Business Strategy and Outlook| Rebecca Scheuneman, CFA |
Despite having leading positions in many categories (fruit spreads, peanut butter, dog treats, coffee, and cat food), we believe Smucker lacks an economic moat, either via its brand assets or entrenched retail relationships. Our analysis shows that for most of its sales base, Smucker does not possess pricing power, and its market shares have slipped. This dilemma cannot be attributed to a lack of support, as Smucker’s brand investments exceed that of its peers (with marketing and R&D averaging 6.9% of sales the last three years versus 5.4% for peers). Rather, we suspect these expenditures are not as productive as its competitors, a problem not easily resolved, in our view.