JM Smucker Company reported mixed financial results as its coffee business continues to thrive while its sweet baked goods division faces significant headwinds. The food giant saw net sales increase 7% in its most recent quarter, driven primarily by higher coffee prices resulting from tariffs and adverse weather conditions. However, the company’s Hostess brand, acquired for $5.6 billion in 2023, has struggled to gain traction with consumers.
The struggling performance has prompted Smucker to narrow its full-year sales growth forecast to 3.5% to 4%, down from a previous projection that topped out at 4.5%. According to the company, comparable revenue in its sweet baked goods sector declined 11%, highlighting the challenges facing brands like Donettes and Twinkies in the current economic environment.
Coffee Sales Resilience Contrasts With Sweet Treats Decline
The divergence in performance between Smucker’s coffee and snack divisions illustrates broader consumer spending patterns during economic uncertainty. While consumers continue purchasing coffee despite tight budgets, they appear more willing to cut back on indulgent snack items. This shift has forced the company to reassess its product strategy and operational footprint.
Additionally, a recent fire at one of Smucker’s manufacturing facilities is expected to further impact profitability. The company acknowledged this setback as another factor contributing to its revised financial outlook for the fiscal year.
Activist Investor Adds Pressure for Turnaround
Elliott Investment Management revealed it has become one of Smucker’s biggest stakeholders, intensifying pressure on the 128-year-old company to improve performance. In response, Smucker agreed to add two new board members, including the former CEO of snackmaker Snyder’s-Lance, signaling willingness to embrace outside expertise.
CEO Mark Smucker, the great-great-grandson of founder Jerome Monroe Smucker, acknowledged that efforts to revive the sweet baked goods segment are taking longer than anticipated. The company had already been pursuing a turnaround strategy before Elliott’s involvement became public.
Hostess Brand Restructuring Accelerates
Smucker recently announced plans to reduce its Hostess sweet treats product lineup by 25% and limit promotional activities. According to company executives, these measures aim to streamline operations and focus on higher-performing products within the portfolio.
The company expects to save $30 million by closing an Indianapolis manufacturing plant. Furthermore, Smucker implemented significant changes to its executive structure earlier this month, parting ways with its chief operating officer while creating a new chief technology officer position and expanding the chief financial officer’s responsibilities to include spreads and frozen handhelds.
Uncrustables Remain Bright Spot
In contrast to struggling Hostess products, Uncrustables frozen sandwiches continue delivering strong performance for Smucker. The company projects the PB&J pockets will generate $1 billion in sales during the current fiscal year, representing a significant revenue stream.
Meanwhile, Smucker has introduced a refrigerated version of Uncrustables to expand the brand’s appeal beyond the freezer section. This product innovation demonstrates the company’s strategy of leveraging successful brands while paring back underperforming ones.
Broader Industry Trends Affect Snack Makers
Smucker’s challenges mirror difficulties facing other major food companies. Elliott Investment Management has also taken a $4 billion stake in PepsiCo, pushing for changes as the Doritos-owner grapples with declining snack sales.
According to PepsiCo, consumers are increasingly opting for healthier alternatives and smaller package sizes, forcing the company to scale back product lines and reduce prices. The company reported last week that its pricing adjustments are beginning to show positive results, though the turnaround remains in early stages.
The coming quarters will reveal whether Smucker’s restructuring efforts and streamlined product portfolio can restore growth in its sweet baked goods division. Investors and analysts will closely monitor the impact of Elliott’s board representation and whether the new strategic direction can reverse declining sales trends while maintaining the momentum in coffee and Uncrustables.
