Smucker sees 'great strides' in Folgers integration

by Staff
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NEW YORK — Noting the company has made "great strides" in the seven months it has owned the business, J.M. Smucker provided an update on the transition of the Folgers coffee business into the Smucker portfolio at the Stephens Spring Investment Conference held June 2 in New York. Smucker acquired the Folgers business from Procter & Gamble Co. in November 2008.

Specifically, Vince Byrd, president of Coffee Market for J.M. Smucker, said the company has completed two of its three primary milestones for the integration plan. In February, the company completed the customer-facing milestone, which allows customers to order, receive and pay for Folgers products with other Smucker brands. In May, the second major milestone was completed, transitioning the manufacturing, warehousing and administrative systems that support the four coffee-producing facilities from Procter & Gamble’s SAP system onto the Smucker Oracle platform.

The final major milestone is expected to occur this fall, Mr. Byrd said, and will include the transition of the Green Coffee system onto the Smucker Oracle platform. The Oracle platform allows Smucker to execute promotions, maintain a view of customer data, manage trade funds, resolve invoice deductions and enhance analytical capabilities.

"With the completion of each milestone, we are able to exit portions of the transition service agreement with Procter & Gamble," Mr. Byrd said. "Due to these efforts of our teams, we are on track with our integration activities and expect to achieve the $80 million in synergies previously stated."

Going forward, Mr. Byrd identified several initiatives for the coffee business, including reestablishing focus on the core Folgers red can business, which makes up approximately 70% of Smucker’s U.S. retail coffee sales.

"Achieving long-term growth in the traditional roast and ground core segment is essential and is our No. 1 initiative for 2010," he said.

A key component to that strategy will be strengthening the core equity of the advertising of the Folgers brand, both through messaging and additional spending on the brand. Mr. Byrd said the company plans to introduce a new advertising campaign this fall that will emphasize the core equities of the brand, including the famous tagline, "The Best Part of Waking Up."

A second initiative will be capitalizing on the fast-growing gourmet category.

"As part of this strategy, we will emphasize growing the Dunkin’ Donuts business in all retail channels," he said. "We believe Dunkin’ is the right brand to take advantage of this expanding segment, and in less than two years since its introduction Dunkin’ sales now exceed $200 million on an annual basis and is the No. 2 gourmet brand."

Finally, Smucker will implement a major pricing initiative effective by the end of June. The move will include reducing the list price of coffee with an equal reduction in trade funds, Mr. Byrd said.

"The change is neutral to our sales, but has the benefit of providing our customers and consumers with a lower everyday price on-shelf, independent of promotions," he said.

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