J.M. Smucker Co.

views updated

J.M. Smucker Co.

founded: 1897

Contact Information:

headquarters: 1 strawberry ln.
orrville, oh 44667-0280 phone: (330)682-3000 fax: (330)684-3370 toll free: (888)550-9555 email: [email protected] url: http://www.smucker.com

OVERVIEW

J.M. Smucker Company is the leading producer of jams, jellies, and preserves in the United States. The company has branched out in recent years, becoming a leader in such other areas as ice cream toppings and natural peanut butter. In 1997 Smucker's celebrated its one-hundreth year. In addition to fruit products for its own jellies, Smucker's makes the fruit filling for Kellogg's Pop Tarts and Dannon yogurt. The company also owns the juice and concentrate brand R.W. Knudsen.

Smucker's divisions include industrial, food service, beverages, and international. In the mid-1990s the company operated 3 international facilities and 12 plants in the United States. Food processing plants are located in Washington, Oregon, and California, and manufacturing facilities are in Orrville, Ohio; Salinas, California; Memphis, Tennessee; Ripon, Wisconsin; Chico, California; Havre de Grace, Maryland; New Bethlehem, Pennsylvania; Australia; and Canada. The main high-speed jelly and preserve producing plant is in Memphis. That plant also serves as a distribution center for more than 1,500 Smucker products.

The company's founder, Jerome M. Smucker, is remembered by members of the company family for his philosophy of unchanging values. The company still lists its basic values—quality, people, ethics, growth, and independence—on its web page. Employees and managers alike found that holding to these values led the company to be the brand leader in fruit spreads and toppings. While remaining dedicated to its core values, Smucker has also had to grow technologically and remain innovative. A sensitivity to fruit prices has been essential, as has increasing cooperation with other companies in the food industry.

COMPANY FINANCES

In 1996 J.M. Smucker Co. was ranked number six by Food Processing magazine with $528.0 million in sales. Total sales in fiscal 1997 were $542.6 million, while net income was $1.06 per share, or $30.9 million. Sales rose for the nine months ended in January 1998, as did net income. Sales of new and existing products in frozen dairy, yogurt, and bakery, and sales growth in fruit spreads helped results. Contributing to the gain were lower raw materials costs in 1997. Earnings per share that year were $1.23 with the stock price reaching a high of $30 and a low of $16.25.

ANALYSTS' OPINIONS

J.M. Smucker is regarded by many analysts as a high-quality company. Consistent earnings and an eye focused both on the ideals of the company's early history and on current trends have kept the company strong. At the same time, the fact that the company's brands were well recognized meant that Smucker's was in a mature market. It was forced to break out of its mold and expand. In the mid-1990s the company held a market share of close to 40 percent in the retail jam market. As a century-old company, it still focused on quality, independence, and high ethical standards. Some Wall Street analysts would have preferred to see the company make bolder acquisitions to better reach customers at the supermarket. Very few seemed to expect radical changes at this family-run company. Despite its long-standing relationship with Kellogg & Co., which involves reciprocal board seats, analysts doubt the company will sell out.

HISTORY

In 1897 Jerome M. Smucker opened a cider mill in Orrville, Ohio. He also made and sold apple butter in hand-sealed crocks. In 1921 he incorporated his business as the J.M. Smucker Company. In 1955 the company introduced a line of portion-control products.

In 1979 Smucker's began a series of acquisitions that allowed it to enter other markets. It acquired Dickinson's product line that year, and in 1984 it bought R.W. Knudsen Family beverages. Although the latter acquisition was successful, not all of them proved to be so fortuitous. In 1995 Smucker's bought Mrs. Smith's frozen pie business for $80 million. After less than a year, the business was sold to a subsidiary of Flowers Industries Inc.

However, 1995 also saw the acquisitions of After the Fall beverages and Laura Scudder's natural peanut butter, both of which have brought steady growth to the company. Smucker's also was attuned to the health concerns in the United States in the mid-1990s. Smucker's Light rolled out in fiscal 1997, and the late 1990s also saw introductions of low-sugar varieties of many other Smucker products.

J.M. Smucker Co. is still very much a family organization. Paul Smucker, the grandson of founder Jerome, owns about 14 percent of the company and serves as chairman of the executive committee. His sons Timothy and Richard run the company as chairman and president.

STRATEGY

The strategy in the company's early years was to concentrate on a few products, and to manufacture and market them with pride and care. As the next generation grew to run the company, they began to expand their horizons. They made some strategic acquisitions, such as beverage manufacturers, and some alliances, such as that with Kellogg.

