Correction: Story corrects throughout to state that J.M. Smucker produces Pillsbury-branded cake mixes and baking products while General Mills, owner of the Pillsbury brand, makes Pillsbury biscuits.
NEW YORK (TheStreet) -- While J.M. Smucker (SJM) had a generally good quarter, considering the rising intensity of price competition among major food retailers, there was one notable area of weakness: sales of its Pillsbury-branded products.
Smucker's, which licenses the Pillsbury name for its cake mixes and baking products, had a rocky quarter, which like its fiscal year, ended in April. Meanwhile, over at Minneapolis-base General Mills (GIS), which owns the brand and makes Pillsbury biscuits, business is much better.
Smuckers reported an 8% decline in sales in the quarter, falling to $1.2 billion. The Orrville, Ohio-based company owed this drop in part to lower coffee prices and slowing business at its international unit. Net income also dropped, falling 9% to $118.5 million or $1.21 per diluted share.Net sales for the year were on the decline as well. Smuckers recorded $5.6 billion in sales for the 2014 fiscal year, a 5% decrease from last year's $5.8 billion. On a lighter note, Smuckers did see a 4% increase in profits this year with over $565 million in sales as compared to last year's $544 million. However, despite Smuckers' decline in net sales and income this past quarter, the company did manage to see volume gains in Crisco oils, flour and Folgers' Coffee while sales of Pillsbury baking mixes and frostings declined. According to the company, "net sales and volume for the overall Pillsbury brand decreased 14 percent and 4 percent respectively". How exactly are we to explain Smuckers' decrease in net sales and volume? The culprit may lie with Pillsbury's decision to downsize some of its popular cake mixes in 2012 after to its sale to General Mills in 2000. Due to the rising cost of food and ingredients, several major cake mix companies including Pillsbury, Duncan Hines and Betty Crocker, reduced their 18.25 ounce boxes of cake mix to 15.25 ounces resulting in fewer yields per box while drastically raising its price. Although cake mix manufacturers decreased the weight of the product in order to compete with other companies, this tactic ultimately resulted in lost customers. Both Smuckers and General Mills continue to sell Pillsbury-branded products, a reality that has sometimes given the Doughboy a split personality. Smuckers was falling 0.2% to $104.91 while General Mills was dropping 0.7% to $54.78.
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