Analyst Note| Rebecca Scheuneman, CFA |
No-moat Smucker’s investor day leaves us encouraged that the firm is taking appropriate steps to stabilize market share, improve execution, and sharpen its cost structure. We have expressed concerns that Smucker’s media investments had seemed less efficient than competitors, as the firm invests a greater portion of sales on marketing (6% over the past four years versus 5% peer average) yet has been losing share in most categories. But over the past 18 months, Smucker redesigned its media model to reach 5 million new households (a 10% increase), while lowering nonworking media spend by $30 million, driving a 15% increase in marketing ROI. Further, in the recent September-ending quarter, Smucker gained market share in 46% of brands, up from 26% a year prior. A renewed focus on execution (a likely byproduct of the recently created COO role, in our view) will also result in a separate, dedicated salesforce for pet food, and the rollout of a proprietary digital AI tool in retail stores. Lastly, Smucker now expects to cut at least $150 million (200 basis points) in operating expenses over the next three years.