Smucker's Management

Smucker's Management team currently faces a series of complex issues and significant problems. Currently based upon early fiscal 2011 there is concern among some analysts that Smucker remains much smaller than its rivals within the processed foods industry. For example, Smucker's revenues increased from $651 million in 2001 to $4.6 billion in 2010. However, Nestle's revenues increased from $61.3 billion to nearly $100 billion over the same period. Therefore Smucker may not have sufficient bargaining leverage or control when negotiating with the powerful retailers. The supermarket retailers have gained significant control over the market because the five largest supermarket chains have consolidated further to account for more than 70 percent of industry sales in 2010. Wal-Mart has become a very strong buyer in the industry, with 2010 grocery sales of $154 billion and a 35 percent share of the US supermarket industry's total revenues. The rapid consolidation of the supermarkets have enhanced the buying power of supermarket chains and enhanced their ability to demand and receive slotting fees for allocating manufacturers favorable shelf space on their grocery aisles. Smucker's management must decide on a tactical strategy to enhance their ability to efficiently bargain with the much larger supermarket buyer. If Smucker fails to effectively bargain they may risk losing their foothold in the marketplace. They must also consider the size of their company and the lacking size of their overall market share. Are they the right size? Do they offer the best, most marketable products? Are they targeting the right customers? Are they too diversified in their product portfolio? Are they sustainable for future growth and competition?

An increase in price competition has become a significant problem that Smucker management must face. Growing shopper confidence in the leading supermarket chains has opened the way for retail chains to effectively market their own house-brand versions of name-brand products. The supermarket is typically able to price their product attractively below the competing name brand. Also, the large supermarkets have utilized their budgets to conduct marketing research to effectively target their customers. The retailers have utilized their resource and capability analysis in order to size up their competitive assets. They determined they could support a sustainable competitive advantage even over popular, name brand products. With the aid of checkout scanners and inventory systems, supermarkets are able to quickly learn what customers were buying and what price differential it took to induce shoppers to switch form name brands to private-label brands. The supermarkets have gained more power and the competition between private-label and products made by Smuckers has escalated rapidly. As private-label manufacturing improves they are better able to match the quality of name-brand products