Smucker--which impressed analysts with its just-announced first-quarter fiscal '09 results--also confirmed its previous guidance that its net sales for the full fiscal year ending next April should reach $3.8 to $4 billion, depending on the exact timing of the Folgers close. Net sales were up 18% in the last fiscal year to $2.53 billion, and Q1 '09 net sales also jumped by a record 18%, to nearly $664 million (including a 13% jump in U.S. retail sales). Profit for the quarter grew 4%.
Earnings per diluted share for Q1 rose 8% to 77 cents, and Smucker confirmed a projection of EPS of $3.45 to $3.50 for full fiscal '09. The company also said that shareholders will receive a special dividend of $5 per share once the deal closes.
The $3.3 billion all-stock deal will be the largest acquisition in the company's history, adding 1,250 employees as well as doubling Smucker sales. Furthermore, it comes on the heels of last year's acquisitions of the Carnation, Europe's Best and Knott's Berry Farm brands, which added $31 million in sales during Q1. Once acquired, Folgers--the No. 1 packaged coffee brand--plus Folgers-owned coffee brands Dunkin' Donuts and Millstone, will account for an estimated 42% of Smucker's total sales.
Smucker upped marketing by 16% during the quarter, and said it expects to boost marketing by even larger percentages in the coming quarters, largely in support of the ongoing rollout of its Crisco Olive Oil line, launched about two years ago.
Co-CEO Richard Smucker reported that the product line is "receiving great acceptance" as its distribution continues to expand, adding that the line's first national television commercial will debut in this year's third quarter.
As for marketing once Folgers is in the fold, co-CEO Tim Smucker confirmed the company's intention to "continue to be the No. 1 spender" in its categories. He noted that existing brands are already being "marketed much closer together," and stressed the greatly expanded cross-marketing opportunities represented by Folgers.
Smucker intends to stick long-term with a core message that he summed up as: "The best way of starting your day is Folgers in your cup and Smucker's on your toast, and the best way of ending your day is Folgers in your cup and some Pillsbury."
The Folgers acquisition will also strengthen Smucker's core retail strategy of having No. 1 brands in center store, noted Vince Byrd, senior VP, consumer marketing.
Richard Smucker confirmed that those in the senior management team will be "transitioning to new roles and responsibilities" as a result of the Folgers merger.
Despite economic pressures driving consumers to private labels and value stores, Smucker saw unit volume increases in all of its brands except Jif peanut butter (which still saw dollar sales growth, due to early '08 price increases.) Jif sales have been affected in recent months by "a competitor's supply interruption," said the co-CEO, although it has seen share increase by a full percentage point and volume increase by 7% over the last two years.
With supply issues being resolved, Smucker can promote the peanut butter along with its flagship brand jellies during its key back-to-school season this year, which it was unable to do last year, he said.
Smucker attributed the company's continued sales growth in the current economy to the No. 1 position of its brands, which enabled the company to implement significant price increases to cover rising input/commodities costs without significant consumer pushback. He also noted that some key commodities--such as soy beans used in oils--are now seeing price declines, adding that if that trend continues, the company should see better-than-projected full-year results.
The Smucker's and Hungry Jack brands were among those seeing particularly strong performance in Q1, including a double-digit sales jump for Smucker's Uncrustables, a line of thaw-and-eat PB&J and cheese sandwiches. In the oils and baking category, Pillsbury and Eagle brand milk products saw increased sales, along with Crisco products.