The firm noted that its decision to sell its US industrial business, discontinue operations at its Salinas, California, facility and restructure its US distribution operations, was based on the need to optimize production and lower its costs.
"The company's strategy is to own and market leading North American icon food brands sold in the center of the store. The US industrial business is not branded and thus does not fit within our strategy," spokeswoman Kim Baker told FoodNavigatorUSA.com.
Smucker said in a statement that it had worked over the past two years to improve its business margins by exiting low margin contracts in excess of $50 million, but has nonetheless decided it is necessary to sell its industrial business.
This mean that the group will sell its industrial bakery ingredients business, located in Orrville, Ohio, to Baldwin Richardson Foods, a privately owned food company located in Chicago, Illinois. The sale is expected to close by the end of calendar year 2004, according to Smucker, who will continue to produce industrial bakery ingredients for Baldwin Richardson through September 2005.
The company plans subsequently to sell its dairy ingredients business, based in Oxnard, California, and Orrville, Ohio, to Sabroso Company, a privately owned producer and distributor of fruit products headquartered in Medford, Oregon. The sale is expected to close by the end of the third quarter, fiscal 2005. Smucker will then continue to operate the Oxnard plant as a fruit processing facility.
The company does not believe that these actions will have an important effect on the business and noted in a statement that industrial sales planned for 2005 are around $60 million.
The food firm announced, moreover, that it will close its plant in Salinas, California and redistribute the production to factories in Orrville, Ohio, and Memphis, Tennessee by the end of 2005.
"While these are difficult decisions, we believe they are important in positioning the company for future growth," said Tim Smucker, the CEO.
As a result of the announced actions, the company expects restructuring charges of approximately $15 million, of which an estimated $6 million will be recorded in the current fiscal year and the remainder in fiscal 2006.
JM Smucker is perhaps best known for its fruit spreads, peanut butter, shortening and oils, ice cream toppings, and health and natural foods and sold under the brands of Smucker's, Jif and Crisco. Since June 2004, Pillsbury baking mixes and frostings, Hungry Jack pancake mixes, syrups and potato side dishes and Martha White baking mixes and ingredients have been part of the company.