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. Smucker
2010 Sales: $4.6 Billion
80% coming from U.S. Markets
Industry: Packaged and Processed Goods
Sector: Consumer Goods
Products: fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages
Acquired 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 more
Acquired Foreign (Canadian) Brands: Bick’s, Double Fruit, Europe’s Best, Golden Temple, Robin Hood, and Shirriff
Target Market: Working mothers of the middle class

3. Snapshot of Smucker’s (II)
CEOs: Timothy P. Smucker and Richard K. Smucker
Employs 4,850 full-time employees
Market Share: 17.31%  9/52
Operates in U.S., Canada, and Australia with consumers in 65 countries
Competes in the U.S. Retail Coffee Market, U.S. Retail Consumer Market, U.S. Retail Oils and Baking Market, and Special Markets
Products 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 operators
Key Competitors: ConAgra Foods, Inc.; Kraft Foods, Inc.; Unilever; Nestle; General Mills, Inc.

4. Smucker’s sales by market: 2010 Sales

5. Pest analysis Factor Trend Evaluation Impact Political Economical
(Threat = T;
Opportunity = O)
Impact
(1 = low;
5 = high)
Rank in Terms of Importance
Political
Food safety regulations
NAFTA regulations
Trade Regulations
T/O O T 1 2 4 11 10 7
Economical
Volatility in commodity market prices
Foreign exchange risk
Natural disasters
Union unrest 3 5 9
Social
Changes in customer coffee preference
Transition to healthier foods
Increasing employment of women 8
Technological
Technological advances in “going green” 6

6. Political influences Food Safety Regulations NAFTA Regulations
Regulations by FDA could increase costs for R & D
Having natural products, rules & regulations easily met
NAFTA Regulations
Free trade between U.S. & Canada
Easier 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 generic
Foreign Exchange Risk
International operations and assets in foreign currency
Currency fluctuations could negatively impact foreign investments
Natural Disasters
Draughts, flooding, etc.
Cause poor quality goods, low production, and destruction of produce
Union Unrest:
Strikes & Work Stoppages
32% of employees of 10 facilities are covered by union contracts
Results 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 sales
Lost market share if consumers change preferences
Opportunity: differentiate coffee brands from competitors to make its brands preferred
Transition to Healthier Foods
Opportunity: offers 100% natural foods
Increasing # of Women in Work Force
Women are holding high employment numbers
Products 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 energy
Appeals to consumers concerned with the environment

10. Industry analysis Factor Evaluation Intensity of Rivalry Strong Force
Buyer Power
Supplier Power
Benign
Threat of Substitute Products
Threat of New Entrants

11. Intensity of rivalry: High
Industry Participants
Large
Similar costs
Highly Committed Participants
Seek market leadership
Compete on same/similar dimensions
High Entry & Exit Barriers
New entrants not likely
Exiting industry requires liquidation of assets
Not what participants want
Favorable Cost Strategies
Participants distribute coupons
Vendors have specials on participant products
Determines which brand is chosen

12. Buyer power Factor Trait of Buyer Power Number of Buyers Many
Volume of purchase relative to size of single vendor
Small
Nature of Vendor’s Product
Standardized or lacking differentiation
Buyers and switching costs
Low Costs
Threat of backward integration by vendor
Weak
Buyers recognize strong bargaining power, overall, thus causing lower profitability in the industry.

13. Supplier power Factor Trait of Supplier Power
Concentration of Industry
Moderate to Fairly High
Dependency on Industry for Revenues
High
Switching Costs for Industry Participants
Availability of Substitutes
Moderate
Differentiated Products
Low
Ability for Forward Integration
Suppliers 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 effect
Buy generic brands; or
Make 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 scale
High: most companies enjoy large economies of scale
2. Demand-side benefits of scale
High: consumers recognize the larger brands and generally purchase based on who the know
3. Capital requirements
High: all major players have invested in several subsidiaries
4. Incumbency advantages independent of size
High: major players have claimed their resources, limiting availability; brands are established and well-known
5. Customer-switching costs
Moderate: companies switching suppliers could be severely costly; customers switching brands wouldn’t prove to be dramatically cost efficient
6. Unequal access to distribution channels
High: major players have claimed their distributors, limiting availability for new entrants
7. Restrictive Government Policy
Low: the government’s involvement is low in the industry, aside from government regulating agencies
Threat 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 cease
Switching costs are low, having adverse effects on the industry
Threat of Substitute Products:
Because products in the industry aren’t necessities, consumers could easily do without or utilize their resources in other ways
Consumers have the ultimate power in the industry
Intensity of Rivalry:
Industry participants are large and distinguished
Competitors in the industry are fighting for market share and leadership

