Smuckers Using Porter's Generic Strategies, Case Study

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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.

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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 recommend moving into the super-premium markets. Firms that would previously have been considered to be adopting a focus strategy (i.e. organic, local and fair trade niches) are becoming more mainstream. Other food conglomerates have already taken steps to shore up their product lines in response to this change in the external environment (Kellogg's buying Kashi for example). It is recommended that Smuckers do the same, or develop its own super-premium brands in house, in order to maintain its position as a premium producer as consumer views of its core products shift downwards. The company is not in a position to compete strictly as a low-cost producer, so it must guard against finding itself in that market unwillingly. Firms with a differentiated strategy often have strong innovation and R&D capabilities. Smuckers has attempted to compete with this strategy but without those capabilities. Investing in new superpremium brands -- through acquisition or otherwise -- would help Smuckers to develop that key competency required to maintain a differentiated status in the market.

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