Cleveland State University
May 5, 2004
Table Of Contents
Internal Strengths and Weakness
External Opportunities and Threats
Cost Efficient Differentiator Strategy
Industry Life Cycle and the Nature of
Conclusions and Recommendations
AppendixóFinancial Graphs and Data
The J. M. Smucker Company is a
manufacturer and market leader of fruit spreads, ice cream toppings,
health and natural foods beverages, and natural peanut butter in North
America. The J. M. Smucker Company was founded in 1897 when the Company's
namesake and founder, Jerome Monroe Smucker sold his first product, apple
butter, from the back of a horse-drawn wagon. The Company, headquartered
in Orrville, Ohio has been family run for four generations.
Smuckerís has over 2,000 employees
worldwide, 12 manufacturing plants, four fruit processing facilities, and
distributes products in more than 70 countries. Grocery stores, specialty
retailers, restaurants, hotels, and other food product manufacturers
comprise their worldwide customer base. Because Jerome Monroe Smucker made
a quality product, sold it a fair price, and followed sound policies, the
Today, Smuckerís continue to grow by
adhering to their basic beliefs of
These time-honored principles have served as a strong foundation
throughout their history, and serve as the guideposts for all their future
strategy, plans, and achievements. The J. M. Smucker Company was
recognized as the top company in FORTUNE Magazine's 2003 annual survey of
The 100 Best Companies to work for, and has ranked consistently in the top
25 companies each year since FORTUNE began the list in 1998.
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In 1887, Jerome Monroe Smucker opened a
cider mill in Orrville, Ohio producing apple butter and cider. In 1920,
the J.M. Smucker Company incorporated and two years later began producing
preserves and jellies. In 1935, Smuckerís expanded its fruit processing to
Washington, which was known for its beautiful production of grapes,
cherries, and berries. In 1942, the national distribution of Smuckerís
products began. In 1945, during World War II, Smuckerís supported the war
effort by supplying Apple Butter overseas to American troops. In 1959,
Smuckerís went public carrying a product line of apple butter, jellies and
preserves, spoonable ice cream topping, and a line of gift boxes. In 1962,
the slogan ďWith a name like Smuckerís, it has to be goodĒ was coined.
During the 70ís, Smuckerís introduced
fruit syrups, opened a shop in the market house of Walt Disney World, and
introduced low sugar and natural peanut butter product lines. By the end
of the 70ís, Smuckerís acquired Dicksonís line of gourmet preserves and
jellies gaining market leadership in the preserves and jellies category.
In the late 80ís, Smuckerís began to expand internationally. It started in
Canada with the acquisition of Good Morningís line of marmalade shirriff
dessert toppings. In 1989, Smuckerís entered the Australian market
acquiring a leading manufacturer of jams and jelly. During the 90ís,
Smuckerís continued to expand its product line with light preserves,
prepackaged peanut butter sandwiches, and cracker snacks. In 1999, a
Smuckerís Museum opened in Orrville, Ohio.
Today, over a century later, the Company
is the market leader in fruit spreads, peanut butter, shortening and oils,
ice cream toppings, health and natural foods and beverages in North
America under such icon brands as Smucker's, Jif and Crisco. The J.M
Smucker Company continues to grow by producing products in seven U.S food
categories, including the latest acquisition of Multifoods Corporation in
a transaction valued at $840 million. Multifoods' primary U.S. brands
include: Pillsbury baking mixes and ready-to-spread frostings; Hungry Jack
pancake mixes, syrup and potato side dishes; Martha White baking mixes and
ingredients; and Pet evaporated milk and dry creamer. In Canada, Smuckerís
will significantly increase its existing presence with the addition of No.
1 brands such as Robin Hood flour and baking mixes, Bick's pickles and
condiments, and also participate in the growing ethnic food category with
Golden Temple flour and rice.
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The most urgent issue facing Smuckerís is managing the merger with
International Multifoods Corporation (IMC). Smuckerís has successfully
acquired and integrated the Jif and Crisco brand product lines into their
operations, but the current merger is on a much larger scale and includes
more product lines.
The integration step is the
most crucial of the acquisition process. If improperly managed, it could
weaken the company and lead to financial losses. The acquisition of IMC
will add an additional 16 plants and offices in the United States and
Canada. Smuckerís will need to carefully analyze the operations of these
facilities to determine which can be integrated into existing operations.
Any operations that cannot be successfully integrated should be
discontinued or sold in order to avoid the increased costs associated with
Another challenge arising
from the acquisition, will be integrating IMCís employees into the
Smuckerís corporate culture. An unsuccessful transition could result in
reduced employee productivity and higher turnover which would translate
into higher operating costs at those facilities. Investing in employee
education programs should help these employees in the transition process
and keep productivity levels stable.
Continued improvement of
domestic operations is another key to maintaining corporate success.
Smuckerís has been making efforts to optimize their supply chain and
consolidate manufacturing facilities. This year, Smuckerís will be closing
three plants: Watsonville, California, Woodburn, Oregon, and West Fargo,
North Dakota. This process will allow Smuckerís to consolidate resources
to further reduce product production and distribution costs.
In order to optimize their production
processes and further streamline operations, Smuckerís is also investing
in capital improvements to existing plants. This strategy will allow
Smuckerís to achieve higher asset productivity and economies of scale
which will increase efficiency and reduce per unit cost.
The food industry in the
developed world is a mature market and therefore, development of new
products that appeal to the changing tastes of consumers is central to
increasing market share. The current low carbohydrate trend is creating a
new market segment in the United States and Smuckerís should focus their
product R&D in this area. A successful launch of a low carbohydrate
product line will capitalize on the current trend and keep consumers
purchasing Smuckerís branded products.
