Smucker eyes coffee growth, global expansion
December 3, 2010
by Eric Schroeder
NEW YORK — Successful new products, double-digit growth in the Dunkin’ Donuts coffee line and potential international growth opportunities have executives at J.M. Smucker Co. optimistic of “some light at the end of the tunnel.”
“We are all familiar with the economic environment,” Richard Smucker, executive chairman and co-chief executive officer of Orrville, Ohio-based Smucker, told analysts at the Citi Food Manufacturing Conference held Dec. 1. “One thing we would say is that we are seeing some light at the end of the tunnel — it’s not a train. The only concern, though, is the tunnel is a little longer than we all anticipated. So it has taken us a little longer to get out of that tunnel, but we see some positive coming in the next several months.
“Consumers continue to search for value … and we see that as continuing, although we do see a change in terms of the deep discounting. We think that some of that will stop, we think after the first of the year, although you may not see this much, we think we’ll see it in some of our results.”
New products coupled with heavy advertising for the company’s top brands have played a key role in Smucker’s ability to maintain steady growth. Snack’n Waffles and a line of no-sugar Pillsbury products have led the way. Additionally, Mr. Smucker said the company’s Jif To Go has done extremely well since Smucker “liberated peanut butter from the jar.”
In an update on the company’s $2 billion coffee business, Vincent Byrd, president of U.S. Retail Coffee at Smucker, said that while the growth of the Red Can business is necessary to the long-term success of the U.S. retail coffee business, the company is performing extremely well in other areas at the moment.
“Probably the most exciting news was our announcement of our arrangement with Green Mountain and Keurig to enter into the K-Cup single-serve space,” Mr. Byrd said. “We started shipping those products about eight weeks ago. It has been accepted by every major retailer. We’ll be the first national brand to be marketed in the traditional grocery segment.”
He said the arrangement contributed about 2% of Smucker coffee sales during the past quarter, even though the company did not start shipping until the second month of the quarter.
Another strong performer within the coffee business has been the Dunkin‘ Donuts brand, which continues to grow at a double-digit clip.
“You may not know that (Dunkin’ Donuts) was originally thought to be about a $50 million brand when Procter & Gamble entered into that relationship,” Mr. Byrd said. “It’s now over a $250 million brand for us. It’s our highest growing brand within our portfolio.”
Mr. Byrd said more opportunities exist for the Dunkin’ brand through expanded distribution, new products and turn in shelf space of the core items. Among the new products recently introduced is Dunkin’ Pumpkin Spice, which Mr. Byrd said was the No. 2 selling bag coffee at a major retailer during a recent four-week period, second only to Dunkin’ Original.
With new products in the baking and oils segment hitting the market and the U.S. retail coffee business up and running, Mr. Smucker for the first time in a while shed light on what may be in store for the company going forward — international expansion.
“When we bought Jif and Crisco in 2002, we had several international operations at that time,” Mr. Smucker said. “And part of our divestitures was really to focus our effort on making sure we did that acquisition right, because it was transformational. So we got out of the business that we had in the U.K., we got out of the business that we had in Brazil and in Australia. And that really was good for us, because it really focused our management time and attention.
“We really believe that now we are in a position that we can look beyond North America. And so we’ve looked around the world and said, ‘Where would we want to spend some management time?’ And if you look at Europe, it’s a very mature market — we don’t think we can really add much there. But, if you are going to spend any time, we have to spend our time outside the United States looking at the China market. I mean, it’s just for all the reasons you all know, and the rumor here is that it’s just the fastest-growing economy. And if you can have a play in that market long-term, it’s going to be a bigger play than anywhere else.”