Life remains challenging in the US packaged grocery sector, but innovative new products and more competitive prices should help JM Smucker avoid a repeat of its recent “sticker shock”, says the Jif peanut butter maker.
Ohio-based Smucker, which has seen sharp drops in volumes in coffee, cooking oil, peanut butter and jam after hiking up ticket prices to recover raw materials costs, said it is “committed to better managing key day-to-day and promotional price points” this year.
Getting the price right in price-sensitive categories such as oils and milk
Speaking to analysts about the firm’s Q4, 2012 results last week, chief operating officer Vince Byrd said the company will be “narrowing our everyday and promotional price gaps with branded and private label competitors and in certain price-sensitive categories, taking a more aggressive stance on pricing”.
It will also ‘downsize’ selected items to meet price points, said chief executive Richard Smucker.
“We've got several categories where we can reduce our size and therefore offer a better value to the consumer without impacting our margins.
“We will also increase focus on getting the price right in price-sensitive categories such as oils and milk.”
It’s fair to say that categories are not growing, they're declining
While coffee and milk prices had come down, the price of peanuts, sugar and certain fruits remained stubbornly high, said the firm, which announced an average 6% price decrease on the majority of its US retail packaged coffee products last month.
However, life remained challenging for the US packaged grocery sector, said Byrd.
“I think it's fair to say that categories are not growing, they're declining. And retailers, if they're growing, they're probably stealing share from their competitors.
“[But] the feedback that we get, despite maybe our results not being where we would like them, we're getting positive feedback that we're doing better than most.”
Everyone has suffered
Meanwhile, “no one is giving up on the center of the store”, stressed Smucker.
“Obviously, with the prices that we've seen this past year, everyone in our industry, and the consumer foods industry, has suffered a little bit from that. But I think we're seeing a turnaround.”
100 new products in fiscal 2013
In fiscal 2013… there will be a “significant planned increase in marketing and innovation”, he added.
“We have a robust new product pipeline across brands and expect to launch approximately 100 new items in 2013.”
New launches will include two new varieties of K-Cup, Folgers FRESH BREAKS, a premium single-serve instant coffee and new varieties of Pillsbury baking mixes, frosting and seasonal items.
Q4, 2012 results
In the three months to April 30, net sales rose 14% to $1.35bn driven by higher prices and the recently acquired espresso coffee company Rowland Coffee Roasters and Sara Lee’s North American foodservice coffee and hot beverage business.
Earnings rose to $104.1m compared with $94.9m in Q1, 2011.
But volume excluding acquisitions slumped 7% owing to “significantly higher retail prices and the competitive environment”.