J M Smucker: ‘Our innovation success rate exceeds industry norms’
Speaking at the Barclays Back to School conference in Boston this week, CEO Richard Smucker said: “Our teams have delivered record levels of innovation this past years ranging from new platforms and line extensions to new flavor varieties and packaging innovations.
“This led to the launch of more than 60 new items in 2012 and an additional 70 new items in 2013, and this year we are on track to launch 100 new items.
“We believe our innovation success rate exceeds industry norms. Our internal target is for new products to contribute 1% growth to the top line annually, but over the past few years we have far exceeded this objective.
“In 2013, products introduced in the last years delivered $530m or approximately 9% of our company’s net sales.”
In 2013, K-Cups added nearly $290m to our top line, accounting for roughly half of the total company’s new product sales
Much of this growth had come from single serve coffee, said president and COO Vince Byrd, and while growth rates in this segment had started to moderate, Smucker is still anticipating its K-Cup sales will grow 15% this fiscal year, he said.
“In 2013, K-Cups added nearly $290m to our top line, accounting for roughly half of the total company’s new product sales.”
Jif Natural continues to be one of our fastest growing product lines with 2013 volume increasing nearly 30%
However, Smucker has also generated strong volume growth in the peanut butter and nut butter categories this year, said Byrd, who said Smucker is on a mission to grow Smucker’s and Jif into billion-dollar brands and significantly increase its presence in frozen handheld products.
Turning to the Jif brand, growth has accelerated with the introduction of Jif Natural and Jif To Go, said Byrd.
“Jif Natural continues to be one of our fastest growing product lines with 2013 volume increasing nearly 30%, it now holds a 22% share of the natural peanut butter segment.” Volumes of Jif To Go have grown nearly 60% in the past year, he said.
Jif almond and cashew butters
Meanwhile, extending the Jif brand beyond peanut butter has created incremental business, he said.
“Nut butters [aside from peanut butter] continues to be the fastest growing category with sales exceeding $400m at retail, more than doubling just two years ago. We entered the category last year with the introduction of two flavors of Jif Hazelnut Spreads.
“This summer, we followed on the launch with Jif Almond and Jif Cashew Butters representing the first national brand in these segments.
“Our teams will continue to innovate around new flavors, forms and packaging, while also seeking new platforms all part of the plan to build Jif into a billion-dollar brand.”
Three quarters of 20% volume growth for Uncrustables frozen sandwiches
Turning to frozen handheld products, the firm’s Uncrustables frozen sandwiches have experienced three consecutive quarter of 20% volume growth, he said.
“Much of the focus this fiscal year centers on adding capacity at our Scottsville, Kentucky plant due to completion of an $80m expansion.”
M&A: Competition for assets is likely to increase
As regards acquisitions, he said, “we evaluate whether the acquisition provides us with leading brands, is it an attractive category? Does it have center of the store presence? And is it North America focused?
“That said, we’ve been clear that we maintain a global perspective and our focus globally is primarily in China outside of North America.”
Bosses also consider whether there are opportunities for “synergies where we can leverage our go-to-market supply chain capabilities”, he said. “And are we willing to pay the right price for which us historically has been multiples between seven and ten times EBITDA.”
M&A activity in the food industry has picked up significantly in the past year, multiples have been increasing and this will likely continue, he predicted.
“We also acknowledge that competition for assets is likely to increase, yet we remain confident in our ability to identify and complete transactions that are necessary to meet our top line growth activities.”
In fiscal 2013, net sales increased 7% to almost $5.9bn.
