J.M. Smucker Co. Earnings Call Insights: Folgers and Dunkin’ Donuts Volumes

J.M. Smucker Co. (NYSE:SJM) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Folgers

Eric Katzman – Deutsche Bank: I guess first question, Vince you talked about the 1% to 2% hit kind of in line with what you thought on Folgers. Folgers is a very profitable business for you, but you said that I guess the team somehow managed that. So are you saying that profitability wasn’t limited at all by the fact that you had a 1% to 2% volume hit on that entry-level Folgers?

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Vincent C. Byrd – President and COO: Eric, this is Vince. That’s correct, and I would also say that there was some compensation from our supplier that helped to offset that.

Eric Katzman – Deutsche Bank: So they gave you some compensation for the fact that they weren’t delivering on target?

Vincent C. Byrd – President and COO: That’s true yes.

Eric Katzman – Deutsche Bank: Then I didn’t hear you mention as part of the coffee profitability, the productivity initiatives and what’s been going on in New Orleans. Maybe you could – was there anything there? How do we think about the savings coming from that piece and how it impacts the coffee line going forward?

Mark T. Smucker – President, U.S. Retail Coffee: The supply chain optimization project in coffee essentially is complete. The savings that we expected to realize, we have realized, and we’re basically through that project.

Mark R. Belgya – SVP and CFO: I will just add to that. We have not defined of the total $70 million that we’ve assigned to the overall restructuring, no, we’ve not went in to how much is coffee, how much is food spreads. But as Mark suggested, most of the savings have come through for coffee. There is probably a little bit of a spillover, but most of those will be realized by year’s end.

Eric Katzman – Deutsche Bank: Then last question, I’ll pass it on. Richard, I guess we’ve heard from two companies now in the industry, Kraft, really early this morning about some inventory – trade inventory issues in de-loading and McCormick, they’re a little more specialized obviously, but they also talked about it. You didn’t mention it at all. Are you seeing anything from retailers, maybe in categories that you’re not in? Or are your categories just somehow performing better in terms of consumptions so the retailer didn’t need to cut back? Maybe you could just help frame that a little bit for us.

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Richard K. Smucker – CEO: Yes, sure. Eric, this is Richard. Your answer was really right. We haven’t seen it in our categories this year. We actually saw it the prior year, but not this year in the categories that we’re in. No, I’m not – I can’t speak to their categories, maybe the retailers have some de-loading on their categories, but we did not see it this year.

Dunkin’ Donuts Volumes

Alexia Howard – Sanford C. Bernstein: Can I ask about the Dunkin’ Donuts brand. Obviously, the volumes were down 2% this quarter. Are you seeing increased competition in the premium end of the roast and ground space, how the shelf space and distribution developing on that brand? Yes, maybe some comments around that.

Mark T. Smucker – President, U.S. Retail Coffee: Sure, Alexia. This is Mark Smucker. Yes, I would say, generally, the category is very competitive right now. We are, again, competing in all tiers of that segment, if you will. We are, of course, pleased with the results that we’ve seen for the year. I think as both Richard and Vince mentioned in the formal remarks, we’re encouraged by the latest four week trends. Obviously, it’s only four weeks, but we’re encouraged to see that some of that consumer takeaways picking up a little bit, and so we believe that, that bodes well for the Dunkin’ brand.

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Alexia Howard – Sanford C. Bernstein: Then maybe as a follow-up, there wasn’t much mention in the press release around what’s going on with Crisco. I was just curious about where that is in the input cost cycle and how that’s developing?

Paul Smucker Wagstaff – President, U.S. Retail Consumer Foods: Alexia, this is Paul Wagstaff, and we had a decent Fall Bake for Crisco. We were not participating in one of our key retailer, our largest key retailer, in the Fall Bake, but that being said, we were able to grow the business by 1%. So we feel it’s pretty decent.