Smucker drops foodservice for brands

- Last updated on GMT

Related tags: Sales

Leading American food producer J. M. Smucker has agreed a deal to
sell its US Multifoods foodservice and bakery businesses in order
to concentrate on well-known consumer brands, reports Chris
Mercer.

Smucker will sell the businesses, along with its Canadian Gourmet Baker subsidiary, to investment firm Value Creation Partners for around $43 million. The sale of the businesses, which have combined net sales of around $202.5 million, should be complete within a month, though is subject to regulatory approval.

Smucker has been keen to get rid of the businesses because of its desire to focus on consumer products under iconic brands such as Smucker's, Jif and Crisco instead of supplying dough, frozen bakery and cakes to restaurants and retailers.

"The performance of our brands was strong and exceeded our expectations,"​ said company chairman Tim Smucker after the firm's second quarter results for fiscal 2005. "We are already starting to see the benefits of our investments behind our newly acquired brands and are encouraged by the early results,"​ he said, adding that an array of exciting new products under Smucker's bakery mix and frosting brand Pillsbury was driving growth.

The company hopes that a focus on brands can help it to increase profit margins after primarily blaming its Multifoods business for a 3 per cent drop in gross margins during the second quarter of 2005, compared with the same period a year earlier. Smucker said that Multifoods' margins were lower than those of the firm's core business even though it produced more than a quarter of the group's $1 billion sales in the first six months of 2005.

Smucker confirmed that the sale of Multifoods will not have an impact on the group's remaining foodservice businesses in the US and Canada, and the company has said it will continue production of industrial bakery ingredients for Baldwin Richardson until the end of September this year.

Related topics: Markets

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