In the mid-1990s the company began a strategic planning process that included close to 10 percent of its workforce. Requesting ideas and input from staff members who ordinarily would not be involved in decision making proved to be very effective for Smucker's. Marketing in the 1990s included attention to the increasing health-consciousness of consumers. The slogan "food that is good for you and tastes good" was pegged to the company's new fruit spread, "Bagel Toppers," as well as a fat-free, fruit-based shortening. The company also reformulated its Simply Fruit brand to have longer shelf life and better taste.

Smucker's acquired Kraft's domestic fruit spread business in 1997. That business accounted for a 2-percent share of the market, which was anticipated to be a boon for Smucker's market share. In the 1990s the company also experimented with co-branding, or working with other established brand names to enter a new market. The Smucker's brand name was licensed to Brach and Brock Confections to make Brach's Smucker's jelly beans and fruit chews. Smucker's Dove ice cream toppings came from a similar partnership with M&M/Mars. A 1997 partnership with Naturipe produced two new flavors—vanilla creme and dark chocolate—for Naturipe's Berry Dippers dip for strawberries.

A 1997 marketing campaign featuring Tim and Richard Smucker growing up in Orrville, Ohio, in the 1950s generated nostalgia for Smucker's products in the company's anniversary year. Advertising expenditures in the late 1990s ranged from $9 to $10 million dollars.

INFLUENCES

The company was influenced by its success in marketing core items to consumers who appreciated freshness, taste, and reliable quality. When it branched out into other areas, the company learned from its mistakes. The 1995 acquisition of Mrs. Smith's frozen baked goods for $80 million proved to be unprofitable, and was sold in 1996. An English subsidiary, Elsenham Quality Foods Ltd., was also less profitable than the company had anticipated; in 1995 Smucker's divested itself of the subsidiary and took a pretax loss of $6 million. However, despite economic uncertainties throughout the century, the J.M. Smucker company built a strong reputation for making high-quality products that sold well.

CURRENT TRENDS

The Smucker family invited analysts to the company headquarters in the mid-1990s for the first time in decades. Despite their company's fairly solid track record, the managers felt compelled to explain their prospects for the future of Smucker's. In 1997 the company invested in new technology, including tailor-made versions of Oracle software developed to improve distribution and help warehouses become more efficient. It consolidated some assembly lines, but hesitated to close plants or impose major layoffs. The company did, however, reduce its number of employees in the late 1990s from more than 2,500 to just under 2,000. It achieved such reductions partly by using outside vendors for transportation, thereby eliminating Smucker's fleet of trucks.

FAST FACTS: About J.M. Smucker Co.

Ownership: J.M. Smucker Co. is a family controlled public company traded on the New York Stock Exchange.

Ticker symbol: SJMA

Officers: Paul H. Smucker, Chmn. of the Exec. Committee, 80, 1997 base salary $356,731; Tim Smucker, Chmn. of the Board, 53, 1997 base salary $366,923; Richard K. Smucker, Pres., 49, 1997 base salary $357,750; Robert R. Morrison, VP, Operations, 63, 1997 base salary $196,000

Employees: 1,950

Principal Subsidiary Companies: J.M. Smucker Co. has several subsidiaries including After the Fall Products Inc.; Dickinson Family Inc.; R.W. Knudsen & Sons; Mary Ellen's Inc.; California Farm Products Div.; JMS Specialty Foods Inc.; and A.F. Murch Co.

Chief Competitors: J.M. Smucker's competitors include: ConAgra; National Grape Co-Op.; and Seagram.

Mass merchandisers and warehouse clubs changed the way many consumers bought shelf goods, and by the late 1980s Smucker was forced to adjust. Distribution lines that had worked before needed to be rethought, and Smucker's fought hard to maintain market share. Private-label competitors took aim at Smucker's, and the company decided to increase advertising expenditures to stay ahead.

PRODUCTS

Jerome Smucker's first product was apple butter. Still, 100 years later, the company is best known for its fruit spreads. But the company that led the way in producing jams, jellies, and preserves also produced dessert toppings such as Magic Shell, syrups and fruit dips, peanut butter brands including Laura Scudder's and Goober's, fruit juices under the R.W. Knudsen and After the Fall brands, pie glaze, and industrial fruit products such as yogurt and bakery fillings.

Smucker's fruit spreads include preserves, jams, jellies, marmalades, fruit butter, and low-sugar and lite varieties of spreads. The increased vigilance about health concerns in the U.S. population led Smucker's to focus on creating the latter varieties. The Simply Fruit brand contains 100 percent spreadable fruit, and the low-sugar varieties have just half the sugar of the regular varieties, with the same amount of fruit per serving. The lite varieties contain fruit and nutra-sweet, creating a fruit spread low in calories and completely sugar-free. Fruit butter is made by cooking fruit pulp and sugar slowly until it develops a thick, butterlike consistency.

