J.M. Smucker's (SJM) Latest Deal to Help Fuel Core Categories
The J. M. Smucker Company SJM has been committed to strengthening its core and more promising businesses via prudent acquisitions and divestitures. In this regard, the company inked a deal to divest its Bick's pickles, Habitant pickled beets, Woodman's horseradish and McLarens pickled onions brands to TreeHouse Foods, Inc. THS for nearly $20 million.
Into the Headlines
These brands formed part of SJM’s Canadian portfolio, which reported results under the company’s International and Away From Home segment. These brands delivered net sales worth roughly $60 million during the fiscal year ended Apr 30, 2023. This deal, which is not expected to impact J. M. Smucker’s bottom line on a full-year basis, is anticipated to conclude in the third quarter of fiscal 2024.
The divestiture of these pickle brands will help J. M. Smucker concentrate on growing its foothold in categories like coffee, spreads, frozen handheld and pet in Canada due to robust brands like Jif, Smucker's Uncrustables, Folgers, Smucker's, Meow Mix and Milk-Bone. It will also help SJM sustain its position in the baking category due to brands such as Robin Hood, Five Roses, Carnation and Eagle Brand.
As for TreeHouse Foods, the buyout of these brands will aid the company in solidifying its position in the growing pickles space. This will also support THS’ expansion into Canada, paving the way for greater success.
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What Else to Know About J.M. Smucker?
J. M. Smucker has always been committed to increasing its focus and resources to reshape the portfolio to achieve sustainable growth across pet food and pet snacks, coffee and snacking categories.
The company concluded the divestiture of certain pet food brands in the fourth quarter of fiscal 2023 to reshape the portfolio. This brings the pet business structure to include 60% pet snacks and 40% cat food. This move, which will help SJM direct more resources toward the fast-growing and higher-margin dog snacks category, is expected to enhance the product mix and profit over time. The J. M. Smucker anticipates increasing its dog snacks portfolio to $1 billion (in annual net sales) in the next few years.
Also, J. M. Smucker actively pursues strategic acquisitions in the United States and overseas. It recently inked a deal to acquire the premier snacking company, Hostess Brands. The transaction is likely to close in the third quarter of fiscal 2024. Apart from this, management has been optimizing its supply chain, lowering discretionary costs and expanding network production efficiencies. This Zacks Rank #2 (Buy) company has also been benefiting from its positive net price realization amid cost inflation.
Wrapping Up
J. M. Smucker has been dealing with rising costs. In its first-quarter fiscal 2024 earnings release, management stated that ongoing cost inflation, supply-chain bottlenecks and the broader macroeconomic landscape continue to affect the company’s results and cause risks for fiscal 2024. Shares of the company have tumbled 23.3% in the past three months compared with the industry’s decline of 15.7%.
However, a focus on core priorities, including driving commercial excellence, reshaping the portfolio, streamlining the cost structure and unleashing the organization to win, bodes well.
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The J. M. Smucker Company (SJM) : Free Stock Analysis Report
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