J.M. Smucker will acquire P&G’s Jif peanut butter brand and Crisco cooking oils. The merger of Jif peanut butter and Crisco shortening brands with Smucker, the largest strawberry jam manufacturer in the US, is a deal reported to have been two decades in the making, P&G’s decision to spin the company off to its shareholders is a welcome improvement on its previously shaky commitment to exiting non-core businesses.

P&G shareholders will receive one new share in the Orville, Ohio-based group for every 50 P&G shares they own, which will give P&G shareholders a 52.5% stake in Smucker. The reformed Smucker will have sales of about $1.3 billion, double current sales. In FY2003, the first full year after the deal closes, Smucker said it expects earnings before one-time costs to be between $95-105 million, almost three times current levels.


According to Tim Smucker, chairmen and co-chief executive, his father Paul began discussions with P&G 20 years ago about the possibility of bringing the core ingredients of the peanut butter and jelly sandwich together.


The transaction finally came about due to P&G’s decision to focus on fewer, market leading brands. However, P&G appears to be suffering separation anxiety. Earlier this year, the company announced a joint venture with Coke that would have combined P&G’s Pringles potato chips and Sunny Delight juice drinks with Coca-Cola’s Minute Maid juices and Hi-C, Five-Alive and Fruitopia drinks. Although the deal has since fallen apart, the companies have continued talks about a scaled down version of the venture, even test-shipping Pringles on Coca-Cola trucks.


Since 1998, food and beverages revenues at P&G have dropped from $4.3 billion to $4.1 billion. As a percentage of total revenue, food and beverages have fallen from 11.5% to 10.3%. Revenue from household and personal products, on the other hand, now comprise the remaining 90% Despite a portfolio of highly recognizable food and beverage brands, including Pringles, Folgers and Sunny Delight, P&G should pursue divesture of these non-core, non-performing brands.


With revenues falling, and the company posting its first quarterly loss in eight years for Q4 2001, P&G should focus its energies on revamping its own corporate and brand structure. Spinning off the merged entity rather than retaining a share was a positive move for the struggling giant.

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