Focus: Smucker upbeat about food division despite pressures
Smucker strikes confident note on shifting consumer demand in US
JM Smucker has insisted it "feels good" about the positioning of its food portfolio in the face of falling sales volumes, lower pricing and shifting consumer trends as US consumers demand more 'better-for-you' options.
The US food group announced its annual results last week and took time to reflect on the rapidly emerging consumer trends shaking up the US food market, Smucker president Steve Oakland said the company has been reformulating and repositioning its core consumer foods brands "for the last three-to-four years". On reformulation, Oakland said the company's efforts included initiatives such as removing trans fats from cooking oil brand Crisco.
Elsewhere, Oakland insisted Smucker's innovation in consumer foods has focused on the development of products that feed into growing consumer demand for simple ingredients or healthier options.
This innovation drive can be noted "in every category", he added. "For example in the baking aisle we have Purely Simple this year which is a very simple ingredients in our baking mixes and the Pillsbury baking mixes."
Despite that work, Smucker's management faced questions over the make-up of its portfolio. JP Morgan analyst Ken Goldman cautioned some items in Smucker's portfolio – such as jams and peanut butter – are high in sugar and "not necessarily in line with where better-for-you trends are going".
Oakland insisted Smucker's NPD efforts are tackling this issue head on. "Fruit spreads we just came out with a line of fruit spreads sweetened with honey which we just came out with a couple few months ago and that's actually being very well received by the consumer," he said. "In peanut butter.. there's not a lot of sugar in peanut butter to be perfectly honest. It's very high-protein. There's a little bit but there's not a lot, never has been."
Innovation has been "driven by better ingredients, simpler ingredients", Oakland continued. "We're trying to [reformulate] in our main line, too, but and most of our main line whether it's coffee or peanut butter are pretty good products for you."
In the 12 months to the end of April, Smucker saw these new products contribute "in total about 7%" to sales, Oakland said. Product launches included Jif To Go Dippers, which feed into on-the-go eating patterns, as well as Cafe Bustelo K-Cups.
In consumer foods, Smucker said that it achieved a "record" profit of US$433m in the twelve month period. "Volume performance in the segment was led by Jif, Crisco and Smucker's Uncrustables brands with Uncrustables achieving its third consecutive year of double-digit volume growth in US retail. New product launches across our consumer foods portfolio also contributed to 2015 results," CEO Richard Smucker revealed on the conference call to discuss the group's performance.
However, the segment's top line performance was down in the period, with the sales drop accelerating in the fourth quarter. For the 12 months, consumer food sales fell to $2.1m versus $2.17m in 2014. In the final three months of the year, consumer food sales fell to $427.5m from $465.8m. Smucker attributed the decrease to lower net price realisation from its Jif, Pillsbury and Smucker brands.
Athlos research analyst Jonathan Feeney highlighted concerns over the group's volume performance - which was also down despite pricing actions. Consumer food retail volumes fell 6% in the fourth quarter. "Retail foods could be more difficult to turn around as volume remains weak despite lower pricing," Feeney wrote in a note to investors.
Smucker was nevertheless upbeat on its prospects for the coming 12 months in consumer foods. The company's chief executive said he expected innovation to continue to drive growth in fiscal 2015. Smucker also anticipates the top line to benefit from an increased marketing spend and by feeding products from the recently-acquired Sahale Snack business into its distribution channels.
Vice chairman Vince Byrd added: "We look for innovation momentum to continue including product launches spanning all of our key brands. We have marketing initiatives planned to support these new products and overall brand equity."
Sweet spreads are generally breakfast accompaniments, such as jams and preserves, honey, chocolate spreads, and nut- and seed-based spreads....
Naturally healthy food is minimally processed food that does not contain any additives such as hormones, antibiotics, sweeteners, food colors, and flavorings, which were not originally in the food....
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