Mark Smucker is trying to run his family’s more-than-$7-billion company like its much smaller competitors as big food companies increasingly lose consumers’ trust, and their dollars, to the little guys.
When The J.M. Smucker Co. president and CEO spoke at Walsh University in March, he acknowledged that big food is a bad word, and lumped the generations-old consumer foods company in with international behemoths such as Kraft Foods Group, Unilever and Nestlé, which are feeling consumers’ collective chill in a very real away.
In a 2015 article “Big Food’s Big Problem: Consumers Don’t Trust Brands,” Ad Age reported that between 2009 and 2014, some $18 billion in sales shifted from large to small companies across all consumer packaged goods categories.
But image isn’t Smucker Co.’s only concern. It’s also facing market fragmentation and investors who demand results from an institution that needs to mobilize its 7,140 employees across its more than 20 locations to make moves in the market. Meanwhile, smaller companies are able to compete on faster iterative processes and speed to market.
Smucker Co. is well aware of its challenges, and is marshaling its institutional strengths to streamline processes and capture consumer data to better understand just what people want from its family of brands, and how to get it to them faster.
Smucker Co.’s portfolio has three main groups: coffee, pet food and food, which are just about evenly split into thirds with each representing roughly $2.2 billion in business. Those brands are some of the most recognizable in the country — Folgers, Jif, Crisco, Milk-Bone, Dunkin’ Donuts and its own eponymous brands, which are, in most cases, tops in market share in their respective categories.
The company’s 2017 annual report declares, “At least one of our products can be found in 93 percent of all U.S. households.” For context, the U.S. Census Bureau reports there are 117.7 million households as of 2016, which means only 8.2 million U.S. households don’t have a Smucker Co. brand in them.
Relative to the days when it was one man in Orville, Ohio, selling apple butter from a horse-drawn cart, Smucker Co.’s growth has been ludicrous. By 2000, the company, which was basically built on fruit — jams, jelly, juices, etc. — had reached some $600 million in business. Mark, the fifth-generation Smucker to head the company, speaking at Walsh, said that it was then that the company had reached an inflection point.
“We recognized that in order to survive for the next generation of employees, the Smucker family made a decision to take on some very large acquisitions. We recognized that we were good at marketing brands,” he said. “And we could market brands in other categories and build emotional bonds between our brands and consumers, and that is what we were good at.”
And the company has made some incredibly large acquisitions. It acquired Jif and Crisco for $813 million in 2001, which doubled its size. Four years later, it acquired International Multifoods in an $840 million deal that brought Pillsbury, Hungry Jack and Martha White brands under its umbrella. (In July, the company announced it was selling its U.S. baking business, which would divest it from the Pillsbury, Hungry Jack and Martha White brands.) Its $3 billion acquisition of Folgers in 2009 made Smucker Co. a $4 billion company, and that’s before it added Big Heart Pet Brands in a $6 billion transaction in 2015, which gave it Milk-Bone, among others.
“We are a house of brands. We’re not a branded house,” he said.
Though Mark has only been leading the company for about two years, he said he took the position as about two thirds of the CEOs in the food industry turned over. Some of that he said was a coincidence, with some exits planned and some not, but the moves coincide with what he called some very intense pressures that the industry faced and continues to face.
Part of that pressure comes just from being a public company.
“We have a lot of responsibility to Wall Street,” Mark said. “The shareholder activism, the zero-base, the cost-cutting initiatives that are going on in our industry is intense. And then, overall, just the general short-term-ism makes it hard to make the right strategic decisions for businesses, for our businesses over a two- to three-year period, because we’re trying to hit a number. So that tension between short- and long-term is another pressure that we are all experiencing.”
Additionally, he said the traditional grocery channel, a home for most, if not all of Smucker Co.’s products, is under significant pressure as consumers have more places to buy goods, which has made it easier for consumers to find emerging craft brands they can identify with. And that leads to its other challenge: connecting with consumers.
“Big brands are not as relevant as they used to be,” he said. “They’re not going away, but they’re not as relevant.”
He referred to the generation currently around college age as “cellennials,” largely because of their relationship with their phones and technology — a generation that has only known life with smartphones.
“As consumers are changing, both millennials and the generation that follows, the expectations that a consumer has toward brands is very different,” Mark said. “It drives a lot of things.”
Consumers now have a voice, he said, and they expect brands to not just listen, but also respond. That’s accompanied by what he called “the anywhere dynamic,” referring to consumers’ expectation that they can order what they want from wherever they are and expect it to be delivered to them in a couple of days.
To stay competitive, Mark said the company has to be relentlessly consumer-centric. This means understanding what consumers want and using consumer insights to create “the next thing before they know they want it,” as he put it.
That, in part, means diversifying its portfolio so that it consists of not only Main Street brands, but also smaller, emerging craft brands.
Data scientists wanted
Facing declines in some of its major brands, Folgers and Jif, for example, the company determined it couldn’t just do incremental innovation and stay competitive.
“It has to be bigger and it has to be faster because these little startups can churn out a new product in 60 days and it takes us two years,” Mark said.
That means finding ways to be more flexible, shorten its speed to market and generate bolder ideas. One answer was to focus on line extensions — the next flavor of jelly, the next roast of Folgers — and bigger platform innovations that will move the needle significantly.
Innovating more rapidly starts with insights and agility, which means coupling the right consumer research to quickly test prototypes, get consumer feedback and iterate that product until it ultimately gets to something that speaks to consumers.
The qualifier “right” that preceded “consumer research” is important to note. Mark said the company is making investments in connected commerce, innovative consumer engagement and consumer insights, which are all based on a foundation of advanced analytics and data.
“We are looking for data scientists,” he said. “We’re hiring data scientists. They are hard to come by, but all of this capability is about getting more robust use of data. We’ve got great data; how do we use it better?”
Connecting with the people
Beyond selling to consumers, just reaching them has become a challenge as media has fragmented.
During his presentation, Mark played a few commercials the company ran on network television during this year’s Winter Olympics; ads that, according to a Broadcasting & Cable report, could have cost as much as $650,000 for a 30-second spot in prime-time; ads that Mark acknowledged many people would never see.
“It isn’t any longer just about playing commercials in mass media,” he said. “We have to have a 360-degree approach to our consumers. So basically, that content can be one piece of it, but making sure that we are engaging with influencers, that we are using other paid media partners, that we are using the social media platform to generate more awareness and trial of these products.
“TV, of course, is important, but that’s mass media. If you think about earned, those are areas where consumers can get engaged on the individual level. We’ve all talked forever about social media. We know what the promise is of it and the data and the ability for us to actually interact and know you as a consumer. And you hear all these things recently about Facebook — what are they doing with my data? You have to be responsible about it. But to the extent that consumers are willing to give it up, we can use that to provide them with services or access to products.”
For Mark, conquering his family company’s current market challenges comes down to being true to its core values and principles. It means getting the culture right when executing acquisitions and preserving its values — the values his great, great grandfather, Jerome Monroe Smucker, instilled in the company, based on the Golden Rule — even as lots of new people are integrated.
But continued success means more than adhering to core values. It also means having a willingness to change.
“There has to be a willingness to adapt to our current market environment and do things in new ways,” he said. “To change even our strategy, if we have to, in order to grow and to prosper as a company. The secret is be true to the foundation that you’ve built on the core values, but be willing to change everything else.”
» Data is valuable. Correctly interpreting data is more valuable.
» Consumers are boss. Listen to what they want and respond.
» Be willing to change everything but your core values to adapt to the market.