US food group JM Smucker, which generates a tiny proportion of its sales outside North America, has emphasised its plans to enter China.
Speaking at the CAGNY investment conference in Florida yesterday (22 February), Vince Byrd, president of JM Smucker’s US retail coffee business, said the company was studying how to enter China but said “ultimately” it wanted to create a presence of some kind in the market.
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JM Smucker, which owns brands including Folgers coffee, Smucker’s fruit spreads and Jif peanut butter, reports its international sales as part of its “special markets” division.
The special markets division also includes JM Smucker’s businesses in Canada, in the foodservice sector and in natural food stores. The division accounts for 19% of the company’s annual net sales and, of that 19%, only 5% of sales are made internationally.
“China’s food and beverage market is emerging as one of the most important globally. We have allocated resources to conduct a thorough review of our opprtunities in China, considering various means of entry. These include importing our current products, entering into business partnerships or acquiring a new business,” Byrd said. “While still clearly in the investment and exploratory stages, our ultimate goal is to establish a presence in China and provide another avenue for growth.”
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Looking at JM Smucker’s whole business, executive chairman and co-CEO Richard Smucker said he sees more acquisitions being made in the overall food sector over the next two years and indicated the company was open to buying businesses.
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By GlobalData“We expect increased activity in the M&A environment in the next couple of years and our strong financial position provides the resources to react when the right opportunities arise,” he said. “We look to acquire number one, iconic brands that complement our centre-of-the-store strategy. This could either be in the aisles where we currently compete or where we do not yet have a presence.”
JM Smucker classifies its acquisitions into three types – ‘enabling’, ‘bolt on’ or ‘transformational’ – and at Smucker all of these have “an important role” in the company’s strategy. The business has set out a long-term goal of a 6% rise in annual net sales and sees half of that coming from acquisitions.
“Although we cannot rule out the possibility of a transformational acquisition, over the next few years, we’re more likely to complete smaller, enabling acquisitions that provide new capabilities or bolt-on acquisitions that provide additional scale that bring us unique brands,” Smucker said.
Considering one of the more pressing short-term issues affecting food manufacturers – rising commodity costs – Smucker said the increasing price of raw materials was “top of our mind”. He said commodities had been driven by higher global demand and speculators. The company told CAGNY that coffee futures were at a 14-year high. However, Smucker said the business’ “strong” portfolio of brands would help it as it tackled its rising costs.
“We have a strong portfolio of number one brands, which generate nearly 75% of our sales. The strength of these brands, and the leading market share position that they hold, has allowed us to use pricing as an effective response to rising costs,” Smucker said. “Our consistent approach to pricing transparency, along with our leadership position, have provided us the ability to weather these periods in the past – and we remain optimistic that we can do the same in the current cost environment.”
