NSRGY - Is J.M. Smucker Barking Up the Wrong Tree by Focusing On Pet Foods?
Once known mainly for its fruit spreads and peanut butter, The J.M. Smucker Company (NYSE: SJM) recently got into dog food, cat food, and pet treats in a big way. Smucker is going head to head with big brands like Purina to fill the food bowls of Fluffy and Fido across the globe. But pointed questions from analysts during its earnings call, the rather obscure answers provided, and disquieting details in its quarterly report might lead some investors to sniff out potential trouble.
In 2014, J.M. Smucker didn't have a single brand of pet chow anywhere in its lineup. Instead, its biggest category was coffee, with the rest of its portfolio made up of jams and jellies, peanut butter, baking products, canned milk, shortening, oils, and frozen snacks. In an apparent effort to rekindle fizzling growth, the company launched itself headlong into the pet food market in 2015.
Massive strategic changes, including both divestitures and acquisitions, followed. The move into pet food began spectacularly with a $5.8 billion purchase of Big Heart Pet Brands. While the deal included the brands Meow Mix, MilkBone, and Kibbles 'n Bits, it also came with unexpected headaches. Foods from the line were contaminated with the lethal drug pentobarbitol, killing several pets in 2016 and prompting an FDA investigation.