Smuckers is inexperienced with the global coffee trade. For Smuckers, the Folgers acquisition has increased its risk significantly, while the benefits are incidental and synergistic. In short, the gains from the acquisition may not have been worth the risk. The degree of diversification is low, which means that there is little improvement in the company's product-line risk position to counter the increase in risk faced as a result of increased exposure to the global coffee market. Time will tell if the expected increase in coffee prices makes the acquisition looks like a poor choice,
The recent strategic choices by Smuckers do not lend the firm any new sources of sustainable competitive advantage. The moves were made in order to take advantage of marketing and merchandising synergies. These moves, therefore, have strengthened existing competitive advantages. One of the primary sources of sustainable competitive advantage for Smuckers is its broad, complementary product line, so the acquisition of Folgers and other earlier acquisitions strengthen this advantage.
There remains some untapped opportunities for Smuckers. The company remains a mass market producer. As consumer sentiment shifts towards higher-end products, including organics and fair trade coffee, there is the risk that Smuckers' brands will lose some of their differentiated positioning. The ability of the company to charge higher prices than the generics is built on brand differentiation. However, what we are seeing in retail with the emergence of a large and vibrant organic market and the trend towards consuming local foods is that Smuckers products often lack this differentiation. Folgers coffee, for example, occupies a relatively low position in a coffee market that has become increasingly differentiated in recent years. The appeal of Smuckers may wane if they cannot shore up their brand image, including more aggressive promotion of organic and super-premium lines.
In order to improve the company's strategy, I would...
The vast majority of the trademark value at Smuckers ($1.824 billion) is considered by the company to be indefinite-lived, not subject to amortization. This means that the company believes its marks have near-permanent value, evidence of their strength in the market. The company's distribution competency is also considered to be one of its greatest strengths. Smuckers has saturation distribution across North America, which allows it to launch brand extensions and
As noted, the recent "supply chain streamlining" is a move to cut costs and build greater economies of scale. This is consistent with a firm engaging in a cost leadership strategy. That the company also has strong brands allows it to continue to pursue its longstanding differentiation strategy as well. However, the company has been slow to respond to new trends, a reflection of its conservative culture and the
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