The J.M. Smucker Company (SJM)
A Dividend Aristocrat and Reliable Consumer Staple with Resilience and Growth Potential
JM Smucker embodies the essence of a consumer staple—reliable, durable, and integral to everyday life. With strong family ownership and iconic brands, Smucker offers investors a mix of stability and growth. Here’s why it may deserve a place in your portfolio.
A Legacy of Beloved Brands
Founded in 1897, JM Smucker has evolved into a $9 billion consumer goods powerhouse. Its portfolio includes household names like Uncrustables, Jif, Milk-Bone, Café Bustelo, and Hostess, with over 90% of U.S. households purchasing its products.
Smucker maintains deep family ties, with Richard and Timothy Smucker owning 3.2% of the company and executives holding another 0.2%. This $383 million ownership underscores management’s vested interest in its success.
Strategic acquisitions, such as Big Heart Pet Brands in 2015 and Hostess in 2024, have allowed Smucker to focus on high-growth categories like snacking, coffee, and pet food. The acquisition of Uncrustables for $1 million in 1998 has turned into a brand generating nearly $1 billion in annual revenue.
Business Segments
Smucker operates across several core segments, each contributing to its stable and diversified revenue base:
Snacking and Spreads: Anchored by Uncrustables and Jif, with consistent growth from innovation and marketing.
Pet Food and Treats: Milk-Bone and Meow Mix lead this segment, benefiting from humanization trends and optimized portfolio margins.
Coffee: Café Bustelo and Dunkin’ drive category leadership, supported by premiumization and product innovation.
Sweet Baked Goods: The addition of Hostess strengthens Smucker’s position in this fast-growing category, leveraging its strong brand equity.
International & Away From Home: A double-digit growth channel expected to exceed $750 million in FY2025, supporting Smucker’s entire portfolio through offerings like Uncrustables and on-demand coffee.
Notably, Walmart accounts for 33% of revenue. While this concentration creates pricing pressure, Walmart’s reliability minimizes associated risks.
Strategic Growth and Long-Term Goals
Smucker’s leadership highlighted several key growth platforms during the 2024 Investor Day earlier this month on December 10th:
Uncrustables: Expanded capacity, including a new manufacturing facility, and a national marketing campaign aim to propel this brand to $1 billion in sales. Distribution expansion through the Away From Home channel further strengthens growth, as Uncrustables targets new markets such as schools, convenience stores, and foodservice. Recent innovation in new varieties, such as peanut butter and raspberry spread sandwiches, and seasonal offerings, like Halloween-themed Uncrustables, further drive its growth trajectory.
Hostess: A revitalized marketing strategy and expanded distribution channels target 4% long-term net sales growth. Innovation is a key focus, with 15% of Hostess's revenue coming from products launched in the past three years, including Mystery Twinkies and limited-time offerings to maintain consumer excitement.
Pet Segment: Smucker has optimized its pet portfolio by divesting lower-margin businesses, such as co-manufacturing operations, to focus on higher-value product platforms. The segment is projected to achieve 3% to 4% net sales growth over the long term, driven by leading brands like Milk-Bone and Meow Mix, which together account for nearly 80% of the segment’s revenue. Profit margins have significantly improved, with an anticipated long-term margin profile in the high-20% range. This refined portfolio strategy underscores the company’s commitment to margin improvement and sustainable growth in the pet category.
Coffee: Smucker’s coffee segment is projected to achieve 1% to 2% net sales growth over the long term, with a high-20% margin profile supported by premiumization and category leadership. Cafe Bustelo has delivered 22 consecutive quarters of growth and is projected to surpass $350 million in net sales by FY2025. Strategic innovations, such as light, medium, dark, and dulce de leche roast varieties in prepackaged and K-Cup formats, aim to double household penetration and expand demographic reach. Additionally, Smucker is capitalizing on cold coffee trends with national expansion plans for multi-serve ready-to-drink offerings, including vanilla and decaf varieties. Seasonal innovations in the Dunkin' brand and decaf K-Cup launches further enhance growth opportunities across the portfolio.
Pricing and Volume Dynamics: Smucker’s long-term growth estimates rely on a balanced mix of price increases and volume gains. For example, in recent quarters, price realization contributed 4 percentage points to growth, while volume/mix added 2 percentage points in certain segments. This reflects both the pricing power of its iconic brands and the success of its innovation pipeline.
Long-Term Growth Algorithm and Objectives
Smucker’s long-term growth algorithm targets low single-digit net sales growth annually, supported by pricing power, innovation, and volume gains. The company aims for a mid-single-digit increase in operating income and high-single-digit growth in adjusted EPS, driven by productivity initiatives, margin expansion, and operational efficiency. Free cash flow conversion is expected to remain robust, enabling continued investment in growth initiatives and consistent shareholder returns in excess of 10% long-term.