Smucker full steam ahead on coffee business

by Eric Schroeder
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BOSTON — With the completion of its primary milestones for the integration of the Folgers coffee business, J.M. Smucker Co. is ready to charge ahead in expanding all aspects of its coffee business.

Vince Byrd, president of Coffee Market for J.M. Smucker, told participants at the Barclays Capital Back-to-School Conference held Sept. 9 in Boston that the company has completed the final of its three primary milestones for the Folgers 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. Lastly, the company recently completed 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.

The core Folgers red can business accounts for approximately 70% of Smucker’s U.S. retail coffee sales, and the company plans to feature the brand in fall bake and holiday promotions.

But just as exciting as what is happening with Folgers, Mr. Byrd said, is the growth of Smucker’s Dunkin’ Donuts business.

"We believe Dunkin’ is the right brand to take advantage of this expanding gourmet segment," Mr. Byrd said. "Our sales of Dunkin’ now exceed $200 million on an annual basis, and we forecast double-digit growth over the next few years."

Mr. Byrd said the Dunkin’ portfolio currently has seven core items, but has room for growth.

"To support the continued growth of Dunkin’, we will focus on expanding the variety of the offerings, increase brand awareness, and push out on distribution gains," he said. "As a point of reference, the leader in the retail gourmet segment on average offers over three times more s.k.u.s (stock-keeping units) than we do. We clearly believe the Dunkin’ brand has ample opportunity for future growth."

Mr. Byrd said Smucker’s Dunkin’ coffee brand also has received a boost from the more than $100 million of advertising that the Dunkin’ Donuts Corp. does in support of its 6,000 franchise stores.

Finally, Mr. Byrd said that a major pricing initiative on Folgers implemented in June has been well received. The change has been neutral to Smucker’s sales, but it has the benefit of providing the company’s customers and consumers with a lower everyday price on-shelf, independent of promotions.

"Whenever you can pass price reductions on and provide a better everyday value to the consumer, I think we believe that’s a good thing," he said. "Quite frankly, trade spend had creeped up over time and this is something we felt we needed to do."

Mr. Byrd said its major competitor did not follow with the price reductions, adding, "We’ll just see how that plays out, then, when we get to the key holiday or other promotional time periods. But we feel very good about the pricing action that we took."

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