JM Smucker explores acquisitions, innovation, stepped-up marketing to energize coffee sales

By Elizabeth Crawford

- Last updated on GMT

Source: JM Smucker Co
Source: JM Smucker Co

Related tags Smucker Co Coffee acquisition

JM Smucker wants to expand its leadership position in the at-home coffee category, where it currently holds 26% of the market share and three of the top eight brands, through potential acquisitions, innovation, broader geographic reach and reinvigorated marketing and new packaging, executives told investment analysts last week.

“Our $2.5bn coffee segment [is] a business in an incredibly strong category, with significant tailwinds,”​ as at-home coffee consumption, currently representing 71% of all coffee drinking occasions, is positioned for continued growth due partly to inflation reinforcing shifts in consumer habits formed in the past three years, CEO Mark Smucker said last week at the Consumer Analysts Group of New York meeting.

During the company’s third quarter earnings this morning, Smucker added the company is already tapping into this potential with US retail coffee net sales increasing 11% over the same period last year. While the increase partly came from price hikes related to inflation, Smucker added it also came from across the company’s portfolio, “underscoring the advantages of our broad product offerings.”

He added the coffee portfolio “grew dollar share more than any other branded manufacturer for the seventh consecutive quarter and continued to outpace the at home coffee category.”

At CAGNY he said the company will build on this momentum by tapping into shopping shifts, including an increased desire to recreate at home the café experience with more premium and yet less expensive options, as well as increased interest in cold coffee, convenient no-brew and ready-to-drink formats and value from multi-serve offerings.

A strong innovation pipeline

To meet this demand, “we are expanding into no-brew liquid coffee concentrates, multi-serve offerings and ready-to-drink offerings,”​ Smucker said.

For example, he said, the company plans to expand its Dunkin coffee brand to $1bn in annual sales within the next four years from its current expected sales of $850m this fiscal year with the addition of new formats, including the launch of a single-serve, no brew Dunk Cold coffee powder, which is “crafted to dissolve in cold water,”​ Cold concentrates and “more innovation to come.”

JM Smucker also is innovating around more premium varieties, such as Folgers Black Silk, which is positioned as a darker, smoother drinking experience and already is the #1 selling dark roast canister and the #1 fastest growing dark roast canister among millennials and Gen X, Smucker said.

This reflects the overall success of Folgers, which the company noted during its third quarter earnings call Feb. 28 maintained double the volume share of any other brand in the category, continued its momentum with double-digit net sales and was the “fastest growing brand in dollar share, increasing over half a point during the quarter.”

Stepped-up advertising, expanded appeal

The company is further supporting Folgers with a punched-up advertising campaign and new packaging designed balance consumer interest in nostalgia but also desire for something modern, functional and affordable.

“The reaction [to the campaign that launched last year] has been positive, demonstrated by the strong momentum for the Folgers brand, as it grew the most dollar-share in the at-home coffee category last year,”​ Smucker said.

JM Smucker also is leveraging digital media to expand the reach of Café Bustelo, currently the eighth largest brand in the coffee category and the #1 in espresso coffee and Latin coffee, said Smucker.

“Café Bustelo was the fastest growing brand in the at-home coffee category, and increased an impressive 28% in consumer take away,”​ and has significant additional room to grow, he said during the company’s third quarter call.

The company plans to build on this momentum to achieve annual net sales for the brand of $300m in the next two years in part by expanding its geographic research to boost its “relatively low” household penetration as well as reinforcing its connection with Hispanic consumers, which Smucker notes is one of the fastest growing demographics in the US.

JM Smucker also plans to increase promotion investments in Dunkin in the fourth quarter, taking advantage of narrowing price gaps to competitors with an expected increase in volume, Smucker said during the company’s third quarter call.

Acquisitions, strategic partnerships could fuel growth

To further support the company’s expansion in the at-home coffee category, Smucker said the business is investing in manufacturing capabilities and strategic partnerships, as well as “establishing a dedicated team to enable agility, speed and autonomy to accelerate commercialization,” and ​exploring potential acquisitions in the at-home coffee category.

Finally, Smucker said, the company will continue to invest in its single-serve options including its fast-growing K-Cup portfolio, which includes Dunkin Original Blend, “the #1 pod brewed in a Keurig machine in 2022.”

He noted the company expects its K-Cup portfolio to grow to $1bn within the next five years with support from new households entering the category.

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