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The J.M. Smucker Company SWOT & PESTLE Analysis

ID : 52279453 | Oct 2017

OVERVIEW

Name of the Company: The J.M. Smucker Company

Business Sector: Food Processing

Operating Geography: Canada, North America

About the Company: The J.M. Smucker Company, founded in 1897 by Jerome Monroe Smucker, is an American manufacturer of fruit spreads, ice cream toppings, beverages, shortening, peanut butter, and other products in North America. It has 49 brands across Consumer and Natural foods, Coffee, Pet Food and Pet Snacks, and other Canadian Brands. Smucker's headquarters are located in Orrville, Ohio and have 6910 employees as on May, 2017.

Revenue: $1748 million – 1st Quarter Ending on 31st July, 2017

Competitive Analysis of the j m smucker company

The SWOT analysis for The J.M. Smucker Company is presented below:
Strengths
Weaknesses
1. Strong popular brands
2. Steady increase in U.S. consumer spending
3. J.M. Smucker is ranked 47 in “Fortune 100 best companies to work for”
4. Increased R&D spending
1. Less global presence apart from US market
2. Dependence on distributors and retailers
Opportunities
Threats
1. Accelerating growth in premium and single-serve coffee category
2. Steady increase in U.S. consumer spending
3. Potential in emerging markets
4. Growth in U.S. Food Service market at a CAGR of 3.33% during the period 2016-2020
1. Competition from stronger brands in the same industry
2. Decline in net sales and profit across all the segments
3. More focus on fresh food

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Strengths

1. Strong popular brands: J.M. Smucker has strong brands across the major food processing segments. consumer foods and beverages, they are the branded market leader in the coffee, peanut butter, fruit spreads, shortening, sweetened condensed milk, ice cream toppings, and natural beverage categories in the U.S. Within pet food and pet snacks, they are the branded market leader in the dog snacks category in the U.S. In Canada, J.M. Smucker is the branded market leader in the flour, pickles, canned milk, fruit spreads, shortening, and ice cream toppings categories.

2. Steady increase in U.S. consumer spending: Consumer Spending in the United States is expected to be 11989.26 USD Billion by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, it can be estimated that consumer spending in the United States to stand at 12174.56 in 12 months time. Such steady increase in consumer spending will ensure healthy growth in revenue earned.

3. J.M. Smucker is ranked 47 in “Fortune 100 best companies to work for”: The company was ranked 47 in 2008 and 1 in 2004 in “Fortune 100 best companies to work for” which reflects the employee-friendly work culture present.

4. Increased R&D spending: The company spends $58.1 million on Research and Development in order to build and improvise brands through innovation leveraged by science and technology. They also partnered with TSC, the University of Arkansas, and Arizona State University to conduct a water risk analysis in nine Company supply chains. The replacement of a compressed air dryer with a more efficient model is expected to save 45,000 kWh per year. And finally, In 2017, a 0.5-megawatt solar array on the plant’s warehouse roof is projected to save 425 tonnes CO2 and offset 640,000 kWh of electricity usage.

Weaknesses

1. Less global presence apart from US market: Emerging markets are the key to growth for companies like J.M. Smucker. Smucker currently operates in the US, where it generates more than 90% of its revenue. It has presence in countries like Canada, Mexico and China. The company has established a small customer base with some manufacturing facilities in Canada, and a limited exports market.

2. Dependence on distributors and retailers: Smucker does not directly sell its products. It majorly depends on distributors and retailers, who are part of its supply chain and are responsible for reaching the products to the end-consumer. Any conflict with the distributors or retailers can negatively impact its sales in the market. So the company needs to increase its share of sales through e-commerce, as it aims to generate 5 percent of net sales in fiscal 2020 through e-commerce.

Opportunities

1. Accelerating growth in premium and single-serve coffee category: The J.M. Smucker Co. has plans to attack the at-home coffee category, including expanding its already strong presence in the mainstream segment while at the same time accelerating growth in the premium and single-serve category. The single-serve and premium segments now account for about 65% of the overall at-home coffee category, with mainstream and instant accounting for the remaining 35%, thus providing an opportunity for growth.

