Peanut Butter Competition Hurts Smucker Shares

(Bloomberg) -- Americans -- no longer fearing fat -- are eating more nut butters, and JM Smucker Co.’s Jif still holds nearly one-third of the market. So why is it blaming peanut butter for its slimmed down full-year guidance?

Jif sales in the U.S. have been growing for two straight years, data from Euromonitor International show, widening its gap over No. 2 Skippy, a Hormel Foods Corp. brand. But even as Smucker sells more, the costs to make peanut butter are rising and the price it gets for each jar is on the decline, squeezing profitability on the sandwich-making staple.

Rising competition from low-cost private-label store brands is what’s making it hard for Smucker to charge more, Chief Financial Officer Mark Belgya said on a Wednesday morning call with analysts after releasing second-quarter results.

The peanut butter problems, paired with lower coffee pricing, led the company to lower its full-year sales outlook to $7.9 billion from $8 billion previously. Smucker shares fell as much as 7.2 percent after reporting earnings, the biggest intraday drop since August.

Still, the overall volume trend is positive, with sales for the total nut and seed butters category up 1.3 percent since 2013, according to Euromonitor. In addition to gains from natural brands like Hormel’s Justin’s, a pickup in other nut butter offerings is also at play.

“People are expanding into other nut butters, almond butter and also cashew butter,” said Michael Halen of Bloomberg Intelligence. They’re also looking for healthier, lower sugar, non-allergenic options, so big-name brands are increasingly expanding their offerings to oblige.

To contact the reporter on this story: Deena Shanker in New York at dshanker@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Craig Giammona

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