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management’S diScuSSion and analYSiS
The J. M. Smucker Company
Year Ended April 30, 2013 % Increase (Decrease) 2012 % Increase (Decrease)
2013
2012
2011
Net sales: U.S. Retail Coffee U.S. Retail Consumer Foods International, Foodservice, and Natural Foods Segment profit: U.S. Retail Coffee U.S. Retail Consumer Foods International, Foodservice, and Natural Foods Segment profit margin: U.S. Retail Coffee U.S. Retail Consumer Foods International, Foodservice, and Natural Foods U.S. Retail Coffee Net sales for the U.S. Retail Coffee segment were flat in 2013, compared to 2012, as favorable sales mix driven primarily by K-Cups and increased volume offset the impact of price declines taken during 2013 and 2012. Segment volume increased 4 percent in 2013, compared to 2012, as the Folgers, Dunkin’ Donuts, and Café Bustelo brands increased 3 percent, 11 percent, and 16 percent, respectively. Net sales of K-Cups increased $108.0, or 61 percent, compared to 2012, and contributed 5 percentage points of growth to segment net sales, while representing only 1 percentage point of volume growth. Segment profit increased 12 percent in 2013, compared to 2012, while segment profit margin increased to 26.3 percent from 23.6 percent in 2012. The increase in segment profit was primarily due to volume growth and favorable mix, partially offset by increased marketing expense. Green coffee costs were lower in 2013, compared to 2012, but were mostly offset by lower net price realization and did not contribute significantly to the increase in segment profit. Net sales for the U.S. Retail Coffee segment increased 19 percent in 2012, compared to 2011, including the net realization of price increases. The acquisition of Rowland Coffee contributed $99.3 to segment net sales, representing 5 percentage points of the increase. Excluding Rowland Coffee, segment volume decreased 8 percent. Volume declined for the Folgers brand in line with the overall segment, and was primarily attributed to consumer response to higher prices and aggressive private label price points by certain key retailers. Additionally, volume decreased 5 percent for Dunkin’ Donuts packaged coffee. Contributing to favorable sales mix in 2012, net sales of K-Cups totaled $178.2, an increase of $125.2, compared to 2011, and represented 6 percentage points of segment net sales growth, but contributed only 1 percentage point growth to volume. Segment profit increased 1 percent in 2012, compared to 2011, despite volume declines, due to the Rowland Coffee acquisition, while segment profit
$2,306.5 2,214.8 1,376.4 $ 607.5 415.3 198.2 26.3% 18.8 14.4
$2,297.7 2,094.5 1,133.6 $ 543.0 393.3 168.6 23.6% 18.8 14.9
$1,930.9 1,953.0 941.8 $ 536.1 406.5 159.6 27.8% 20.8 16.9
—% 6 21 12% 6 18
19% 7 20 1% (3) 6
margin declined to 23.6 percent from 27.8 percent in 2011. Price increases realized during the year more than offset higher green coffee costs and, along with a decrease in segment marketing and distribution expenses, also contributed to segment profit. U.S. Retail Consumer Foods Net sales for the U.S. Retail Consumer Foods segment increased 6 percent in 2013, compared to 2012, due primarily to higher net price realization and favorable sales mix, offset partially by a 1 percent decline in segment volume. Jif brand net sales increased 21 percent in 2013, compared to 2012, reflecting overall higher net price realization and an 8 percent increase in volume. The overall higher net price realization resulted from price increases taken during 2012, which were only partially offset by a price decline taken in the third quarter of 2013. Smucker’s fruit spreads net sales were down 1 percent, while volume was flat. Net sales and volume of Smucker’s Uncrustables® frozen sandwiches increased 24 percent and 23 percent, respectively, in 2013, compared to 2012, benefiting from new distribution. Crisco brand net sales and volume decreased 5 percent and 3 percent, respectively, in 2013, compared to 2012, resulting from declines at a key retailer. For the same period, net sales for the Pillsbury brand increased 8 percent, while volume decreased 4 percent mainly due to the tonnage impact of a cake mix downsizing made early in 2013. Segment profit increased 6 percent in 2013, compared to 2012, while segment profit margin was 18.8 percent of net sales in both periods. The increase in segment profit was primarily due to favorable mix and a decrease in marketing expense. Overall raw material costs were higher for 2013, driven by peanuts, but were mostly offset by higher net price realization. The peanut butter price decline in the third quarter of 2013 was taken in anticipation of lower peanut costs in 2014, and resulted in higher peanut costs not being fully recovered during 2013.
2013 Annual Report
29
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