J.M. Smucker Company

1. Company Background:

a. J.M. Smucker Company is a leader in the market for branded food products and has built the trademark Smucker’s into a household name. The company was founded by Jerome Monroe Smucker in 1897, went public in 1959 and is headquartered in Orrville, Ohio - 44667, United States.

b. One of the primary products of J. M. Smucker Company is filtered Fruit Spread, which is widely known as Smucker’s fruit spread. Other primary products of the company are fruit-full (blended fruit), peanut butter, ice-cream toppings, fruit syrups etc.

c. The Company operates principally in consumer food and beverage products industry on a worldwide basis and the majority of the Company's sales are in the United States. It’s a public company and traded as NYSE: SJM. J.M. Smucker Company is registered with SIC: Other Food Products Industries N.E.C. (1099) and Canned Fruits, Vegetables, Preserves, Jams, and Jellies (2033), Food Preparations, NEC and with NAICS Fruit and Vegetable Canning (311421). Also J.M. Smucker’s company is registered with ISIC: Manufacture of Other Food Products N.E.C. (1079).

2. Market Definition:

a. Product dimension

J.M. Smucker Company produces variety of filtered fruit spread products, such as simply fruit, natural fruit spread, low sugar fruit spread, sugar free fruit spread with variety packaging like glass jars, tin packed or squeeze packets. Fruit spreads also come with different flavors such as Blackberry, Concord grape, Mango, Red plum, Strawberry, Apricot, Cherry etc. But it is very easy to find to a substitute for any of the fruit spreads of Smucker’s. So the market of Smucker’s fruit spread is very competitive and deep. Some of the substitutes of Smucker’s fruit spreads are:

         - Welch’s fruit spreads                             - Walden Farms Fruit spreads

         - Polaner Fruit spreads                             - Stonewall Kitchen Fruit spreads

         - Crofter’s Fruit spreads                           - Made In Oregon Fruit spreads

         - St. Dalfour Fruit spreads                        - Fiordifrutta Fruit spreads            

b. Geographic Dimension

In USA it’s very common to find fruit spreads at any super markets, convenient stores, and bakery shops and even in small grocery stores. All the online grocery stores or retailers also have a variety of fruit spreads available to purchase. Fruit spread producing companies also have their own online stores to sell products. So the geographic dimension is very deep for Smucker’s fruit spreads.

c.  Customer Segments

By initiating “Mealtime Movement”, J.M. Smucker’s company says that ‘It’s the family celebration time’. So Smucker’s targets every generation of family members. As per Mark Belgya, senior vice-president “The focus for fruit spreads is providing consumers with choice — not only flavor varieties, but also simpler ingredients,” and as per chief financial officer, “Consumers’ preference for naturally sweetened products is increasing, and we’ve expanded our portfolio to meet this need.”

So, Smucker’s fruit spread is targeted for or consumed by:

                                             - Children, teenagers and adults.

                                             - Organic fruit spreads for natural flavor lovers *

                                             - Low sugar fruit spreads for health conscious people *

                                             - Sugar free fruit spreads for diabetic patients *

Above (*) written customers do prefer healthy, organic and natural foods. These customers are very concerned about low sugar and good nutrition. Though these types of customers also fall in the general customers category, they are treated as different market segment.

3. Market Structure:

[pic 1]Graph-1. Survey result of most eaten fruit spreads in USA 2013-2014

USA is a huge consumer of the sweet-based fruit spreads. Though, Smucker’s produces a good proportion of the fruit spread market, Smucker’s fruit spread has significant number of substitutes and hence competitors. The market structure for fruit spreads can be best described as a combination of two market structures that we discussed in class; it is monopolistically competitive as many substitute products are available and products are very close substitutes to each other and it is an oligopoly also as Smucker’s and it’s second branded competitor which is Welch’s, produce most of the total market output (which can be observed from graph-1).

a. Number of competitors

The number of competitors for the Smucker’s fruit spread is large including Welch’s fruit spreads, Polaner Fruit spreads, Walden Farms Fruit spreads and jam, Crofter’s Fruit spreads and jelly, St. Dalfour Fruit spreads.

b. Product similarity

Substitute products for fruit spread are very close to the Smucker’s fruit spreads. The differences between the products are depending upon, natural or artificial flavors added, packaging style, taste profile, recipes, and percentage of sugar and original pulp contained. Some of the primary branded substitutes are mentioned in part 2(a).

c. Barriers to entry

Smucker’s fruit spreads has both monopolistic and oligopoly competition market. So entry may be difficult or may be easy depending upon the firm function segment. Such as a firm already producing foods and owning facility and machinery could very easily start producing fruit spreads as raw materials are very common and there is not much intellectual required to produce fruit spreads. But for firms, which do not operate in the food manufacturing industry, capital is needed for equipment and for setting up the manufacturing establishment. But for both types of firms raw materials required to produce fruit spreads, is the barrier. For producing fruit spreads the primary inputs are fresh and natural fruits, sugar, honey, citric acid, preservatives and flavors etc. Capital or machineries required are juice extractor, mixer, slicer, cap sealing machine and bottle washing machine etc. As natural fruits are limited resource as raw material to produce fruit spreads and lot of companies are purchasing the same raw material, the new entry firms have to negotiate with the price of raw materials. As Smucker’s follows oligopoly competition market and it has a history of more than hundred years of operation in fruit spreads, for the new entry firms it will be tough to break the product network of Smucker’s fruit spread. Brand loyalty of consumers for the Smucker’s fruit spread will restrict new entries to find enough potential customers.