17. Industry summary
Overall, 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 demand
Buyers have significant power, posing a threat to the industry
Rivalry intensity is contingent on consumer preference for product, price, and availability
While 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 industry
Substitutes 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 consumers
In the event of natural disasters, have a fall-back plan
In the event of indirect natural disasters, make products readily available to the affected region
Differentiate products to better suit consumer preferences

19. Suggestions to the industry (II)
Consider other alternatives to cutting costs to combat increasing commodity prices
Keep in mind the rules and regulations of the FDA when performing R&D of new and existing products
Perform focus groups to determine customer preferences
Determine “what women want” in terms of products for their families
Continue making transitions to “going green”

20. The J.M. Smucker Company: Competitor and Market Analyses
Smucker’s
The J.M. Smucker Company:
Competitor and Market Analyses

21. Key Competitor Evaluation
ConAgra Foods, Inc.
Kraft Foods, Inc.
Unilever
Nestlé
General Mills, Inc.

22. Competitor Comparison (I)
Location
Market Segments
Competing Brands
Smucker’s
Strong presence in North America, competing globally
U.S. retail coffee;
U.S. retail consumer; U.S. retail oils & baking; & Special
Crisco, Dunkin’ Donuts, Eagle Brand, Folgers, Hungry Jack, Jif, Martha White, Millstone, Pillsbury, Kava, Nature’s Peak, Robin Hood
ConAgra
World-wide presence
Consumer & Commercial Foods
Pam, Fleischmann’s, Blue Bonnet, Parkay, Peter Pan, Swiss Miss
Kraft
U.S. beverages, cheese, convenient meals, grocery & snacks; Canada & N.A. food service; Kraft Europe; & Kraft developing markets
A1, Capri Sun, Claussen, Crystal Light, Maxwell House, Gevalia, Good Seasons, Kool-Aid, Lunchables, Nabisco, Sure-Jell, Yuban
Unilever
Global giant
Savoury, dressings and spreads; ice cream and beverages; personal care; home care products
Lipton, Blue Band, Rama, Country Crock, Knorr, Hellman’s
Nestlé
Powdered & liquid beverages; water; milk products and ice cream; nutrition; prepared dishes and cooking aids; confectionary; pet care; pharmaceutical; Emerging markets
Nescafe, Thomy, Carnation, Juicy Juice, Nestea, Minor’s
General Mills
U.S. Retail; International; Bakeries & Foodservice; Emerging & developing markets
Betty Crocker, Bisquick, Gold Medal, Jus-Rol, Pillsbury, Cascadian Farm

23. Competitor Comparison (II)
Net Income*
Net Sales* (consumer goods)
Growth from 2009 (%)
Full-Time Employees
Market Rank
2010
R & D Expense
(& % of Sales)
Smucker’s
$494 M
$4.6 B
22.5
4,850
8/52
$21 M
.457%
ConAgra
$745 M
$12.1 B
-2.79
24,400
5/52
$77.9 M
.644%
Kraft
$4.1 B
$14.4 B
7.25
127,000
N/A
$583 M
4.05%
Unilever
$2.6 B
€22.8 M
$32.1 M
8.38
165,000
1/52
Nestlé
CFH 37.5 B
$40.8 B
CFH 71.1 B
$77.26 B
6.44
281,000
General Mills
$1.53 B
$2.74 B
0.67
33,000
3/52
$218 M
7.96%
* from 2010 annual reports

24. ConAgra experiences most of its sales in the consumer foods market
Sales By segment
Smucker’s experiences most of its sales in the U.S. coffee retail market
ConAgra experiences most of its sales in the consumer foods market

25. Sales by Segment
Kraft experiences most of its sales in the U.S. beverages, cheese, convenient meals, grocery & snacks market
Unilever experiences most of its sales in the savoury, dressings, & spreads market

