Rowland Coffee integration on track at Smucker
Sept. 8, 2011
by Eric Schroeder
BOSTON — The May acquisition of Rowland Coffee Roasters, Inc. has provided additional scale and unique brands for J.M. Smucker Co. and is on track to contribute more than $100 million in sales in the current fiscal year, according to a presentation by Richard Smucker, chief executive officer of Orrville, Ohio-based J.M. Smucker, at the Barclays Capital Back to School Consumer Conference held Sept. 7 in Boston.
Mr. Smucker said Rowland’s Café Bustelo and Café Pilan Hispanic brands complement Smucker’s portfolio and position the company well for establishing a strong presence in coffee in the Hispanic markets.
“This demographic represents nearly 15% of the coffee drinking households in the U.S. and is expected to grow significantly over the next several years,” he said. “Over the long term, we expect to expand distribution of these brands into the key Hispanic regions in the U.S. by leveraging our go-to-market strategy and our national scale. This acquisition is on track to contribute over $100 million in sales, or approximately 2 percentage points of our net sales growth in this fiscal year and approximately add 5c per share to our earnings excluding charges.”
Mr. Smucker said customer facing and distribution network activities are on schedule to be completed by November, while manufacturing operations are expected to be consolidated into Smucker’s existing facility in New Orleans in approximately three years.
Product innovation also has driven growth for Smucker during the year. Mr. Smucker indicated new products are expected to contribute about $200 million, or approximately three percentage points, to net sales during the current fiscal year. In the company’s fruit spread business, recent product launches include new flavors of Orchard’s Finest preserves. Additionally, Smucker is testing fruit spreads sweetened with Truvia.
Addressing the commodities situation, Mr. Smucker said the status of the peanut crop and its impact on availability and costs remain an area of focus. While confident in the company’s supply position, Mr. Smucker said peanut costs will be significantly higher the remainder of the year. As a result, Smucker will implement a 30% price increase on peanut butter products effective in November.
“While the level of price elasticity will depend on many factors, including the responses of our retailers, our competitors and consumers, as well as supply, we expect to achieve significant price realization that will be sufficient to recover our higher costs,” Mr. Smucker said. “Once again, this is an issue facing the U.S. peanut industry.”
Higher costs also have weighed on the fruit spreads business, and Mr. Smucker said the company will hike the prices on the majority of its fruit spread products by 4%, also effective in November.