The Prudent Investor

How J. M. Smucker Co. Makes Its Money
April 24, 2007, 7:00 am
Filed under: Consumer Goods

The final three companies on the list actually are small. With less than a $3 billion Market capitalization, the J. M. Smucker Company is the next company to be examined.

J. M. Smucker Co. produces fruit spread products, foods, beverages, ice cream toppings, and natural peanut butter. In 2002 it acquired Jif and Crisco. It reports as two segments, U.S. retail and special markets.

The U.S. retail market segment includes the consumer foods and oils and represents 69% of sales and 82% of operating profits. The special market segment, which includes foodservice, international, industrial and beverage businesses, represents 31% of sales, 18% of operating profit.

Principal product categories are peanut butter (19% of sales), shortening and oils (16%), fruit spreads (14%), flour and baking ingredients (14%), baking mixes and frostings (11%), and other categories that each contribute less than 5% to sales.

Although Standard & Poor sees the current net sales growth to only be in the 2-3% range, they expect that earnings will rise 4.5% for the year, and 7-8% longer term, and this works for me. This growth will probably come from thaw-and-serve sandwiches, as well as price increases.

The company appears to be favorable enough to retain for further consideration.


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