The J.M. Smucker Company

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The J.M. Smucker Company

Strawberry Lane
Orrville, Ohio 44667
U.S.A.
(216) 682-3000
Fax: (216) 684-3370

Public Company
Incorporated: 1921
Employees: 2,600
Sales: $511.5 million
Stock Exchanges: New York

SICs: 2033 Canned Fruits and Vegetables; 2037 Frozen
Fruits and Vegetables; 2099 Food Preparations, Nec

The J.M. Smucker Company is America’s top producer and marketer of jams, jellies, and preserves. Operating in the United States, Canada, Great Britain, and Australia, it also manufactures and markets peanut butter, ice cream toppings, and fruit drinks and syrups. The familiar corporate trademark, “With a name like Smucker’ s, it has to be good,” alludes both to the company’s founding family and its reputation for high-quality products. The firm is also known for its insistence on independence: family members maintain a controlling interest in their namesake company and fiercely guard their majority stake.

The company was founded in 1897 by Jerome Monroe Smucker, a Mennonite from the small agricultural community of Orrville, Ohio, about 45 minutes south of Cleveland. The Mennonites’ traditional disdain for modernization did not keep Smucker from rational and efficient business practices. He applied his education from a two-year business course at a nearby academy to the management of four farms and a creamery that shipped butter as far as New York City. The success of his businesses allowed him to expand operations around the turn of the century, when Smucker bought a cider mill and began pressing apples from an orchard planted in the early nineteenth century by Johnny Appleseed. To even out the seasonality of apple cider sales, Smucker began to make apple butter from his Pennsylvania Dutch grandfather’s recipe. Smucker’s steam-powered press and secret method for capturing the vapors usually lost in cooking gave the spread a unique flavor that soon drew more customers than the cider mill and creamery. Smucker staked his name and reputation on each crock of apple butter, hand-signing the paper lid on every package.

The family-owned business prospered. J.M. Smucker’s eldest son Willard began delivering the 25-cent, half gallon tubs in a wagon at the age of ten. By 1915, the first year for which records are available, the business was bringing in nearly $60,000 and netting almost $3,000 annually. And by the time it was incorporated in 1921, Smucker’s offered a full line of preserves (generally made from whole fruit or large pieces of fruit) and jellies (made from strained, pure fruit juice). Sales topped $147,000 the year The J.M. Smucker Company, Inc. was capitalized at $100,000. J.M. Smucker owned 94 percent of the private company’s stock; his sons and daughters split the remainder. The company had grown to such a scale that in 1928 the Pennsylvania Railroad built a special siding to the Smucker plant, as the company’s products were distributed in ever-increasing volume throughout Ohio, Pennsylvania, and Indiana.

Sales continued to grow in spite of the October 1929 stock market crash, nearing $319,000 in 1931. But the company did not emerge from the crisis unscathed: it recorded two consecutive years of losses in 1932 and 1933. Throughout this period, J.M. Smucker began to delegate authority to Willard, who directed the establishment of Smucker’s first facility outside Ohio in 1935. The plant was located in the state of Washington, chosen for its high-quality, low-priced apples, which were pre-processed, then shipped to Orrville for cooking. The move set Smucker’s up for national distribution and marked the first step toward the vertical integration that would become a company hallmark.

Packaging and marketing were taken for granted at Smucker’s until 1938, when Willard decided that the traditional crockery was too heavy and awkward to ship. He wanted to shift to a more modern glass package without losing the Smucker reputation for “old-fashioned” quality. The glass jar he designed and later trademarked reflected the old crock, and its label, showing a pioneer woman boiling up a batch of apple butter over an open fire, reinforced Smucker’s quaint image. The new package was a success; after its introduction, sales surpassed the $1 million mark in 1939. The new jar and label also garnered the company an award from the National Packaging Show for best packaging design success.

The war years at Smucker’s were characterized by labor, glass, and fruit shortages, but the company withstood such hardships to celebrate its fiftieth anniversary in 1947. Founder J.M. Smucker, too, endured just long enough to see his business through five decades: he passed away at the age of 90 the following year.