26. Sales by segment
Nestlé experiences most of its sales in emerging markets
General Mills experiences most of its sales in the U.S. retail market

27. Overall Competitor Position
Market Share ?
$ Cows
Dogs
High
Low
High
Smucker’s
Market Growth
Low
Kraft
ConAgra
Unilever
Nestlé
General Mills

28. Competitor Position: U.S. Retail coffee market
Market Share ?
$ Cows
Dogs
High
Low
High
Nestlé
Market Growth
Low
Kraft
Smucker’s
General Mills
ConAgra
Unilever

29. Competitor Position: U.S. Retail consumer market
Market Share ?
$ Cows
Dogs
High
Low
High
Market Growth
Smucker’s
Unilever
Low
ConAgra
General Mills
Kraft
Nestlé

30. Competitor position: U.S. retail oils & baking market
Market Share ?
$ Cows
Dogs
High
Low
High
Market Growth
Nestlé
Smucker’s
Kraft
Low
General Mills
ConAgra
Unilever

31. Competitor position: special markets
Market Share ?
$ Cows
Dogs
High
Low
High
Smucker’s
Market Growth
Low
ConAgra
General Mills
Nestlé
Kraft
Unilever

32. Strategic business groups: Leading competitors of Processed & Packaged Goods
Beverages
Ingredients
Spreads
Baking mixes
Juices:
- Nestlé
Flour:
- General Mills
Fruits:
- Smucker’s
Pancake Mix:
Coffee:
Evaporated Milk:
Mayonnaise:
- Unilever
Instant 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
Competitor
Core Competences
Strategies
Smucker’s
Quality, people, ethics, growth, and independence
Own & market food brands that hold #1 market position in their category
Expanding portfolio
Embracing a global perspective
ConAgra
Establishing 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 food
Divesting commodity-based and lower-margin businesses
Innovate and reduce costs to drive sales growth
Kraft
Product quality; brand recognition; brand loyalty; service; marketing; advertising; price; and performance-driven, values-led organization
Growth in developing markets
Global Snacks powerhouse iconic heritage brands and culture
Unilever
N/A
Nestlé
Unmatched product and brand portfolio; R & D capability; geographic presence; and people, culture, values, and attitude
Nutrition, water and rural development
General Mills
Innovation; brand building; leading customer growth; international expansion; and margin expansion
Brand-building with innovative merchandising and consumer-based marketing
- Building global platforms

34. Market segmentation: Consumer Markets
Factor
Consumer Markets
Characteristics of People
Female; 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 lifestyles
Purchase / Use Situation
Single purchase; brand loyalty is high; Use: consumption; Purchasing behavior: best quality for best price; Importance of purchase: low; Choice criteria: nutrition, price, quality, availability
User’s Needs & Preferences for Product Characteristics
Differentiation from consumer perspective needed; Price preference: low; Brand preference based on environmental concerns, taste, price, availability, quality

35. Market Segmentation: Commercial markets
Factor
Industrial / Organizational Markets
Characteristics of Organizations
Food industry: Restaurants, bakeries, etc.; Globally based (with large focus in the U.S.); Large organizations with many locations; No significant technology; Moderate levels of profitability
Purchase / Use Situation
Ingredient 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 purchase
User’s Needs & Preferences for Product Characteristics
Proper 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 Loyalty
Coupon Availability
Vendor Relations
Marketing
Television ads, newspaper articles/ads, social media (Facebook, Linked-In)
Acquisitions and Divestitures
Economical / Environmental Advances

37. Conclusions (I) Smucker’s Key Competitors:
ConAgra Foods, Inc.
Kraft Foods, Inc.
Unilever
Nestlé
General Mills, Inc.
Consumer goods companies have similar strategies: focusing on innovation and becoming more prevalent in developing markets
Competitive 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 performance
Smucker’s recognizes market leadership in the U.S. Retail Coffee Market, U.S. Retail Oils & Baking Market
Room 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 Company
Focused in U.S. markets
Sells its products in over 65 countries
Prides itself on acquisition of large brands
Focuses products on bringing families together at mealtime
Driven to make products healthier
Basic Beliefs:
Quality
People
Ethics
Growth
Independence
Hold 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:

