Presentation on theme: "Smucker’s The J.M. Smucker Company: PEST and Industry Analyses"— Presentation transcript:
1 Smucker’s The J.M. Smucker Company: PEST and Industry Analyses By: Kati Wilkerson
2 Snapshot of Smucker's (I) Incorporated Orrville, OH by Jerome M. Smucker2010 Sales: $4.6 Billion80% coming from U.S. MarketsIndustry: Packaged and Processed GoodsSector: Consumer GoodsProducts: fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beveragesAcquired U.S. Brands: Crisco, Dunkin’ Donuts, Eagle Brand, Folgers, Hungry Jack, Jif, Martha White, Millstone, Pillsbury, Kava, Nature’s Peak, Knott’s Berry Farm, Santa Cruz Organic, and many moreAcquired Foreign (Canadian) Brands: Bick’s, Double Fruit, Europe’s Best, Golden Temple, Robin Hood, and ShirriffTarget Market: Working mothers of the middle class
3 Snapshot of Smucker’s (II) CEOs: Timothy P. Smucker and Richard K. SmuckerEmploys 4,850 full-time employeesMarket Share: 17.31% 9/52Operates in U.S., Canada, and Australia with consumers in 65 countriesCompetes in the U.S. Retail Coffee Market, U.S. Retail Consumer Market, U.S. Retail Oils and Baking Market, and Special MarketsProducts sold via direct sales and brokers to food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, military commissaries, health and natural food stores, restaurants, schools and universities, and healthcare operatorsKey Competitors: ConAgra Foods, Inc.; Kraft Foods, Inc.; Unilever; Nestle; General Mills, Inc.
5 Pest analysis Factor Trend Evaluation Impact Political Economical (Threat = T;Opportunity = O)Impact(1 = low;5 = high)Rank in Terms of ImportancePoliticalFood safety regulationsNAFTA regulationsTrade RegulationsT/OOT12411107EconomicalVolatility in commodity market pricesForeign exchange riskNatural disastersUnion unrest359SocialChanges in customer coffee preferenceTransition to healthier foodsIncreasing employment of women8TechnologicalTechnological advances in “going green”6
6 Political influences Food Safety Regulations NAFTA Regulations Regulations by FDA could increase costs for R & DHaving natural products, rules & regulations easily metNAFTA RegulationsFree trade between U.S. & CanadaEasier to conduct business with Canadian brands
7 Economic influences Volatility in Commodity Market Prices Increasing costs of raw materials (farmed produce & crude oil)Higher prices encourage consumers to buy genericForeign Exchange RiskInternational operations and assets in foreign currencyCurrency fluctuations could negatively impact foreign investmentsNatural DisastersDraughts, flooding, etc.Cause poor quality goods, low production, and destruction of produceUnion Unrest:Strikes & Work Stoppages32% of employees of 10 facilities are covered by union contractsResults of collective bargaining, the financial situation, the business itself, and operations severely affected
8 Social influences Change in Consumer Coffee Preferences Coffee represents significant portion of salesLost market share if consumers change preferencesOpportunity: differentiate coffee brands from competitors to make its brands preferredTransition to Healthier FoodsOpportunity: offers 100% natural foodsIncreasing # of Women in Work ForceWomen are holding high employment numbersProducts are working-mother “friendly – save time for moms on-the-go
9 Technological influences Technologic Advances: “Going Green”Brands, including Santa Cruz Organic, utilize environmentally friendly means of energyAppeals to consumers concerned with the environment
10 Industry analysis Factor Evaluation Intensity of Rivalry Strong Force Buyer PowerSupplier PowerBenignThreat of Substitute ProductsThreat of New Entrants
11 Intensity of rivalry: High Industry ParticipantsLargeSimilar costsHighly Committed ParticipantsSeek market leadershipCompete on same/similar dimensionsHigh Entry & Exit BarriersNew entrants not likelyExiting industry requires liquidation of assetsNot what participants wantFavorable Cost StrategiesParticipants distribute couponsVendors have specials on participant productsDetermines which brand is chosen
12 Buyer power Factor Trait of Buyer Power Number of Buyers Many Volume of purchase relative to size of single vendorSmallNature of Vendor’s ProductStandardized or lacking differentiationBuyers and switching costsLow CostsThreat of backward integration by vendorWeakBuyers recognize strong bargaining power, overall, thus causing lower profitability in the industry.