The second generational transfer of power at Smucker’s began in the late 1950s, when son Paul joined Willard in drawing up a plan for future growth and diversification. Like his father, Paul had started working in the family business at a young age. From the age of 13, according to the Wall Street Journal,” … after school and during the summer months, he did everything from janitorial work to assisting the cook.” Paul earned a business degree from Miami (Ohio) University in 1939, then returned to Orrville to work full-time as a cost accountant at a salary of $100 per month. After marrying and serving in the Navy for three years during World War II, Paul was put in charge of a recently-acquired applesauce factory. Despite the venture’s failure, Paul’s responsibilities increased: he was promoted to corporate secretary in 1946, treasurer in 1949, and executive vice-president in 1954.

In 1961 Paul became president of Smucker’ s. In spite of merger offers from such respected giants of the food industry as Quaker Oats, Ralston Purina, Beatrice Foods, and Borden, the family opted to remain independent. They offered one-third of the company to the public, raising $2.3 million for capital investments. At the time, Smucker’s had annual sales of $11.4 million and earnings of $812,000. The family business legacy under Paul Smucker included an aversion to long-term debt and “an almost obsessive concern for avoiding any move that might adulterate his company’s products or blemish the corporate image,” according to the Wall Street Journal.

Paul Smucker lead a two-decade period of dramatic growth through increasing vertical integration, product diversification, acquisition, and national advertising and market penetration that culminated in the company’s 1980 dominance of the fruit spread market. From early in its history, the company sought control of all aspects of production. Contracting directly with farmers for fruit crops precluded buying produce on the open market and empowered Smucker’s to control production from seed to jam. Along with this vertical integration came vertical quality control. Beginning in 1946, Smucker’s paid U.S. Department of Agriculture inspectors to oversee every aspect of its production, earning the company the designation “U.S. Grade A Fancy.” This evidence of quality assurance allowed Smucker’s a higher markup and better shelf placement.

Smucker’s maintained its quality control as it expanded. The company opened a manufacturing plant in Salinas, California, that increased production capacity by 40 percent in 1960. Acquisitions, including $4 million (annual sales) West Coast jam and jelly maker Mary Ellen’ s, Inc. and Pennsylvania peanut-butter manufacturer H.B. DeViney Company, Inc., helped extend Smucker’s geographical reach, augmented its annual sales volume, and increased product variety. Smucker’s most successful and innovative internally-developed product was a candy-cane-striped mixture of peanut butter and jelly dubbed “Goober Jelly.” The company expanded its product line to over 100 varieties, including ice cream toppings, which accounted for 20 percent of sales by 1960. By the late 1960s, jellies, jams, and preserves comprised less than two-thirds of sales. Product acquisitions and internal developments helped diversify the company’s offerings, but not all new product launches and acquisitions were successful. The 1965 purchase of Wooster Preserving Company and the 1966 purchase of H.W. Madison Co., both pickle concerns, became an oft-noted example of failure.

In spite of Willard Smucker’s general disdain for advertising, the company hired Wyse Advertising of Cleveland to produce radio spots in 1961. The agency thought up the enduring “With a name like Smucker’ s, it has to be good” slogan the following year. Family members didn’ t relish the thought of making fun of their own name at first, but the tagline’s phenomenal success on the West Coast convinced them to use it for the brand’s New York launch in the later years of the decade.

Sales doubled from $14.6 million in 1961 to $30 million in fiscal 1965. Smucker’s stock more than tripled from its $20 issue price to $67.50 in 1965, when it was split 3-for-l and listed on the New York Stock Exchange. Despite its growth, the company ranked second to grocery chain A & P’s Ann Page store brand at the end of the decade. Smucker’s increased its advertising budget to $1.3 million to accommodate network television, and continued to push for first place.

Profits more than tripled to $3 million between 1959 and 1969, then dropped almost 13 percent in the 1970 fiscal year in spite of a sales increase. The company continued to have troubles throughout the decade. Not able to increase prices as fast as inflation boosted overhead, the Smuckers steadfastly refused to compromise quality to pad earnings. As a result, profit margins shrunk from 16 percent in 1964 to 11 percent in 1970. Smucker’s instituted cost cutting measures, including the consolidation of three packing operations into two and corresponding workforce reductions that reduced the payroll by 15 percent by from 1973 to 1984. The 1969 and 1971 acquisitions of manufacturing operations in Oregon, Tennessee, and California enhanced economies and enabled Smucker’s to sell its excess fruit to competitors.

