Smuckers’ Stock Plummets

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Share prices of The J.M. Smucker Company dropped well over 10 percent this week as sales and profits did not meet their hopes and predictions. The price per share fell from $112 to $103 in overnight trading. 

The American manufacturing company blamed the drop on a 6 percent decline in quarterly net sales as well as lower peanut butter and pet food prices. The prices of Smuckers’ products such as Folgers Coffee and Jif Peanut Butter have been getting cheaper lately, which is good for consumers but not for corporate profits. In an interview with CNN, Chief Executive Officer Mark Smucker explained, “ We did not fully anticipate how aggressive some of the competition would be on pricing.” Sales of Smucker’s pet food fell seven percent while revenue for consumer products fell as much as 17 percent. Total revenue missed expectations by over 900 million dollars. 

Despite the rough past couple of days, CEO Mark Smucker is still optimistic. “We will respond with pricing, in-store merchandising and advertising. We have continued momentum in many key product categories. We are already taking decisive actions and prioritizing initiatives that strengthen our business.”

Smucker’s saw revenue of $1.78 billion in Quarter Two of 2019. This number is a combination of sales from their line of jams, peanut butter, pet food, and Uncrustable sandwiches.

Smucker’s is one of many companies who is seeking to expand there corporate portfolio by acquiring many popular brands. In 2001 they purchased Jif Peanut Butter for $1 billion. In 2008, Folgers was acquired for a whopping $3 billion. And most recently Smucker’s bought Ainsworth Pet Nutrition, who are most known for manufacturing Meow Mix, for $1.7 billion. 

Smucker’s has there own line of natural peanut butters as well as owning Jif. As a self-proclaimed peanut butter expert, I would advise Smucker’s to discontinue their line of peanut butter and focus on the more well known and popular Jif. Peanut butter is a profitable and well-respected business model. A recent survey found that peanut butter has a 75 percent  household permeation rate in the United States. Smucker’s should continue selling their Jif products but not their natural Smucker’s products. They are oily and unappetizing, and in my opinion, not many people are buying them.

Smucker’s should also continue selling their Folgers coffee products. Coffee also has a high U.S. household permeation at 62 percent. In 2018, Folgers made Smucker’s a profit of over $162 million. This is one of Smucker’s top revenue streams. 

However, I would advise Smucker’s to sell their stake in Ainsworth Pet Nutrition. The food manufacturer should stick to what they do best, which is manufacturing food for human consumption. With much more notable and recognizable competition in the pet food category, Smucker’s should just cut their losses and end their partnership with any and all pet food companies.

Smucker’s should also continue producing their various jams and jellies. This accounted for a sizable portion of their revenue in 2018, and they pretty much have the market to themselves with not much competition.

Perhaps Smucker’s most exciting area for growth and development is in the sale of their Uncrustables. The sandwiches are delicious and provide a good deal of protein and healthy fats. In 2018, they accounted for $200 million of the companies revenue, a number that experts predict will grow to $500 million in 2019. Uncrustables currently have only 7 percent household penetration, giving the product a lot of room to grow and generate more profit.

Moving forward, I would suggest that Smucker’s attempt to corner the peanut butter market by purchasing other notable peanut butter brands such as Justin’s, Peter Pan or Skippy. Additionally, the company could create some new flavors of Uncrustables to try and expand that market.

The reduced share price could be a good thing for potential investors such as myself. This is a good time to buy shares of Smucker’s while the buy-in is low. Smucker’s is a strong company which has a bright future moving forward. I would urge anyone interested in getting into the stock market to take advantage of this opportunity.

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