Along with Crisco products, trademarks and licensing agreements in the US, JM Smucker also will pass to B&G its ex-US oils and shortening business, which is primarily in Canada, dedicated manufacturing and warehouse facilities in Cincinnati and 160 employees who support the brand, according to the Oct. 26 announcement.
Smucker’s decision to sell Crisco is not a criticism of the brand’s business, which holds the No. 1 position in shortening and vegetable oil, and offers a strong cash flow with net sales reaching approximately $270m in fiscal year 2020 ended April 30. Crisco’s market position continued to strengthen in the first quarter of fiscal 2021 in which Smucker reported net sales grew more than 50%.
Rather, the sale was part of Smucker’s previously stated intent to exit the US baking category to better focus on other key growth areas.
“Crisco is an iconic brand that is beloved by consumers, and the business has been a solid contributor to our financial performance,” JM Smucker CEO Mark Smucker said in a statement. “However, our strategic priorities include an increased focus an allocation of resources toward pet food and pet snacks, coffee and snacking to maintain momentum in these categories.”
Smucker’s coffee business includes iconic brands Folgers, Dunkin’ and Café Bustelo – all of which grew double-digits in the first quarter, and which Smucker told analysts in August he expects will continue to grow in the second quarter as the company boosts production, adds more variety to store shelves and invests in marketing focused on new consumer acquisition. The company’s pet business also saw sold growth in the first quarter with cat food sales up 13% and dog snacks up 9%. At the same time, Smucker’s snacks and at-home consumer foods division also saw a 22% increase in sales with strong contributions from Uncrustables, frozen sandwiches, fruit spreads, ice cream toppings and Jif peanut butter products in the quarter.
Reflecting on these strengths, Smucker added that by selling Crisco, the company can “further grow our core business and unlock value for our shareholders” with a deal that should be dilutive to its adjusted earnings per share of 45 cents to 55 cents on a full-year basis.
Acquisition reinforces B&G’s commitment to baking
Given Crisco’s strong track record, B&G Foods’ acquisition of the brand is in keeping with its “longstanding acquisition strategy of targeting well-established brands with defensible market positions and strong cash flow at reasonable purchase price multiples,” B&G CEO Kenneth Romanzi said in a statement.
It also aligns well with B&G’s existing portfolio of diverse iconic brands and recent acquisitions to fill out its baking business – including the 2019 acquisition of the backing soda and corn starch brand Clabber Girl Corporation from Human & Company for $80m. According to the company, initial debt from this and the February 2020 acquisition of the vegan appetizer and nugget brand Farmwise with cash on hand have already been absorbed ahead of schedule.
The addition of Crisco also reinforces B&G’s commitment to strengthen its baking business, to which it added in July 2018 McCann’s Irish Oatmeal. Other brands in the company’s baking portfolio include Baker’s Joy, Brer Rabbit molasses, Grandma’s Molasses, Dec-A-Cake and others.