Richard K. Smucker, CEO of J.M. Smucker Company, realizes that the key to creating memorable customer experiences and ongoing customer engagement revolves round value.
“We do recognize the need to continuously create value for consumers and have adjusted our tactics to address the current dynamics in the marketplace,” Smucker said during Thursday’s conference call to discuss the company’s second-quarter fiscal 2015 financial results, according to a Seeking Alpha transcript.
Smucker said his company plays a vital role for retailers. “We play a vital role for retailers as they look to us for insights on consumertrends and our overall perspective on the category,” he said, referring to the coffee category. “For these reasons, we believe our coffee strategy remains on point and we are confident in achieving our long-term growth goals.”
Smucker’s coffee business fell short of expectations during the second quarter.
“As noted, the shortfall was driven by the U.S. retail coffee segment, specifically the consumer response to higher price points, reduced promotional effectiveness, and ongoing competitive activities all contributed to the decline in volume for the segments, resulting in lower net sales and segment profit for the quarter,” Smucker explained. “In the back half of the fiscal year, we anticipate coffee value trends to improve compared to the second quarter, but to remain down from the prior year. This, combined with the relationship between price and green coffee costs, resulted in the lower full year guidance that we provided last week. Our teams have spent a great deal of time analyzing the recent results allowing us to conclude that this performance does not reflect a fundamental change in the coffee category.”
Mainstream roast and ground coffee will continue to be very relevant to consumers as the largest segment in terms of value within the category, Smucker stated.
“Despite the current higher pricing, at approximately $0.05 per cup, mainstream coffee continues to provide a strong value proposition for consumers,” he explained. “The modest value declines in the overall mainstream segment for the last few years have been in line with our expectations. Within premium, the Dunkin Donuts brand has strong equity and resonates with consumers. We have grown this brand consistently over the years, including volume gains in eight of the past 10 quarters, increasing Dunkin Donuts’ market share in the premium segment over this time. Within K-Cups, our growth rates have slowed since we first entered the segment, yet recently, we have seen significant gains for our Folgers K-Cup and the initial contributions from our recently launched Café Bustelo K-Cups. We remain confident that our brands will continue to play a key role in the growth of this platform.”
Marketers in the food industry continue to navigate through a challenging environment, Smucker said.
“Two months ago at the Barclay’s back-to-school conference, we spoke to some of the current dynamics including the certain segments of the consumer base are financial pressed and remain cautious that there are evolving consumer trends such as heightened focus on health and wellness and increased desire for transparency and the growing impact of the social media and ecommerce on consumer behavior,” he added.