Smucker is considering a sale of its baking brands for $700M
- J.M Smucker Co. is considering selling its baking brands, including Pillsbury, Robin Hood flour and cereal, and Martha White baking mixes, according to Food Business News. The deal could fetch roughly $700 million.
- Smucker’s various baking products, from flour to frosting, have been floundering, according to Bloomberg. They represented 5% of the company’s revenue in 2017, down from 10% in 2014.
- The Orrville, Ohio-based company is reportedly working with an advisor as it considers a sale, but no specific buyer has been mentioned.
When a group of products grow stagnant, or worse, start cutting into profits, it’s natural for an owner to consider selling the floundering brands.
Pillsbury, the most recognizable of Smucker’s baking assets, has been on the ropes for years. Most recently, it contributed to a decline in net sales during the fiscal third quarter, according to a company statement last month. It's no wonder that Smucker is now considering cutting the brand, along with its other baking products. It's not uncommon for Big Food companies facing changing consumer demands and floundering sales to jettison underperforming brands in order to focus their time and money in higher-growth areas — General Mills did it when it sold Green Giant to B&G Foods and, most recently, Nestle did the same when it sold its U.S. confectionary division to Nutella maker Ferrero Group.
Smucker picked up Pillsbury, Robin Hood flour and cereal and Martha White baking mixes as part of its 2004 acquisition of International Multifoods Corp. This was before consumer demand for clean label, fresher and organic items took off and center-of-the store shopping was much more popular than it is today.
In recent years, there has been a consumer push to focus shopping dollars on healthier fare more often found on the store perimeter, such as produce, lean meat and dairy. Once beloved CPG products like Pillsbury’s Funfetti cake mix and frosting, went from celebratory treat to villain, guilty of containing corn syrup, artificial colors and various unpronounceable ingredients.
As shoppers look at product labels, they want to see simple ingredients found in their own kitchen, and Pillsbury often doesn’t meet their standards. It’s understandable that the brand has taken a hit.
If Smucker is able to sell its baking unit for $700 million, it would help it in a couple of ways. First, it would provide an injection of capital that could be used to bolster R&D of its remaining brands with a focus on coffee, peanut butter and snacks, all of which are popular with consumers. In addition, it would divest itself of these products before sales erode further.
Smucker also may be considering acquiring a new brand that’s more in line with where the company is headed. Earlier this week, it called off a $285 million deal to acquire Wesson oil brand from Conagra Brands Inc., after the Federal Trade Commission said it could lessen competition in the market. Based on its recent moves, Smucker appears eager to keep itself busy in M&A.
- Food Business News Smucker may look to part with baking businesses
- Bloomberg Smucker's Pillsbury Doughboy, Baking Brands May Soon Be for Sale