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February 22, 2012

CAGNY: Smucker responds to volume pressure with value focus

JM Smucker has said it will focus on reinforcing the value of its brands to respond to the pressure on consumer spending in the US, which has hit volumes within its consumer foods business.

JM Smucker has said it will focus on reinforcing the value of its brands to respond to the pressure on consumer spending in the US, which has hit volumes within its consumer foods business.

Smucker is struggling to adapt to the difficult economic situation in the US and the group booked a greater-than expected 10% drop in third-quarter sales volumes last week.

The company attributed the decline to price increases – including a 30% hike in the price of Jif peanut butter – combined with lower consumer demand across the industry.

“People are managing their expenses and making do with less. As a result overall volume in retail food, including many of the categories we participate in, have declined,” CEO Richard Smucker said during his presentation at the Consumer Analyst Group of New York (CAGNY) conference yesterday (21 February).

He added that growing disparity in consumers’ incomes – the “hourglass effect” –meant that premium brands and value brands were faring best, while Smucker’s mid-tier brands were being hit harder.

“The hourglass effect explains why some premium brands are doing very well, while other brands have experienced challenges. And in this environment the consumer seeks value more than ever before…. Quality, variety, convenience and price all make up an element of value.”

Mr Smucker said that the company’s jams and spreads division was well positioned to deliver on value – “whatever the definition” – because it offers a variety of products, at a variety of price points, through all major retail channels.

Going forward, management revealed that the group will invest in brand building and product innovation in order to strengthen the relevance of the group’s brands to consumers.

Mr Smucker said that the company sees further cause for optimism on volumes in the mid-term.

With commodity prices expected to moderate and cost controls coming into affect, this will to lead to “future pricing actions” and promotional activities which should translate to higher sales volumes, he suggested.

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