28 PMComment [2]: In!the!smuckers???!!
Corbin Brown� 3/17/13 1:28 PMComment [3]: Clarify.!!!Expanded/!expounded!upon!“it”!will!push!
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! 27!
Quantitative
!
The goals for Smuckers™ in the quantitative arena are intended to broaden the cash flow
channels Smuckers™ can draw from in the future and allow for further expansion into world
markets. Straying away from the traditional markets that Jams and Jellies have reached
maximum popularity in, the team proposes an expansion into markets were spreads are popular
but not the spreads native to America. The final recommendation is the expansion of the existing
product line and a timeline for the R&D as well as release of products.
Cash Flow !
The proposal is to double the cash flows of Smuckers™ existing sales channels by 2018.
Existing net profit numbers are 460 million, with operating cash flow for 2012 being 731
million. With this cash flow being ready and the expected cash flow being 1,031 million,
expansion is possible into foreign markets is feasible. Altering the layout of Smuckers™
products in stores and how they are displayed would put the product in more convenient aisle
and encourage the unconscious consumer to pick a jar of their favorite jam or jelly. Placing the
Smuckers™ products along the bread aisle and aisles that contain products that use jams or
jellies in their consumption would be a way to differentiate Smuckers™ from the competitions.
Also shelving Smuckers™ products at chest height for the average person would put the
products at arm’s length without breaching Smuckers™ pledge to not market to children by
placing them in the children’s direct line of sight.
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! 28!
Tapping into Three Foreign Markets in Five Years
Tapping into virgin markets like the Middle East could yield great profits after the initial
investments of acquisitions and factory up fits in order to produce Smuckers™ products. The
proposal is expansion into three foreign markets with the next five years including, Egypt, China,
and Amsterdam. Egypt is a good candidate due to the sheer amount of snack foods that are
paired with spreads and jellies. With no other product like Smuckers™ already existing in Egypt
but with jellies being produced an acquisition is recommended for moving into the Egypt
Market. Coffee is another popular product in Egypt with the brand Folgers™ in Smuckers™
arsenal it is poised to become a major player in the coffee market. Currently Smuckers™ has
purchased a non-controlling interest in a Chinese based company Guilin Seamild Biologic
Technology Development Co, commonly referred to as Seamild™. This company produces oats
and oatmeal for Mainland China; Smuckers™ is using this as a foothold to bring its products to
Chinas market. Amsterdam has a love of coffee shops and with over 650 cafes and coffee shops
already existing in Amsterdam, Folgers™ stands to make a large splash in the market.
Commodities
The overall goal should be to reduce raw material costs by 15% by incorporating vertical
integration. This proposal is intertwined with the introduction of new products is to set goals for
how many new products are to be introduced and set a timeline for the R&D and release. Due to
the market saturation Smuckers™ enjoys, their products go through their life cycles at an
accelerated pace and need to be replaced or revamped at a matching pace. This demand for
copious amounts of raw materials begs the question of how to keep materials costs as low as
possible without comprising quality. Smuckers™ has contracted with local growers to gain
control of the manufacturing processes from start to finish, which allows for greater quality
control and a reduction in raw material costs.
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! 29!
Works Cited
(n.d.).!CNN.!(2008,!02!08).!100#Best#Companies#To#Work#For.!Retrieved!02!24,!2012,!from!CNN!Money:!http://money.cnn.com/magazines/fortune/bestcompanies/2011/snapshots/93.html!Feeney,!J.!P.!(2013).!The!J.M.!Smucker!Compan!Presents!at!2013!Cosnumer!Analyst!Group!of!New!York!Conference,.!about#SJM.!NY:!SJM.!Ford!Equity!Research.!(2013,!1!1).!Mergent#Online.!Retrieved!3!28,!2013,!from!Mergent!Online:!http://www.mergentonline.com/documents.php?pagetype=equityreport&compnumber=7644!hoovers.com.!(2013,!4!1).!hoovers.com.!Retrieved!4!2,!2013,!from!hoovers.com:!http://subscriber.hoovers.com/h/company360/financialsummary.html?companyid=10811000000000!J.M.!Smucker!Company.!(2012,!05!01).!Smucker's#Investors#Anual#Report#2012.!Retrieved!02!15,!2013,!from!Smucker's:!http://phx.corporate]ir.net/phoenix.zhtml?c=77952&p=irol]IRHome!J.M.!Smucker.!(2013,!3!24).!The#J.M.#Smucker#Company#Announces#Plans#to#Significantly#Improve#Supply#Chain.!Retrieved!2013,!from!PR!Newswire:!http://www.prnewswire.com/news]releases/the]j]m]smucker]company]announces]plans]to]significantly]improve]supply]chain]89004032.html!J.M.!Smucker's!Company.!(2012,!05!01).!Smucker's#Investors#Coporate#Responsiblity#Report#2012.!Retrieved!02!15,!2013,!from!Smucker's:!http://phx.corporate]ir.net/phoenix.zhtml?c=77952&p=irol]irhome!J.M.!Smucker's.!(2013,!1!1).!History.!Retrieved!2013,!from!smuckers.com:!http://www.smuckers.com/family_company/history/!J.M.!Smucker's.!(2013,!1!1).!Smuckers.com.!Retrieved!2013,!from!Smuckers.com:!Smuckers.com!Jayson,!S.!(2012,!6!19).!Retrieved!3!17,!2013,!from!Daily!Finance:!www.dailyfinace.com/2012/06/19/is]j]m]smuckers]cah]machine]empty,!
