Smuckers Strategic Choices Smuckers Pursues Case Study

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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 slow pace of change at the family-owned firm. This may have cost the company some market share in the past. Indeed, the company's recent success has been Folger's, which is positioned at the low end of the coffee market. As the recession hit high end coffee companies like Starbucks hard, low end companies benefited as consumers traded down. Folgers has been a rare cost leadership success for Smuckers, but did so on the existing strong level of brand recognition.

The Folgers success and recent move towards economies of scale indicates a shift in focus for Smuckers. While this move has already been successful in some ways, it also leaves the company's structure at least somewhat incongruent with its current strategy. There is limited alignment between the structure and the branding element of the strategy. The differentiation that Smuckers hopes to achieve may be difficult to achieve because the company's organizational structure is focused on channels rather than on products. Smuckers appears to take the view that building and supporting brand strength is less important than building economies of scale. The brand strength, however, is a critical element to the blue ocean elements of strategy. For example, Folgers was in a good position to win coffee drinkers as they traded down because of its combination of brand strength and cost leadership.

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If either of these elements had been lacking, it is unlikely that Folgers would have been the success story it was. Yet, the brand focus that helped build Folgers did not come from Smuckers, which had just acquired the brand. That brands in the Smuckers family did not enjoy the same benefits of the recession as Folgers despite their combination of strong brand equity and relatively low cost indicates that perhaps Smuckers does not sufficiently emphasize branding. In doing so, it may lose brand equity and if that occurs the company would become just another low cost producer, to the detriment of the company's ability to charge premium prices for its products.

Despite this significant risk, Smuckers does still have competitive advantage by virtue of its strategic choices. The company is well-positioned to add a cost leadership element to its strategy as the result of its focus on developing economies of scale. The company's brands still have strong brand equity and even if this begins to erode these brands will remain strong for a number of years into the future. Smuckers may not yet have moved fully into the blue ocean it seeks, but with a more emphasis on supporting its brands and making smart tactical brand extensions into areas where there is room for premium or niche products then the company can close the gaps in congruence between its strategic choices and its generic strategy.

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