Smucker Enters Chinese Markets - Analyst Blog


Heading for the Chinese market, The J.M. Smucker Company ( SJM ) has announced the acquisition of a minority non-controlling stake in privately-owned Chinese oatmeal maker Guilin Seamild Biologic Technology Development Co. (popularly known as Seamild) for $35 million.

Seamild is headquartered in the Guangxi province of China, and sells oatmeal under the Seamild brand and retails throughout China. Further, the oatmeal maker runs two manufacturing facilities in southern China and is working on another unit situated in northern China.

Smucker, the maker of Folgers coffee, Jif and Smucker peanut butter, believes that the deal will help the company to set its footprint in the Chinese markets. However, the acquisition is not likely to contribute to profits immediately for fiscal 2012. Nevertheless, Seamild's continuous investment in brand building will go well with Smucker's strategy of selling leading food brands.

Recently, in early January, Smucker acquired the majority of  North American foodservice coffee and shot beverage business from U.S. package-food company Sara Lee Corporation ( SLE ). Smucker made the upfront payment of $350 million in cash for the purchase and has agreed to pay $50 million to Sara Lee through the next 10 years.

With the acquisition, Sara Lee's liquid coffee concentrate brand Douwe Egberts has been added to Smucker's portfolio, along with a variety of roast and ground coffee, cappuccino, tea, and cocoa products. In addition, the companies entered into a long-term innovation partnership to collaborate on liquid coffee technology for the foodservice market. Moreover, subsequent to the acquisition, 450 Sara Lee employees were shifted to the Ohio-based J.M. Smucker plant.

Smucker which faces stiff competition from ConAgra Foods Inc. ( CAG ) and Kraft Foods, Inc. ( KFT ), holds a Zacks #4 Rank (a short-term Sell rating). Over the long-term, we provide a Neutral recommendation on the stock.

CONAGRA FOODS ( CAG ): Free Stock Analysis Report
KRAFT FOODS INC ( KFT ): Free Stock Analysis Report

SMUCKER JM ( SJM ): Free Stock Analysis Report
SARA LEE ( SLE ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CAG , KFT , SJM , SLE

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