The J. M. Smucker Company

The J. M. Smucker Company is one of the leading producers and marketers of jams, jellies, and preserves in United States, Canada, and Australia. The company is a family managed enterprise with its history dating back to 1879 when Jerome Monroe Smucker founded it. Over time, the company’s management has been relegated from one generation to the other. Under this management, the company has expanded in the 20th century through the acquisition of several small companies in the same line of business (Gamble 77). In this regard, the company has managed to sustain a constant growth in its sales through increased production levels and diversity in the products it offers. After the 20th century, the company witnessed stiff competition from its rivals that commanded a large portion of the market share. As a result, the company was compelled to take initiatives that would foster its survival and increase its revenues. Consequently, it would lead to increased shareholders’ wealth and growth in the company’s net income.

The Smucker brothers and co-CEOs Timothy and Richard Smucker, having analyzed the potential threats the company was exposed to in 2001, identified two business lines, Procter & Gamble (P&G) and Jif and Crisco, for divesture. This implied that the company’s revenue would strategically grow through organic sales and the introduction of new products. In this regard, the Company anticipated increased annual revenue of $3 billion. As pertaining to acquisitions, in 2004, the company acquired the International Multifoods for $840 million. This acquisition added two more food brands, Pillsbury and Hungry Jack to Smucker Company boosting its sales by a significant margin (Gamble 75). At the same time, Smucker’s acquisition of Folgers from P&G for $3.7 billion made it one of the largest producers of breakfast foods and beverages in North America.

The acquisitions gave Smucker some of the best brands of coffee, jams, and jellies, peanut butter and cooking oil available in the North America’s market by the end of 2010. Similarly, the company’s revenue increased immensely from $632 million in 2000 to $4.6 billion in 2010. In addition, its profits rose from $36 million to $ 494 million. Thus, the Company’s share price provided the shareholders with a 309 percent total return in relation to a 15 percent return for S&P 500 between 2000 and 2010 (Gamble 76). This indicated that the company’s rating had substantially improved and its market share was notable among investors.   

Considering the industry’s growth rate, many food companies’ earnings growth was unattractive. Nevertheless, most survived the harsh economic conditions. During this time, the food companies had to compete aggressively in terms of the prices, sales volume, and product quality. Notably, over the years, consolidation in the retail grocery industry was prevalent and thus the Smucker Company’s growth was still unnoticed in the market. An analysis of its competitors like Walmart, Kroger, Safeway, Supervalu/Albertson’s, and Ahold USA indicated that the Company remained diminutive in the processed food industry. This implied that the Smucker Company might not have gained adequate bargaining advantage when negotiating with other powerful retailers. Additionally, the consolidated supermarket chains who rivaled the Smucker Company commanded 70 percent of the industry’s sales.

In its 2011 fiscal year, the Smucker Company’s financial performance was significant despite the economic downturn witness in US. Notably, its operating income rose by a 5% in the first quarter of the year indicating that the Company influenced the market influence despite the stiff competition. An analysis of its statement of income indicates that there had been a significant increase in the Company’s net income over the years. Similarly, the asset base of the company had dramatically changed after the series of acquisitions. This indicated that the company was noticeable in the market as one of the influential process food producer (Gamble 88). In addition, the cash at the company’s disposal was significant to meet any obligations that would have emerged over the years. This is reflected in the company’s cash flow statements. Finally, the overall financial performance of the Smucker Company has been improving simultaneously compared with that of its rivals.

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