The J.M. Smucker (SJM) Benefits From Solid Demand & Strategies

JM Smucker Co. SJM leverages strengths in its core priorities, which include driving commercial excellence, reshaping the portfolio, and simplifying the cost structure.

The company continues to benefit from the home consumption trends caused by the pandemic as consumers search for trusted brands. Furthermore, the revival of the “away from home” segment has spurred growth. However, the mounting input cost inflation is a headwind.

Let’s discuss more.

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What works with JM Smucker?

JM Smucker is progressing well with Core Priorities. Strength in its core strategies helps The JM Smucker navigate complex supply chain challenges. This also helps the company improve in-store fundamentals and stock performance for brands.

JM Smucker is committed to increasing its focus and resources to reshape its portfolio for sustainable growth across pet foods, pet snacks, coffee and snacks. In December 2021, J.M. Smucker announced the divestiture of its dry pet food business, including its production unit in Frontenac, KS, to Diamond Pet Foods, Inc. This divestiture coincides with the company’s strategy to focus investments and resources in the fast-growing pet food and snack business. Recently, J.M. Smucker signed an agreement to offload its natural and organic beverage as well as grain business to Nexus Capital Management LP. The deal is likely to expire in the third quarter of fiscal year 2022.

JM Smucker is actively seeking strategic acquisitions in the United States as well as abroad. We note that the company’s acquisition of Ainsworth (completed in May 2018) was aiding performance in the pet food category in the United States. Other noteworthy acquisitions of the company include; Big Heart Pet Brand (maker of pet food) and Sahale Snacks (maker of nut and fruit snacks), among others.

Many other companies in the food business such as Post Holdings, Inc. Mail, Hormel Foods Company HRL and McCormick & Company, Incorporated MKC benefits from acquisitions.

In the fourth quarter of fiscal year 2021, Post Holdings net sales included $99.8 million of net sales from acquisitions made in fiscal year 2021. Acquisitions include ready-to-eat cereal company Egg Beaters, Almark Foods and related assets and Peter Pan butter brand walnut;

Hormel Foods is strengthening its business through strategic acquisitions. In June, HRL acquired the Planters snack portfolio. Prior to that, the company acquired Texas-based smoked meat company Sadler’s Smokehouse in March 2020. The acquisition coincides with Hormel Foods’ initiatives to strengthen its position in the foodservice business.

McCormick has strategically strengthened its presence through acquisitions that have strengthened its investment portfolio. In December 2020, McCormick purchased a 100% stake in FONA International, LLC and some of its subsidiaries. FONA’s diversified portfolio helps McCormick enhance its value-added offerings and expand the flavor solutions segment into attractive categories. In November 2020, McCormick acquired the parent company of Cholula Hot Sauce – a premium hot sauce brand based in Mexico.

Is everything rosy for JM Smucker?

JM Smucker faces cost inflation as well as challenges in the supply chain and transportation, along with isolated labor shortages. During the second quarter of fiscal year 2022, adjusted gross profit decreased 7% to $730.9 million, primarily due to increased costs for goods, manufacturing, transportation and packaging.

JM Smucker, in its second-quarter earnings call, said it expects costs to rise for the remainder of fiscal 2022, primarily due to green coffee and transportation. The company also anticipates additional manufacturing expenses, particularly for business and business continuity plans. However, management is focusing on taking inflation-justified pricing actions, revenue growth management strategies as well as productivity initiatives to minimize the impact of these headwinds.

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The JM Smucker Company (SJM): Free Stock Analysis Report

Hormel Foods Corporation (HRL): Free Stock Analysis Report

McCormick & Company, Incorporated (MKC): Free Stock Analysis Report

Post Holdings, Inc. (POST): Free Stock Analysis Report

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The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

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