13 Supplier power Factor Trait of Supplier Power Concentration of IndustryModerate to Fairly HighDependency on Industry for RevenuesHighSwitching Costs for Industry ParticipantsAvailability of SubstitutesModerateDifferentiated ProductsLowAbility for Forward IntegrationSuppliers do not recognize high levels of bargaining power, giving some level of power to industry participants.
14 Threat of substitute products With rising costs of raw materials, the prices of products in the industry are likely to increase, causing the consumer to:Do without;Buy a different, less expensive product that has the same effectBuy generic brands; orMake similar products themselves (this requires time and resources), which could be the less attractive alternative to consumers;Purchase other grocery items in place of those of industry participants
15 Threat of new entrants Nature of Barrier Extent of Barrier 1. Supply-side economies of scaleHigh: most companies enjoy large economies of scale2. Demand-side benefits of scaleHigh: consumers recognize the larger brands and generally purchase based on who the know3. Capital requirementsHigh: all major players have invested in several subsidiaries4. Incumbency advantages independent of sizeHigh: major players have claimed their resources, limiting availability; brands are established and well-known5. Customer-switching costsModerate: companies switching suppliers could be severely costly; customers switching brands wouldn’t prove to be dramatically cost efficient6. Unequal access to distribution channelsHigh: major players have claimed their distributors, limiting availability for new entrants7. Restrictive Government PolicyLow: the government’s involvement is low in the industry, aside from government regulating agenciesThreat of new entrants is low.
16 Strongest forces Buyer Power: Threat of Substitute Products: Consumer demand is the driver for sales; without demand, profits will ceaseSwitching costs are low, having adverse effects on the industryThreat of Substitute Products:Because products in the industry aren’t necessities, consumers could easily do without or utilize their resources in other waysConsumers have the ultimate power in the industryIntensity of Rivalry:Industry participants are large and distinguishedCompetitors in the industry are fighting for market share and leadership
17 Industry summaryOverall, the Packaged and Processed Goods Industry is an industry that does relatively well, achieving a semi-attractive rating:Products within the industry will always be in demandBuyers have significant power, posing a threat to the industryRivalry intensity is contingent on consumer preference for product, price, and availabilityWhile new entrants are unlikely, participant growth and expansion are highly likely, posing an opportunity for industry participants
18 Suggestions to the industry (I) Aim to differentiate products to reduce buyer power, and increase power in the industrySubstitutes are difficult to avoid, so participants should attempt to emerge into other markets to increase ability to reduce the threat of substitutes by gaining “substitute market share”Continue to transition products into healthier options for consumersIn the event of natural disasters, have a fall-back planIn the event of indirect natural disasters, make products readily available to the affected regionDifferentiate products to better suit consumer preferences
19 Suggestions to the industry (II) Consider other alternatives to cutting costs to combat increasing commodity pricesKeep in mind the rules and regulations of the FDA when performing R&D of new and existing productsPerform focus groups to determine customer preferencesDetermine “what women want” in terms of products for their familiesContinue making transitions to “going green”
20 The J.M. Smucker Company: Competitor and Market Analyses Smucker’sThe J.M. Smucker Company:Competitor and Market Analyses
22 Competitor Comparison (I) LocationMarket SegmentsCompeting BrandsSmucker’sStrong presence in North America, competing globallyU.S. retail coffee;U.S. retail consumer; U.S. retail oils & baking; & SpecialCrisco, Dunkin’ Donuts, Eagle Brand, Folgers, Hungry Jack, Jif, Martha White, Millstone, Pillsbury, Kava, Nature’s Peak, Robin HoodConAgraWorld-wide presenceConsumer & Commercial FoodsPam, Fleischmann’s, Blue Bonnet, Parkay, Peter Pan, Swiss MissKraftU.S. beverages, cheese, convenient meals, grocery & snacks; Canada & N.A. food service; Kraft Europe; & Kraft developing marketsA1, Capri Sun, Claussen, Crystal Light, Maxwell House, Gevalia, Good Seasons, Kool-Aid, Lunchables, Nabisco, Sure-Jell, YubanUnileverGlobal giantSavoury, dressings and spreads; ice cream and beverages; personal care; home care productsLipton, Blue Band, Rama, Country Crock, Knorr, Hellman’sNestléPowdered & liquid beverages; water; milk products and ice cream; nutrition; prepared dishes and cooking aids; confectionary; pet care; pharmaceutical; Emerging marketsNescafe, Thomy, Carnation, Juicy Juice, Nestea, Minor’sGeneral MillsU.S. Retail; International; Bakeries & Foodservice; Emerging & developing marketsBetty Crocker, Bisquick, Gold Medal, Jus-Rol, Pillsbury, Cascadian Farm
