“Consumer behavior has evolved rapidly in recent years, and will continue to do so,” prompting JM Smucker to reshape its portfolio and restructure its corporate organization “to better support our business,” CEO Mark Smucker told analysts during the company’s third quarter earnings call Feb. 25.
“We really want to create a leaner and flatter organization, ensuring that we align ownership accountability, incentives and so forth to the financial statements, and we do have confidence this is going to make us more agile,” he said.
But, this also means “there are decisions that do negatively impact our employees,” which are “very difficult” and which the company takes “extremely seriously,” Smucker said.
“From time to time, there are moments when we need to ensure the long-term health of our business, and this is one of those moments,” he explained. “We have a very strong continuous improvement mindset, and this is one factor in that process.”
Without providing additional details about how many employees will be laid off or where in the business those roles will come from, Smucker assured analysts that the company is “making sure we treat our employees with the utmost respect, for those that would be exiting the organization.”
Currently, the company employs about 7,000 people across 30 production centers and in sales offices across the US and Canada.
Losses follow divestures, plans to discontinue SKUs
The pending losses will come after the company’s announcement in December that it will restructure as part of a larger effort to generate $50m in annual savings over each of the next three years.
The news also comes after JM Smucker divested its Crisco shortening and oils business for $550m last year, and sold its Natural Balance pet food to Nexus Capital Management for $50m in December.
“We have made great progress in reshaping our portfolio. … These divestitures underscore our commitment to further our focus on brands and categories that have the greatest growth opportunities over the long-term,” he explained.
He added the company is not yet finished, and may divest or cut additional lines and SKUs in the future.
“As we move ahead, we will continue to evaluate all elements of the portfolio and make changes when necessary to ensure our portfolio is positioned for growth,” he said.
During a presentation to the Consumer Analyst Group of New York last week, Smucker said the company planned to discontinue an additional 30% of SKUs in its away from home business, which has been hard hit by the pandemic.
At the time he reassured analysts that the move would have minimal impact on the company’s finances, noting these products account for just 3% of the business’ net sales and that he anticipates customers will transition to other offerings within the company’s portfolio. He did not discuss the impact on employees or the corporate structure.
Retailers continue to simplify assortment
Smucker added that the company’s confidence in this approach “is further supported by external factors, including retailers’ desire to simplify assortment,” which began as a way to alleviate pressure on supply chains and keep shelves stocked during the early days of the pandemic, but which “we do see … as an ongoing trend.”
He explained retailers’ decisions to reduce assortment tends to benefit larger mainstream brands because they are more efficient on shelf and as fewer options are made available sales and market share are concentrated on the remaining brands.
Smucker added: “Coffee and peanut butter would be two of the notable ones where we’re benefiting from that, and what that means is not only are we staying on shelf, but in many cases, we are getting more shelf space. And so, we do see that as an ongoing trend for the foreseeable future.”