Dive Brief:
- J.M. Smucker cut marketing spending 5.8% to $119.5 million in the last quarter ended April 30 from a year earlier as coronavirus-related shutdowns interfered with the packaged food company's plans. Revenue rose 10% to $2.09 billion as grocery shoppers stocked up their pantries, but Smucker didn't expect to match those gains last quarter amid plunging sales to restaurants and the ebb in panic-buying at stores, per a quarterly report.
- Smucker's marketing expense was 5.7% of net sales for the quarter, less than the 6.5% to 7% the company had expected to spend as sales exceeded forecasts and the COVID-19 pandemic led to spending cuts. The company expects sales to decline 1% to 2% in the next year amid pressures from the health crisis.
- Smucker had some bright spots, such as the 11% profit growth for its coffee segment whose brands include Folgers, Dunkin' and Café Bustelo. More than 1 million new households tried those brands in the quarter, with 75% of those households purchasing Folgers for the first time in 12 months, management said in a conference call with analysts.
Dive Insight:
Smucker's results show how the coronavirus pandemic has disrupted its marketing and other business areas. It's among the consumer packaged goods (CPG) companies that saw a surge in demand among shoppers who stocked up on groceries as lockdowns went into effect. The increased revenue more than offset steep declines in sales to commercial foodservice suppliers in the restaurant and hospitality industries that have borne the brunt of the health crisis.
Now, Smucker has an opportunity to maintain loyalty among consumers who have bought its brands for the first time in the past year. While many grocery stores struggled to keep shelves stocked during the early days of the pandemic, about a third (33%) of consumers tried a new brand, per a consumer survey by Vox Media. Lack of product availability was the top reason to try a new brand, ahead of needing variety (22%), lower price (10%), more time to research (9%) and needing better quality (8%), among other reasons cited in the survey.
Smucker saw many shoppers discover or rediscover Folgers, a storied coffee brand whose roots go back to the mid-1800s. Before the pandemic, Folgers already was the No. 1 brand of ground coffee with a market share of 26% last year, per Statista data. Going forward, the company recognizes the possibility to advance its market share by turning recently converted shoppers into repeat customers.
"When you look at Folgers … many consumers have sort of rediscovered their delight for our brands," CEO Mark Smucker said in a conference call with analysts. "That is the key thing that we really must leverage as we move forward with our marketing efforts to make sure that those feelings, those sensations about our brands truly do stick."
As for its retailer customers, Smucker said there's a chance to provide greater merchandising support in stores.
"I am hopeful and cautiously optimistic that we will see a return to or a greater support of some of these leading brands, which maybe heretofore were considered slightly lackluster," he said. "Even with a brand like Folgers — which we saw tremendous growth and tremendous improvement in household penetration — we will continue to reinvigorate to think about how we market those brands in a new and more contemporary way."