Fruit syrups come in 12-ounce jars and in flavors including apricot, blackberry, blueberry, boysenberry, red raspberry, and strawberry. Fruit dips were developed and marketed as a fat-free snack in which to dip fruit. They are sold in 15-ounce tubs in caramel apple or chocolate flavor. A serving of two tablespoons contains no fat and 130 calories.

Smucker's dessert toppings include spoonable toppings, microwaveable toppings, sundae syrup toppings, magic shell topping that hardens on ice cream, and special recipe toppings in hot fudge, butterscotch, and caramel flavors. Peanut butter varieties made by Smucker's include Laura Scudder's Old Fashioned peanut butter in smooth, nutty, and no-salt varieties; Goober, a peanut butter and jelly combination; natural peanut butter in creamy, chunky, and no-salt-added varieties; and reduced-fat peanut butter, which contains 25 percent less fat than the regular natural peanut butter.

Smucker's line of gourmet and specialty foods includs the Dickinson's brand, which is closing in on the top market share in the gourmet/specialty foods segment. The company has expanded efforts at co-marketing and co-branding. The company also saw strong growth in its industrial sector, providing fruit for Dannon yogurt and for Kellogg's Pop Tarts.

Smucker's beverage business centers around the R.W. Knudsen Family line. Simply Nutritious juices were among its successful product introductions of recent years. The juices include vitamins and such herbs as ginseng, echinacea, and wheat grass, and were marketed to health-conscious consumers.

CORPORATE CITIZENSHIP

The community in Orrville, Ohio, respected Smucker's as a good neighbor. Most notable among Smucker's environmental efforts was the introduction in 1995 of a six-pack beverage container made of paper-board. This was to replace the plastic version, which not only threatened wildlife but also was not easily recyclable. The new paperboard container showed the company's commitment to waste reduction, recycling, and animal welfare.

GLOBAL PRESENCE

Smucker's international division includes facilities in Australia, Canada, and Latin America. In 1988 management decided to expand the company's international presence. Growth overall has been steady, although 1997 results were flat due to the divestiture of Smucker's English partner, Elsenham Quality Foods.

CHRONOLOGY: Key Dates for J.M. Smucker Co.

1897:: Founded as a cider mill in Orrville, Ohio by Jerome Smucker
1921:: Incorporates as J.M. Smucker Co.
1955:: Introduces a line of portion-control products
1979:: Acquires Dickinson's produce line
1984:: Buys R.W. Knudsen Family
1995:: Buys Mrs. Smith's frozen pie business and buys After the Fall beverages
1996:: Sells Mrs. Smith's
1997:: Celebrates 100 year anniversary; introduces Smuckers Light

The company has manufacturing facilities in Quebec, Canada, and in Victoria, Australia. Smucker's hopes to have a manufacturing presence in Mexico and China during the early twenty-first century. Export sales are strong and growing to the Pacific Rim, and domestic business in Australia also has good margins. The IXL brand has a significant market share in Australia and aims to be that country's most popular brand.

EMPLOYMENT

Top management at Smucker's is said to be quite accessible, and the corporate culture relaxed and informal. Employees call each other by first names, and top managers meet with employees at all major U.S. facilities twice a year. Christmas bonus checks for every employee are calculated at 2 percent of salary, and the bonus also includes a gift and a turkey.

IT MUST BE JELLY, 'CAUSE JAM DON'T SHAKE LIKE THAT

The story goes that in the early nineteenth-century a man by the name of John Chapman strolled about the Ohio countryside, scattering apple seeds wherever he went. He became known as Johnny Appleseed and his legend grew, even as stories about his brothers, Bobby Tomatoseed and Harry Watermelonseed withered on the vine. It was from these apples that J. M. Smucker started up his cider mill business in 1897.

These days, the Smuckers empire is going strong, boosted in part by the 1,500 peanut butter and jelly sandwiches Americans consume by the time they graduate from high school. That's the equivalent of eating peanut butter and jelly every day for over four years. In fact, it is estimated that the average American consumes 1.7 pounds of jelly annually. Naturally, the company makes many different varieties of jelly, and their motto states, "With a name like Smuckers, it has to be good." Whether or not this claim extends to their quince jelly is a matter of some dispute.

Employees work on task forces and in worker teams and are empowered to make decisions about their dayto-day work. The company earns the respect of its employees by not succumbing to the trend of layoffs and downsizing. Employees are valued and encouraged to meet the highest standards, and the company stresses business ethics that are related to high personal ethics.