Due to the maturity of the
fruit spread industry, Smuckerís has adopted a growth strategy of
acquiring existing brands in other product categories that are well known
and have the potential to be the top seller in their category. By
acquiring products in additional categories Smuckerís can continue
corporate growth which will prevent stagnation of stock value and increase
operations have been challenged due to new market entrants and fluctuating
currency exchange rates. While Smuckerís Australian brands continue to
hold the number one share of the market, growth has been lower than
expected due to increased competition in the fruit spread segment.
Smuckerís should focus on streamlining its operations in order to achieve
lower per unit cost and gain competitive advantage. The companyís generic
strategy of differentiation has been successful in the US market and
should also serve it well in Australia. Increasing advertising spending in
this area will help to further this strategy in the Australian market and
increase market share.
Over the past few years,
Smuckerís has spent more than $20 million to upgrade its IT
infrastructure. With the current acquisition of IMC and plans for
additional acquisitions in the future, Smuckerís must continue to invest
in this area in order to keep pace with corporate growth. By utilizing
appropriate information technology Smuckerís can further streamline
processes within the organization and better track overall corporate
performance. Having the means to better monitor performance across all
operations will allow quick intervention in problem areas resulting in
better management and higher profitability.
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Smuckerís basic beliefs are an expression
of its values and principles which guide the companyís strategic behavior
and direction. These beliefs are tied to the companyís founder, Jerome
Monroe Smucker, who sold a quality product at a fair price, and followed
solid policies. Therefore, the company prospered. In this decade,
Smuckerís continues to grow by adhering to the basic beliefs of quality,
people, ethics, growth, and independence. These time honored principles
have provided a strong foundation throughout its history, and serve as the
guideposts for all future strategies, plans and achievements.
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The risk of new entrants to the food
industry is low because the industry is in the mature stage. The intensity
of rivalry among established companies in an industry in the mature stage
is high. There are few players battling for market share, hence, a degree
of price cutting exists. The bargaining power of buyers is low because
there are too many buyers to gain an aggressive power over the
manufacturer. This power may be rising with the growth of superstores
like Aldi and Wal-Mart. The bargaining power of suppliers is high due to
the commodity nature of inputs and the impact of a poor growing season
upon price of inputs. Finally, the closeness of substitutes to the
industryís product is high because there are many alternatives for lunch.
The next section will go over in more detail these forces as they relate
In the lunch product industry, there is a
low risk of new competitors. This industry is a highly saturated industry
with a substantial amount of competition. . For example, the market
share in this industry is diverse. Many small companies share the total
market. Hence, if another firm successfully enters, industry incumbents
absorb the impact by losing market share.
This industry is consolidated, meaning a
small number of large sized companies exist. Therefore, the intensity of
rivalry between these companies is fierce. Most of these consolidated
industries are characterized by high entry barriers and commodity-type
products that are hard to differentiate. Smuckerís is successful in
differentiating its products on the basis of quality which allows it to
charge a higher price for its products.
Since food products are considered a
necessity, buyers have low bargaining power making this a weak force. For
example, almost every household has at least one jar of jelly which is
most likely Smuckerís. Most of these jars of jelly are around the same
price; therefore, unless the cost of Smuckerís jellies sky rocket, people
will continue to buy Smuckerís along with the other brands. Most likely,
individuals will not stop buying jelly. Prices should remain stable
because this product is already a commodity and people will continue to
purchase jelly in the future.
Smuckerís does not own its suppliers or
distributors. It doesnít grow its own fruit, nor does it manufacture its
own labels or storage containers. Hence, Smuckerís is directly affected
by its suppliers. Therefore, if their raw materials increase in price,
Smuckerís will directly have to adjust prices to make up for this change.
For example, if the cost of aluminum goes up, Smuckerís would have to
absorb this cost or pass it on to the consumers.
The value of substitution in the industry
is somewhat high. In the food industry companies are continuously trying
to improve upon or develop new food products which appeal to consumers.
Many substitutes exist for fruit spreads such as, butter, peanut butter,
and cream cheese. However, fruit spreads will maintain a significant
portion of market share in the food product industry.
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Analyzing the J.M. Smucker
Companyís internal strengths and weaknesses reveal several key strengths
that the company can use as being lynch pins to success. It will also
reveal weaknesses which are components that need to be fixed to improve
internal operations. Smuckerís strengths include; being the market leader
in fruit spreads, a well established name, a Fortune Magazine top 25
company, and the ability to keep employees happy. The weaknesses include;
a very weak distribution system which isnít a major player
internationally, lack of an in-house sales force, lack of effective
marketing for their low sugar/sugar free jams, and susceptibility to
lawsuits from product mislabeling.
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The external environment
plays a major role on how Smuckerís does business. These factors which are
demographic, economic, technological, political, and social give way to
business opportunity and threat. The opportunities include; co-branding
with companies which use fruit filler, the buyout of Multifoods
International, increasing the market share of the younger consumers
(contracts with schools), targeting baby boomers looking for sugar free
jelly/peanut butter substitutes, and increasing overall profitability.
Threats from the external environment include:
Major competition from
industry players such as ConAgra, and Kraft
Increased fruit prices from
growers which lead to less real fruit in the product.
Consumer tastes which can
substitute Smuckerís products with other spreads such as butter or cream
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As Smuckerís grows into a
bigger corporation it must recognize the importance of being a
differentiator. However, it must not lose sight of factors that control
cost. The industry Smuckerís operates in is an industry which is very
price sensitive, with the larger corporations who are very price
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The sauces and condiment
industry, which the J.M. Smuckerís corporation operates in, is in its mature
industry can be defined by companies who make and sell refrigerated
sauces, condiments, pickles, preserves, peanut butter, jellies, and jams.
Competitors include; Kraft, ConAgra, Mars, Del Monte, Unilever, Dean
Foods, and several others.
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