US spreads-to-coffee group JM Smucker is to increase its marketing spend in fiscal 2014 alongside plans to launch around 100 new products across its portfolio.
Smucker, which yesterday (6 June) booked an increase in full-year earnings, boosted by price cuts in its coffee division, said marketing spend will increase by 10% this year, equating to around US$0.20 of EPS.
Speaking to analysts on the firm’s earnings call, CEO Richard Smucker said its initiatives will be built around recent investments the company has made to grow the business.
“These 2014 initiatives include the launch of approximately 100 new items, crossing all key brands and categories. At the same time, we project another increase in marketing support, including new advertising and digital investments. Recently, we announced our sponsorship of the 2014 and 2016 US Olympics and Paralympics teams, and we are proud to play a part in supporting these talented athletes. Related initiatives will span TV advertising, retailer and consumer promotions, product packaging and digital support behind our participating brands of Folgers, Jif, Smucker’s and Uncrustables.”
Smucker said the company is progressing on capacity expansion initiatives at is Uncrustable facility and it expects to complete the installation of an additional sandwich line in fiscal 2014. This comes on the heels of a recent doubling of its bread baking capacity.
“Our expectations for continued growth and the ability to generate significant free cash flow provides flexibility to support our cash deployment strategy, be it acquisitions or returning cash to shareholders through dividends and share repurchases,” Smucker said.
“As we look ahead, we are excited about the new year and remain confident in our long-term strategy, the strength of our leading brands and our employees’ ability to execute with the operational excellence that the marketplace and our customers have continued to expect from Smucker’s.”
In the year to the end of April, Smucker saw earnings climb18% to US$544.2m. The increase reflected price cuts of its Folgers flagship coffee brand and other packaged coffee products in the period.
Operating profit climbed 17% to $910.4m, while net sales were up 6% to $5.86bn. In the quarter, volumes increased 2%.
Stephens Research analyst Farha Aslam said Smucker’s volumes “outperformed” company expectations in the quarter. She questioned whether this was down to the firm’s marketing programmes or the consumer “getting more comfortable with the prices on the shelf now”.
Paul Smucker Wagstaff, director and president of US retail consumer foods said on some of its categories like peanut butter, the company got pricing “back in line to what made sense with the consumer”.
“Clearly, we saw significant increase. Jif was up 17% for the quarter, so that was good. When you look at our frosting business, we were up 17%. That was also driven by a couple of factors, the new product launches that have done very well, and we’re very pleased with that, and some of the promotional dialogue that we talked about earlier. Fruit spreads was also up 4%, and we have taken some pricing action on that as well as launching some new items. So I think it’s a combination of pricing, new products and getting back in line from a price point perspective on shelf.”
Smucker added that around 80% of the actions it has taken internally and 20% results of consumers “feeling a little more confident”.
However, he added: It was more, I think, what we’re doing. And we do see the consumer being a little more confident. But that’s the smaller portion of it to.”
Smucker’s share price was up 2.94% to $101.26 at 11:05 ET today.