BOSTON — The J.M. Smucker Co. has plans to attack the at-home coffee category, including expanding its already strong presence in the mainstream segment while at the same time accelerating growth in the premium and single-serve category.
In a Sept. 5 presentation at the Barclays Global Consumer Staples Conference in Boston, Mark T. Smucker, president and chief executive officer, described several ways the Orrville, Ohio-based company plans to succeed in the nearly $9.5 billion at-home coffee category. He said the single-serve and premium segments now account for about 65% of the overall at-home coffee category, with mainstream and instant accounting for the remaining 35%. But for J.M. Smucker, the inverse is true, with 65% of the company’s sales coming from the mainstream and instant segments and 35% coming from single-serve and premium.
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| Mark Smucker, president and c.e.o. of The J.M. Smucker Co. |
“We view this as a significant growth opportunity for our coffee business on several fronts as we accelerate our efforts to shift the balance of our portfolio over time,” he said. “While we anticipate the overall mainstream coffee segment to decline low single digits over the near term then stabilize, this remains an important component of the coffee category, catering to a large segment of the population.”
J.M. Smucker’s objective, he said, is to expand its 55% market share in the nearly $2.5 billion mainstream segment. The company plans to achieve that goal by continuing to support the brand with advertising while leveraging its scale, supply chain capabilities and strong retail programs to maintain competitive positioning. Additionally, J.M. Smucker intends to capitalize on the growth potential of Café Bustelo.
“The (Café Bustelo) brand continues to resonate strongly with its core Hispanic consumer base while also attracting millennial coffee drinkers who appreciate the brand’s authentic heritage,” Mr. Smucker said. “Reflecting double-digit sales growth over the past year, Café Bustelo now holds a 4% share of the mainstream segment. The continued growth of Café Bustelo can help offset modest declines in Folgers coffee within our overall mainstream coffee portfolio.”
Mr. Smucker said the company envisions an even greater opportunity in growing its premium and single-serve cup coffee business.
“Premium coffee has become a $2.3 billion segment, increasing 3% over the latest 52 weeks, while the one-cup segment is approaching $4 billion in annual retail sales,” he said. “With our brands holding a combined 15% share in each of these segments, the opportunity for growth is significant.”
J.M. Smucker’s participation in the premium and K-Cup space is led by the Dunkin’ Donuts brand, Mr. Smucker said. In the most recent quarter, net sales for Dunkin’ Donuts grew 10%, surpassing $500 million in annual sales for the first time, he said.
“Dunkin’ Donuts original remains the No. 1 selling s.k.u. (stock-keeping unit) in both premium, bagged coffee and K-Cups,” he said. “To meet consumer desire for larger product sizes and convenience, we are expanding our portfolio with Dunkin’ Donuts canisters. Available beginning in the fourth quarter of this year, we anticipate the product offering to generate incremental sales for our coffee business.”
To accelerate its growth in the premium and single-cup coffee category, J.M. Smucker will introduce a new platform to extend the “reach and relevancy” of the Folgers brand in the fourth quarter, Mr. Smucker said, adding that the company will share more details on the program at the Consumer Analyst Group of New York (CAGNY) meeting in early 2018.
Lastly, Mr. Smucker said the company is excited about the potential opportunities under a new K-Cup agreement with Keurig Green Mountain.
“In addition to lower cost, we will broaden our product lines and retail presence, which will drive growth,” he said. “Ultimately, this provides the opportunity to improve the performance of Folgers K-Cups while accelerating the growth of our Dunkin’ Donuts and Café Bustelo brands. Combined with our innovation activities, this will support our objective of growing our share of the one-cup market by one to two points per year for the foreseeable future.”