!
! 30!
Parents!Television!Council.!(2007,!08!07).!PTC#Presents#the#J.M.#Smucker#Company#with#the#“Integrity#in#Entertainment#Award”.!Retrieved!02!15,!2013,!from!Parents!Television!Council:!http://www.parentstv.org/PTC/news/release/2007/0816.asp!Smuckers.!(2005,!August!19).!Proxy!Statement!for!Annual!Meeting!of!Shareholders.!Schedule#14A!.!Orrville,!Oh,!USA:!Securities!and!Exchange!Commission.!Smuckers,!J.!(2005,!August!19).!Smuckers#Schedule#14.!Retrieved!02!17,!2013,!from!SEC.gov:!www.sec.gov/archives/edgar/data!wikinvest.!(2013,!4!5).!wikinvest.com.!Retrieved!4!5,!2013,!from!wikinvest.com:!http://www.wikinvest.com/stock/J.M._Smucker_Company_(SJM)/Data/Return_on_Assets!!
Appendix
Financials 1.1!
Statement of Cash Flow
J.M. SMUCKER CO. (SJM)
Statement of CASH FLOW
Fiscal year ends in April. USD in
millions except per share data.
2008-
04
2009-
04
2010-
04
2011-
04
2012-
04
TTM
Cash Flows From Operating
Activities
Net income 170 266 494 479 460 481
Depreciation & amortization 63 120 182 240 247 253
Investment/asset impairment
charges
9 12 18 5
Deferred income taxes 18 26 -39 -60 -17
!
! 31!
Stock based compensation 22 26 24 22 20
Accounts receivable -79 32 -103 9 -7
Inventory -35 35 -46 -204 -48 210
Income taxes payable 23 55 -66
Other working capital -36 23 2 52 31 77
Other non-cash items 11 -4 11 23 -3
Net cash provided by operating
activities
192 445 713 392 731 1031
Cash Flows From Investing
Activities
Investments in property, plant, and
equipment
-76 -109 -137 -180 -274 -237
Property, plant, and equipment
reductions
4 3 0 6 4 4
Acquisitions, net -218 -77 20 -728 -374
Purchases of investments -229 -76 -36
Sales/Maturities of investments 258 3 14 57 19
Other investing activities 0 5 -1 0 -20 -48
Net cash used for investing
activities
-262 -175 -104 -193 -1036 -656
Cash Flows From Financing
!
! 32!
Activities
Debt issued 400 400 749
Debt repayment -625 -10
Common stock issued 17
Common stock repurchased -153 -4 -6 -389 -316 -446
Dividend paid -68 -385 -166 -194 -214 -219
Other financing activities 253 2 8 23 1 -2
Net cash provided by (used for)
financing activities
50 13 -789 -170 220 -667
Effect of exchange rate changes 5 3 6 8 -5 0
Net change in cash -16 285 -173 36 -90 -293
Cash at beginning of period 200 172 457 284 320 496
Cash at end of period 184 457 284 320 230 204
Free Cash Flow
Operating cash flow 192 445 713 392 731 1031
Capital expenditure -76 -109 -137 -180 -274 -237
Free cash flow 115 336 576 211 457 794
(Ford Equity Research, 2013)
!
! 33!
1.2
Revenue vs. Earnings
(Jayson, 2012)
!
!
!
!
! 34!
Stock Pricing
1.3
1.4
Profit per Employee
(Ford Equity Research, 2013)
!
! 35!
1.5
Return on Equity/ Return on Sales
1.6
Return on Assets
(hoovers.com, 2013)
!
! 36!
1.7
Revenue vs. Net Income
!
! 37!
1.8
Free Cash Flow Components
!
! 38!
1.9
Statement of Consolidated Shareholders Equity
!
! 39!
1.1.1
Competitor Comparison Report
!
!
! 40!
!
! 41!
!
! 42!
!
! 43!
!
! 44!
!
! 45!
!
! 46!
2.1
Manufacturing Facilities
3.1
Aerodynamic Shipping
!
! 47!
3.2
Natural Gas Powered Vehicles
!
! 48!
!
! 49!
3.3
Solar Energy for Manufacturing
3.4
Hub and Spoke Distribution
!
! 50!
4.1
Major Policies
1) Marketing
a) Smucker’s prohibits marketing to children under the age of 18.
b) Limited advertisement placement to media outlets where children constitute no more than
one quarter of the audience
2) Manufacturing and Operations
a) Through expansion of operations and acquisition of existing product lines, Smucker’s is
leaning the Manufacturing and Operations to create a more efficient organization.
3) Financial
a) Smuckers will not use debt in order to acquire assets or gains. Debt percentages will not
exceed asset percentages.