2. Steady increase in U.S. consumer spending: Consumer Spending in the United States increased from 11758 USD Billion in the first quarter to 11853 USD Billion in the second quarter of 2017. So, an increase in consumer spending means more customers can buy more Smucker products which will in turn increase the revenue earned.

3. Potential in emerging markets: Emerging markets are the key to growth for food processing companies like Smucker. It has set itself a target of increasing its sales by 2020 and this can be achieved by an aggressive expansion in markets across Asian Subcontinent, ASEAN region, Africa and Latin America. Developed markets are expected to deliver a growth of only 1-2% over the next five years due to market saturation.

4. Growth in U.S. Food Service market at a CAGR of 3.33% during the period 2016-2020: Growth in U.S. foodservice market is providing an opportunity to the company for further investment for expansion, as the company plans to increase capital expenditures to add new manufacturing capacity, improving flexibility and productivity at several existing manufacturing facilities, and enhancing our information technology.

The unpublished sections of the entire SWOT analysis is available in the 'Complete Report' on purchase.

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The PESTLE / PESTEL analysis for The J.M. Smucker Company is presented below:
Political
Economical
1. US withdrawing from NAFTA Regulations
2. Trade Regulations
1. Economic indicators of a country
2. Foreign exchange risk
3. Natural disasters
Social
Technological
1. Change in customer coffee preference
2. Transition to healthier foods
1. Technological advances in going green
2. Additional Smucker's Uncrustables Sandwiches Manufacturing Facility in Longmont, Colorado
Legal
Environmental
1. Change in tax laws and regulations1. Actionable steps to address climate change within the value chain
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Political

1. US withdrawing from NAFTA Regulations: NAFTA essentially reduced tariffs between the three countries, US, Mexico and Canada to zero. Without it, tariffs would revert to levels under the World Trade Organization. That could put a dent in North American trade. Since JM Smucker has a significant share in the Canadian market, US withdrawing from NAFTA will increase tariff rates which will affect the cost of production.

2. Trade Regulations: The US government’s trade policy can affect business by making it easier or more difficult to trade across international borders. Increased protectionism policies impact global trade and more often than not these are influenced by political factors and issues. Trump administration has already withdrawn from Trans-Pacific Partnership trade agreement and is expected to take much more administrative changes to trade deals and partnerships.

Economic

1. Economic factors affecting a country: The J. M. Smucker Company can use country’s economic factors such as growth rate, inflation & industry’s economic indicators such as Processed & Packaged Goods industry growth rate, consumer spending etc to forecast the growth trajectory of not an only sector but also that of the organization.

2. Foreign exchange risk: It is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. Investors and businesses exporting or importing goods and services or making foreign investments have an exchange rate risk which can have severe financial consequences. So, in order to expand globally, the company needs to consider Foreign Exchange Risk.

3. Natural disasters: The unpredictability of natural disasters can also affect businesses as it causes sudden price rise due to the scarcity of raw materials, especially in food processing industry.

Social

1. Change in customer coffee preference: With Folgers and Dunkin Donuts packaged coffee in its brand portfolio, the J.M. Smucker Company is both the biggest coffee roaster in the U.S. and one of the companies that are best-positioned to reap the profits from America's caffeine addiction. The single-serve and premium segments now account for about 65% of the overall at-home coffee category, with mainstream and instant accounting for the remaining 35%, thus providing an opportunity for growth.

2. Transition to healthier foods: Heightened focus on health and wellness, an increased desire for fresh foods, and the growing impact of social media and e-commerce on consumer behavior is also affecting the sales.

The unpublished sections of the entire PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.

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Chipotle Mexican Grill SWOT analysis has been conducted by Prerna Pathre and reviewed by senior analysts from Barakaat Consulting.

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