• by Thom Forbes , June 8, 2018

Even as J.M. Smucker Co released a fourth-quarter earnings report yesterday that was a lot worse than analysts anticipated it would be in both results and projections, CEO Mark Smucker iterated that the company was “transforming” its business with “a new pace of chance and sense of urgency.” Smucker purveys its eponymous jams throughout North America, as well as retail brands including Folgers, Jif, Dunkin’ Donuts, Crisco, Café Bustelo, Milk-Bone and Kibbles ’n Bits.

The company has been spending “heavily on marketing to battle competition while struggling with high costs,” reports Reuters’ Aishwarya Venugopal. “Smucker, like other U.S. food companies, has been fighting higher freight costs by raising prices of some of its consumer foods products. That, however, hurt sales of food brands such as Jif peanut butter and Crisco cooking oil…. Intense competition from several private label brands has also weighed on Smucker. The company has been spending to introduce new brands to keep up with rivals and consumer demand for healthier and simpler foods,” Venugopal continues.

“Smucker has been trying to reshape its business as well-established brands — like Crisco oil and Pillsbury cake mixes — struggle with sales declines. Like other food makers, Smucker has invested in adapting its brands to consumers’ demand for fresher, more natural food. But the persistent declines in certain areas of the grocery store continue to weigh on Smucker,” Annie Gasparro and Allison Prang write in the Wall Street Journal.

“Excluding non-recurring items, adjusted earnings per share of $1.93 missed the FactSet consensus of $2.19. Sales slipped to $1.781 billion from $1.784 billion, below the FactSet consensus of $1.80 billion, as declines in the oils, peanut butter and baking categories, which was partially offset by gains in coffee, led to lower volume and mix,” Tomi Kilgore reports for MarketWatch, adding that it expects adjusted EPS of $8.40 to $8.65 for 2019, below the FactSet consensus of $9.18.

It took a beating on the stock market as a result, with its shares falling $5.72, or 5.4%, to $100.80, on the report. 

“Smucker noted various moves the company has made, including bringing two new items to market: 1850 premium coffee and Jif Power Ups snacks. The 1850 coffee is designed to appeal to those younger customers who have a preference for stronger coffee, the CEO said earlier. Smucker Co. touts 1850 as bold, yet smooth,” Katie Byard reports for the Akron Beacon Journal. “Smucker also noted the company’s recent acquisition of Ainsworth Pet Nutrition LLC, strengthening its pet food portfolio. Ainsworth makes Rachael Ray Nutrish premium pet food.”

CEO Smucker defended the recent increase in marketing expenditures in the Q4 2018 earning call, which was transcribed on Seeking Alpha.

“If you look at our … investment in our consumer marketing over the last decade or so, you will see that we have actually eroded our marketing spend to the tune of about $80 million and that is simply not acceptable. And so, as a result of that erosion — and yes some of it is going to trade —  but as a result of that erosion we have made choices in the particular years about supporting core brands versus innovation and we’ve got to ensure that we are supporting our brands for the long term …”  

A key message going forward, he said, would be that “if you look at our marketing as a percent of net sales, we need to be more in line with the rest of the industry in terms of what we’re supporting — both our new products or new brands as well as our core business.”

But a chunk of its fortune going forward — like that of many other companies and the farmers who produce their staples — may not be under its control.

The Orrville, Ohio-based company also “has been under pressure recently as Canada announced potential retaliatory tariffs on jam and other products, one of the company's most well-known products. Trade tensions between the U.S. and one of its partners under the North American Free Trade Agreement continue to escalate as President Donald Trump joins other members of the G-7 in Canada to discuss global economic goals this week,” CNBC’s Gillian Brassil reports.

Indeed, White House Council of Economic Advisers’ “economic analysis of President Trump’s trade agenda has concluded that Mr. Trump’s tariffs will hurt economic growth in the United States, according to several people familiar with the research,” Jim Tankersley and Alan Rappeport report in the New York Times this morning.

The President will step off Air Force One in Charlevoix, Quebec, today after reportedly griping with aides about attending the G-7 meeting at all as he prepares to meet with North Korean leader Kim Jong-un in Singapore on Tuesday, even if he also maintains he doesn’t need “to prepare very much” because “it’s about attitude,” as he said yesterday.

“The president also told advisers that he thinks attending [G-7] … was not a good use of his time because other world leaders attending oppose his policies and he ‘does not want to be lectured by them,' The Washington Post reported, citing a trio of sources. Trump also fumed about Canadian Prime Minister Justin Trudeau as their differences on trade and tariffs have been publicly revealed,” Bob Fredericks writes for the New York Post.