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J.M. Smucker CEO on engaging consumers amid COVID: ‘shelf presence is key’

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J.M. Smucker CEO & President Mark Smucker joins Yahoo Finance Live to discuss the company’s strong Q3 earnings report and outlook for 2021.

Video Transcript

BRIAN SOZZI: JM Smucker out with better than expected sales and earnings this morning on the back of strong demand for Folgers coffee and Meow Mix cat food. The JIF owner also lifted its full-year profit outlook.

Let's get more on this with JM Smucker president and CEO Mark Smucker. Yahoo Finance's Julia la Roche is here as well. Mark, good to speak with you again here. The stock's up about 3% on this news, I think taking the cue off of your outlook. You're raising the top end of your earnings guidance by about $0.25. What gives you the confidence in raising guidance here?

MARK SMUCKER: Well, look, first of all, our industry as a whole has done just a fantastic job this last year, just working together to try to meet demand and ensure that we're delivering safe food for our consumers. We are very pleased with the performance that we've had and are really focused on ensuring that a meaningful portion of the new consumers that have come back into our brand franchises, that we can maintain them, whether that's through marketing engagement, very sharp commercial execution at the store level, and leveraging things like the shelf assortment.

Retailers are optimizing their shelves. It benefits larger brands. And so we stand to benefit from that also not only now but in the future.

JULIA LA ROCHE: Mark, I'm going to get into that with you in just a bit. But I do want to ask you about where you see the company heading in the future. During the quarter, you did make two divestitures. I think it was-- what was it? It was Crisco and Nature's Balance. So I am curious. Where do you want to focus your efforts? And what do you think JM Smucker really looks like in the future? And what kind of opportunities do you want to go after?

MARK SMUCKER: Yeah, thanks, Julia. So a very key part of our strategy that we've been vocal about is leading in the best categories. And what that means is ensuring that, over time, we evolve our portfolio to have the best brands that we know that we can give the right amount of TLC and focus to.

So these divestitures, if you think about Crisco, in the past, we divested our canned milk business and our Pillsbury baking business. This is sort of the last step in exiting the baking category. And then Natural Balance is a dog food brand that we felt wasn't in need of as much focus as some of our other portfolio. So it's just about really getting our portfolio right and focusing.

BRIAN SOZZI: Mark, that ultimately raises the next question. What type of acquisitions could you be looking at to help build out this portfolio? The deal activity in packaged food has really come out of the gate strong this year. Look at Hormel pick up Planter's. There's just a lot of deal activity. Are you feeling some pressure to get something done?

MARK SMUCKER: Acquisitions has always been part of our strategy. We built the company over the last 20 years on many significant acquisitions. And so we are always in the market for those. We're always looking.

They have to be right. We have to be able to get them at the right price. They could be in our existing categories. And there is always the opportunity if something more transformational comes along, we could consider other categories. But we think about them in the buckets of transformational, enabling, and bolt-on. So always on our radar screen, but nothing to report at this time.

JULIA LA ROCHE: Mark, you were mentioning in the first question, just some of the ways in which you plan to keep customers. And if you just look across the portfolio, a lot of impressive growth, whether it's the coffee category or, my favorite, Uncrustables, and then the pet food as well. But I am interested in learning what is it that really works when it comes to retaining a new customer when you start to gain share. It's an unusual time, obviously, because of the pandemic. But what do you find actually works when it comes to retaining customers?

MARK SMUCKER: Yeah, sure. It comes down to our marketing efforts and then how we execute at the store level, whether that's the digital store or the actual physical store. So in terms of engaging consumers, we have the ability to triangulate and identify consumers who have come into the franchise and push messaging to them, whether through social channels or what have you.

And we have more confidence now, say, than we did six months ago in our ability to retain many of those consumers. And so it's just getting the message out there and making sure that there's that engagement.

And then the second thing I alluded to earlier was this notion of both manufacturers, CPG, as well as retailers are getting a lot more granular at optimizing their assortments. And so if you think about the shelf, think about coffee or peanut butter, for example, where retailers are actually refining or taking out the long tail of the smaller items, larger brands like JIF and Folgers stand to benefit and actually gain shelf space. So the presence, the physical presence on shelf is key.

JULIA LA ROCHE: Mm-hmm. I did notice the away-from-home category. Obviously, at-home consumption has been a lot stronger. Can you talk to us about what you're seeing there? And where are you starting to see some recovery in that space?

MARK SMUCKER: Sure, Julia. We have seen a bit of recovery ahead of our expectations as we return to normal. And what is normal? We still believe it's going to be relatively gradual. So that segment is going to come back relatively slowly. There are certain areas. Uncrustables is there. Schools have continued to stay in session in many states. And so Uncrustables has done well in that segment. But there are other areas where we're serving lodging and so forth which continue to be challenged.