Smucker’s Case Study
P&G represents a related business corporate diversification because it involves building the company around businesses where there is strategic fit with respect to key value chain activities and competitive assets. Proctor & Gamble acquired Jif and Crisco in 2001 for divestiture because P&G believed it would fit within its range of management skills and allow it to become a larger, stronger competitor in the food industry. J.M. Smucker acquired the two brands from P&G in a $786 million stock swap which they believed the merger would allow J.M. Smucker to ultimately grow to $3 billion through a strategy that included organic sales growth of existing brands, new product introductions, and further strategic acquisitions that fit within the company’s vision. Smucker’s goal was to acquire and market all Number 1 brands, sold in the center of the store so in 2004, they acquired International Multifoods and gave it center-of-the-store food brands Pillsbury and Hungry Jack. Smucker’s expansion efforts have allowed the company’s sales to increase from $632 million in 2000 to $4.6 billion in 2010. Over the same 10-year period its profits had increased from $36 million to $494 million. Their expansion efforts have been successful for the company itself but maybe not compared to other major processed foods industry leaders. Analysts are concerned that they may not have enough bargaining power when negotiating with even more powerful retailers such as Nestle whose revenue had increased from $61.3 billion to nearly $100 billion over the same 10-year period as Smucker’s.
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