Smucker Sees More Products on Chopping Block in Slim-Down Push
(Bloomberg) -- More than half of JM Smucker Co.’s products are under the microscope and could even be headed for the chopping block unless they start pulling their weight on the supermarket shelves.
“We are evaluating the 60% of our total items that represent only 20% of company sales,” John Brase, chief operating officer, said at the company’s investor day Thursday. “We will stop efforts that are unproductive or no longer consistent with our growth strategy.”
Cutting underperforming lines will let the company invest more in the high-return SKUs, or stock-keeping units, an industry term for specific products. It will also make things less complex for the Smucker sales team, according to Chief Strategy and International Officer Amy Held.
Like so many things, the pandemic has changed eating habits and consumption patterns, pushing the 123-year-old company to rethink everything.
Chief Executive Officer Mark Smucker declined to name which brands or categories could be cut next. The maker of Jif peanut butter and Folgers coffee has already trimmed several big-name consumer products, including selling its Crisco shortening business earlier this month and announcing a deal last week to divest premium pet-food business Natural Balance to Nexus Capital Management LP, which was mostly sold at specialty retailers.
“Ultimately, Covid has helped to make it much more clear what consumers really want, so some of those decisions are easy and it should have no meaningful impact on our top line by eliminating those items,” CEO Smucker said in an interview. “By eliminating non-productive, low-volume items, it frees up resources to focus on the important ones.”
Other pet food brands are still a priority. In 2021, the company is planning to reintroduce its Milk Bone biscuits as a more premium brand, add trendy bone broth as an ingredient to some pet foods and start shipments of a new dog food line for larger breeds. To keep up with the booming pet foot space, Smucker is splitting its sales team into two, with one group focusing exclusively on pets.
E-commerce is also a priority, especially after people ate at home more during the Covid-19 lockdowns. Smucker is looking to develop online-only products and test direct shipping to customers, while also partnering with click-and-collect retailers.
Increased demand during the pandemic has also led to some supply shortages. Its Uncrustables line of sandwiches continues to be a hot item, with capacity constrained at times during seven of the past 10 years, Brase said. As a result, a new production line for the manufactured sandwiches will be operational starting next month and the company has accelerated another plant expansion phase, with construction to begin early next year.
Earlier Thursday, the company reaffirmed its fiscal year 2021 guidance and provided long-term financial targets, including annual net sales growth of 2%.
The company’s shares are up 13% this year through Wednesday, about on par with the S&P 500.
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