42. Smucker’s Past performance: Historical Profit

43. Changes in distribution of sales: By division
(in Millions)
2010 Sales
U.S. Retail Coffee
$855.6
$1,700.5
U.S. Retail Consumer
$1,103.6
$1,125.3
U.S. Retail Oils & Baking
$995.5
$905.7
Special
$803.6
$873.8

44. Distribution of Sales: By Geography
Country
U.S.
(Domestic)
Canada
Other International
Sales
(in $ Million)
4,167
385.9
52.4
Growth from 2009 (%)
24.3
8.3
8.5

45. Smucker’s resources Agriculture (Raw Materials): Oil: Foreign Exchange
Fruit
Grains
Dairy
Oil:
Transportation of products
Foreign Exchange
Hedge against currency exchange risk
Diversified Portfolio of Brands
Folgers, Dunkin’ Donuts, Crisco, Pillsbury, Eagle Brand, Hungry Jack, Jif, Millstone, Martha White, etc.

46. Smucker’s key assets in thousands
Current Assets:
Cash generated from operations ($283,570)
Trade Receivables ($238,867)
Inventories:
Finished Products ($413,269)
Raw Materials ($241,670)
Property, Plant, & Equipment:
Land ($62,982)
Buildings & Fixtures ($308,358)
Machinery & Equipment ($997,374)
Construction in Progress ($31,426)
Noncurrent Assets:
Goodwill ($2,807,730)
Intangible Assets ($3,026,515)
Other ($5,892,910)

47. Breakdown of Assets

48. Swot analysis Strengths Weaknesses Opportunities Threats
Ownership of industry-leading brands
Diverse portfolio
Aggressive acquisition of major brands
Leader in U.S. markets
Low market share
Low global presence
Smaller scale of operations compared to competitors
Target market is too concentrated
Opportunities
Threats
NAFTA regulations
Food safety regulations
Natural disasters
Changes in consumer preferences
Transition to healthier foods
Increasing full-time employment of women
Technological advances in “going green”
Volatility in commodity market prices
Foreign exchange risk
Union unrest
High intensity of rivalry

49. Smucker’s BCG Matrix: competitive Position
Market Share ?
$ Cows
Dogs
High
Low
High
Market Growth
Smucker’s
Low

50. Smucker’s BCG Matrix: competitive brands
Market Share ?
$ Cows
Dogs
High
Low
High
Millstone
Eagle Brand
Hungry Jack
Market Growth
Dunkin’ Donuts
Crisco
Low
Martha White
Jif
Pillsbury
Folgers

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 Suppliers
Receiving, storing, & disseminating supplies
Operations
Transform supplies into products
Ready products for consumer consumption
Outbound Logistics
Activities for collecting, storing, & distributing
Ready products for product distribution
Marketing & Sales
Inform consumers of products, provide coupons
Make products more appealing than competitors’
Service
Consumer support
Adjusting 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-Based
Needs-Based
Provides variety of flavors of products
Markets and manufactures products based on consumer preferences
Provides variety of brands
Making products healthier
Providing products at affordable prices: issuance of coupons, vendor deals

55. Smucker’s Generic Strategy
Competitive Advantage
Overall Cost Leadership
Differentiation
Cost Focus
Differentiation Focus
Low Cost
Higher Cost
Low Cost Leadership:
Smucker’s competes by providing consumers with low-cost goods, while providing consumers with coupons and vendor specials
Broad
Competitive Scope
Broad Competitive Scope: Smucker’s owns a variety of brands, providing consumers with an array of products
Narrow

56. Smucker’s Grand Strategy
Acquire large house-hold brand names
Build family moments by providing products that bring families together at mealtime
Provide low-cost products for its consumers
Provide the healthier products consumers prefer
Utilize 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 products
Smucker’s has a low cost base & reinvests in its product quality & low-cost products

58. Conclusions Smucker’s Business Model:
Focused on U.S. markets
Diverse portfolio of brands
Products focused on bringing families together at mealtime
Driven to make products healthier
Profit over the past 5 years has increased
Its coffee segment has proven to be its most profitable
Sales are primarily in the U.S., while international growth is increasing
Generic and grand strategies focused on the consumer