Still the number two jelly manufacturer (now to Welch’ s) in 1974, Smucker’s launched a concerted effort to dominate the industry. The company broadened its institutional markets and rounded out consumer jelly lines with the introduction of “Smucker’s For Kids,” a lower-priced line, as well as low-calorie and all-natural products. The combination of increased advertising and more thorough market penetration (especially in the South) catapulted Smucker’s to the number one spot among jelly and jam manufacturers, with over one-fourth of the market, in 1980. Over the course of the decade, sales increased almost three times to $145.8 million, and profits nearly doubled to $5.9 million.

The 1970s also saw the ascent of Smucker’s fourth generation of family leadership, when Timothy Smucker was appointed vice-president of planning. The assignment marked a new, more modern approach to strategic, tactical, and operational planning, as the company began to rival some of the world’s largest food companies in its specialized niche. Timothy refined the “Basic Beliefs” first outlined by his father in 1967, including commitments to quality, personal and business ethics, growth, and independence. He incorporated them into a detailed blueprint for the company’s future. Timothy was promoted to president and chief operating officer and brother Richard earned the title chief administrative officer in addition to executive vice-president in 1981.

As the leader of the highly competitive, but slow growing, jam and jelly market, Smucker’s found itself ever more dependent on heavy advertising expenditures, acquisitions, and product launches to increase sales and earnings in the 1980s. A four-year plant expansion program was announced in 1982 on the heels of a 39 percent year-to-year earnings gain. Magic Shell brand ice cream toppings were purchased from Foremost-Mc-Kesson in 1980 and Knudsen & Sons, Inc., a manufacturer of pure fruit juices, joined the family of companies in 1984. The 1987 purchase of R-Line Foods complimented Smucker’s institutional operations.

Smucker’s began international efforts in the late 1980s. In 1988, it acquired Canada’s Good Morning brand marmalade (citrus jelly made of small pieces of fruit) and Shirriff ice cream toppings, as well as Elsenham Quality Foods, Ltd., a British manufacturer of specialty preserves, marmalades, and fruit chutneys. Henry Jones Foods, producer of “one of Australia’s oldest and best-known labels,” IXL preserves and jams, was purchased the following year. Sales more than doubled from $151 million in 1980 to $367 million in 1989, and earnings quadrupled during the same period from $6.7 million to $27.6 million. By 1993, international sales comprised almost eight percent of Smucker’s annual total.

Smucker’s entered the 1990s with 38 percent of the domestic jam and jelly market. The fourth-generation leaders set an even loftier goal for their namesake brand and company: a 70 percent share. But with tenacious, experienced branded rivals like Kraft and Welch as well as locally strong store brands, the company had its work cut out for it. In 1994, Smucker’s ended its 35-year relationship with Wyse Advertising in favor of Leo Burnett Co., an agency company executives believed could support the brand’s aspirations.

In the early 1990s, members of the Smucker family continued to control over half of the company’s stock, and evinced no intentions of relinquishing that majority rule. As consolidation within the food industry gained momentum, the family shored up its takeover defenses by creating a new class of nonvoting stock. This allowed older members (Paul Smucker, for example) to plan their estates without relinquishing influence. From 1990 to 1993, sales increased over 16 percent to $491.31 million, as Smucker’s sought to increase per capita consumption of its products, as well as increase its market share in each category.

Principal Subsidiaries

H.B. DeViney Company, Inc.; The Dickinson Family, Inc.; Elsenham Quality Foods Limited; IMS Specialty Foods, Inc.; Knudsen & Sons, Inc.; Mary Ellen’ s, Incorporated; A.F. Murch Company; Santa Cruz Natural Incorporated; Henry Jones Foods Pty. Ltd.; Smucker Australia, Inc.; J.M. Smucker (Canada), Inc.; Smucker International, Ltd.; Juice Creations Co.; Mrs. Smith’ s, Inc.; After the Fall Products, Inc.