23 Competitor Comparison (II) Net Income*Net Sales* (consumer goods)Growth from 2009 (%)Full-Time EmployeesMarket Rank2010R & D Expense(& % of Sales)Smucker’s$494 M$4.6 B22.54,8508/52$21 M.457%ConAgra$745 M$12.1 B-2.7924,4005/52$77.9 M.644%Kraft$4.1 B$14.4 B7.25127,000N/A$583 M4.05%Unilever$2.6 B€22.8 M$32.1 M8.38165,0001/52NestléCFH 37.5 B$40.8 BCFH 71.1 B$77.26 B6.44281,000General Mills$1.53 B$2.74 B0.6733,0003/52$218 M7.96%* from 2010 annual reports
24 ConAgra experiences most of its sales in the consumer foods market Sales By segmentSmucker’s experiences most of its sales in the U.S. coffee retail marketConAgra experiences most of its sales in the consumer foods market
25 Sales by SegmentKraft experiences most of its sales in the U.S. beverages, cheese, convenient meals, grocery & snacks marketUnilever experiences most of its sales in the savoury, dressings, & spreads market
26 Sales by segmentNestlé experiences most of its sales in emerging marketsGeneral Mills experiences most of its sales in the U.S. retail market
27 Overall Competitor Position Market Share?$ CowsDogsHighLowHighSmucker’sMarket GrowthLowKraftConAgraUnileverNestléGeneral Mills
31 Competitor position: special markets Market Share?$ CowsDogsHighLowHighSmucker’sMarket GrowthLowConAgraGeneral MillsNestléKraftUnilever
32 Strategic business groups: Leading competitors of Processed & Packaged Goods BeveragesIngredientsSpreadsBaking mixesJuices:- NestléFlour:- General MillsFruits:- Smucker’sPancake Mix:Coffee:Evaporated Milk:Mayonnaise:- UnileverInstant Potatoes:Tea:Oils:Peanut Butter:Cake, Muffin, etc. Mix:Smucker’s enjoys the leading position within the Spreads and Baking Mixes strategic business groups, while they also hold the lead in Coffee and Oils segments.
33 Core Competences & Strategies CompetitorCore CompetencesStrategiesSmucker’sQuality, people, ethics, growth, and independenceOwn & market food brands that hold #1 market position in their categoryExpanding portfolioEmbracing a global perspectiveConAgraEstablishing a demand-driven supply chain; reducing complexity; achieving plant optimization; extracting value from SAP implementation; insight-based approach; platform innovation; making higher-quality, and more nutritious foodDivesting commodity-based and lower-margin businessesInnovate and reduce costs to drive sales growthKraftProduct quality; brand recognition; brand loyalty; service; marketing; advertising; price; and performance-driven, values-led organizationGrowth in developing marketsGlobal Snacks powerhouse iconic heritage brands and cultureUnileverN/ANestléUnmatched product and brand portfolio; R & D capability; geographic presence; and people, culture, values, and attitudeNutrition, water and rural developmentGeneral MillsInnovation; brand building; leading customer growth; international expansion; and margin expansionBrand-building with innovative merchandising and consumer-based marketing- Building global platforms
34 Market segmentation: Consumer Markets FactorConsumer MarketsCharacteristics of PeopleFemale; years old; middle, to upper-middle class; at least 2 family members (one being a child); family in developing stages; living in urban or suburban areas; time-sensitive, busy lifestylesPurchase / Use SituationSingle purchase; brand loyalty is high; Use: consumption; Purchasing behavior: best quality for best price; Importance of purchase: low; Choice criteria: nutrition, price, quality, availabilityUser’s Needs & Preferences for Product CharacteristicsDifferentiation from consumer perspective needed; Price preference: low; Brand preference based on environmental concerns, taste, price, availability, quality
35 Market Segmentation: Commercial markets FactorIndustrial / Organizational MarketsCharacteristics of OrganizationsFood industry: Restaurants, bakeries, etc.; Globally based (with large focus in the U.S.); Large organizations with many locations; No significant technology; Moderate levels of profitabilityPurchase / Use SituationIngredient use - compliment to products; Importance of purchase: high; High volume purchases; Weekly – monthly purchases; Purchase through mass distributors; Choice criteria: best price/quality based on size of purchaseUser’s Needs & Preferences for Product CharacteristicsProper consistency; Not much assistance needed from suppliers; Brand preferences based on price, quality, availability; Best quality for lowest price; No service requirements needed – unless recalls on products
