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Smucker’s Hopes to Share a Cup of Green Mountain Coffee Profits

Company debuts several new products, including Folgers K-Cups

By InvestorPlace Staff


No one is singing the Folgers’ “Best Part of Wakin’ Up” jingle more fervently this morning than J.M. Smucker Company (NYSE: SJM), which just announced the launch of dozens of new products, including Folgers gourmet single-serve coffee cups. The move is a bid to share in the success of the single-serve coffee market that has produced runaway profits for Green Mountain Coffee (NASDAQ: GMCR) and others.

Smuckers will offer K-cups for brewing machines under the Keurig brand, a subsidiary of Green Mountain that has seen blistering success in the last few years. SJM will look to cash in on its Millstone brand coffee, as well as the better-known Folgers name.

The consumer goods company is trying to tap into the ever-growing K-cup market. With the Keurig single cup brewer all the rage in the office and home, Smuckers believes it can make money on these new products despite the down economy.  Last year, K-cups sold over $190 million in grocery stores.  Clearly there is money to be made.

But the Smucker-Folgers launch comes at a complicated time in the coffee industry.  Fast-food pioneer McDonald’s (NYSE: MCD) has tapped into the specialty drink market with its new line of McCafe products, creating quite a splash and really boosting its bottom line. MCD stock is up +16.7% year-to-date, a number many experts are attributing to its lattes and smoothies. Consumers seem to be ditching high priced coffee drinks for cheaper options – but will the Folgers K-cup line build on this trend or arrive too late to the party?

The caffeinated drink is far from the only product being rolled out.  In fact, Smuckers will now offer products from sugar-free frostings to low-salt pickles to Crisco imported olive oils. It’s safe to no longer envision Smuckers as just a jelly manufacturer, but investors need to wonder that’s a good thing or a bad thing.

What’s more, Smuckers’ new product launches come at a time when consumer spending is anything but strong.  Not many companies are rolling out new products during a time when the general public is at its most frugal, making Smuckers’ move that much more intriguing.

The Ohio based company is hoping the new products will add a spark to their stock.  Smuckers has underperformed year-to-date, down -4.7%.  More recently, shares have fallen nearly -7% since late July.  Despite the stock slipping, Smuckers has outperformed earnings estimates for four consecutive quarters, and reported a net profit margin of 11.3% in the second quarter.  The stock appears to be in limbo.

Smuckers’ stock is worth watching in the upcoming weeks.  Time will tell if the myriad of new products are a hit with consumers, or if the lack of consumer confidence has a detrimental effect on the launch.

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Article printed from InvestorPlace Media, https://investorplace.com/2010/08/smucker%e2%80%99s-hopes-to-share-a-cup-of-green-mountain-coffee-profits/.

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