36 Methods of competition Brand LoyaltyCoupon AvailabilityVendor RelationsMarketingTelevision ads, newspaper articles/ads, social media (Facebook, Linked-In)Acquisitions and DivestituresEconomical / Environmental Advances
37 Conclusions (I) Smucker’s Key Competitors: ConAgra Foods, Inc.Kraft Foods, Inc.UnileverNestléGeneral Mills, Inc.Consumer goods companies have similar strategies: focusing on innovation and becoming more prevalent in developing marketsCompetitive Methods: consumer loyalty, coupon distribution, vendor relations (specials), marketing, acquisitions and divestitures, advances in environmental friendliness
38 Conclusions (II)Market Segmentation: working mothers of the middle – upper-middle class; businesses requiring the products within the industry required for business performanceSmucker’s recognizes market leadership in the U.S. Retail Coffee Market, U.S. Retail Oils & Baking MarketRoom for growth in Special Markets and overall market share
39 Smucker’s The J.M. Smucker Company: Internal and SWOT Analyses and Competitive Positioning
40 Smucker’s Business model Marketing and Manufacturing CompanyFocused in U.S. marketsSells its products in over 65 countriesPrides itself on acquisition of large brandsFocuses products on bringing families together at mealtimeDriven to make products healthierBasic Beliefs:QualityPeopleEthicsGrowthIndependenceHold the belief that building trust and confidence with constituents in the company, brands, & products
41 Smucker’s past performance: historical sales by market (in Millions) Growth:
48 Swot analysis Strengths Weaknesses Opportunities Threats Ownership of industry-leading brandsDiverse portfolioAggressive acquisition of major brandsLeader in U.S. marketsLow market shareLow global presenceSmaller scale of operations compared to competitorsTarget market is too concentratedOpportunitiesThreatsNAFTA regulationsFood safety regulationsNatural disastersChanges in consumer preferencesTransition to healthier foodsIncreasing full-time employment of womenTechnological advances in “going green”Volatility in commodity market pricesForeign exchange riskUnion unrestHigh intensity of rivalry
49 Smucker’s BCG Matrix: competitive Position Market Share?$ CowsDogsHighLowHighMarket GrowthSmucker’sLow
51 Smucker’s Value Chain Analysis Smucker’s key primary activities are its operations, outbound logistics, and marketing and sales.
52 Smucker’s Value Chain Marketing & Sales Service Inbound Logistics Relationship with SuppliersReceiving, storing, & disseminating suppliesOperationsTransform supplies into productsReady products for consumer consumptionOutbound LogisticsActivities for collecting, storing, & distributingReady products for product distributionMarketing & SalesInform consumers of products, provide couponsMake products more appealing than competitors’ServiceConsumer supportAdjusting product & services based on consumer’s needs
53 Smucker’s strategic vision “The Company’s strategic vision is to own and market food brands which hold the number one market position in their category, with an emphasis on North America while embracing a global perspective.”
54 Smucker’s Competitive Position Variety-BasedNeeds-BasedProvides variety of flavors of productsMarkets and manufactures products based on consumer preferencesProvides variety of brandsMaking products healthierProviding products at affordable prices: issuance of coupons, vendor deals
55 Smucker’s Generic Strategy Competitive AdvantageOverall Cost LeadershipDifferentiationCost FocusDifferentiation FocusLow CostHigher CostLow Cost Leadership:Smucker’s competes by providing consumers with low-cost goods, while providing consumers with coupons and vendor specialsBroadCompetitive ScopeBroad Competitive Scope: Smucker’s owns a variety of brands, providing consumers with an array of productsNarrow
56 Smucker’s Grand Strategy Acquire large house-hold brand namesBuild family moments by providing products that bring families together at mealtimeProvide low-cost products for its consumersProvide the healthier products consumers preferUtilize advances in technology in making products more environmentally friendly
57 Smucker’s Strategic Clock Smucker’s provides its products to its consumers at low costs.Smucker’s provides its consumers with high quality productsSmucker’s has a low cost base & reinvests in its product quality & low-cost products
58 Conclusions Smucker’s Business Model: Focused on U.S. marketsDiverse portfolio of brandsProducts focused on bringing families together at mealtimeDriven to make products healthierProfit over the past 5 years has increasedIts coffee segment has proven to be its most profitableSales are primarily in the U.S., while international growth is increasingGeneric and grand strategies focused on the consumer