ORRVILLE, Ohio -- The J.M. Smucker Co., the food company better known for its fruit preserves, is investing $99 million to make even more of its best-selling Jif and other peanut butter brands. Smucker has received out-of-state incentives to expand its peanut-butter-making operations and add some jobs at its three facilities in Memphis, Tenn., Lexington, Ky., and New Bethelehem,...
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J.M. Smucker wants to increase capacity at its three factories that make its top-selling Jif and other peanut butter brands.
Smucker has received out-of-state incentives to expand its peanut-butter-making operations and add some jobs at its three facilities in Memphis, Tenn., Lexington, Ky., and New Bethelehem, Pa.
The company, which has more than doubled the size of the top-selling Jif brand since acquiring it in 2002, said its expansion is driven by rising demand.
Smucker said it decided to expand in Memphis rather than move peanut-butter production to its Orrville corporate campus.
"We will make a significant investment to convert the existing infrastructure into a state-of-the-art peanut butter facility in support of our natural peanut butter brands, such as Smucker's, Adam's, Santa Cruz Organic and Laura Scudder's," spokeswoman Maribeth Badertscher said via email. "We expect to begin production of peanut butter products in Memphis by summer 2014."
In Memphis, Smucker will invest $55 million in new equipment and other improvements at its plant and add 75 workers to the 50 already employed there.
In exchange, the company will receive 12 years' worth of tax breaks worth about $5.5 million from the Economic Development Growth Engine for Memphis and Shelby County for creating jobs with average wages of $48,256.
She said Ohio was ruled out as a possible alternative and that the company never sought financial aid from the State of Ohio.
Converting the Memphis factory into a peanut butter plant allowed Smucker to use an existing facility already located near the peanut supply chain, she added.
In Lexington, Smucker is investing $43.7 million to increase efficiency and productivity, upgrade machinery and equipment and expand capacity at its primary Jif plant.
The company is eligible for $2 million in state tax breaks over the next five years from the Kentucky Economic Development Finance Authority toward the cost of that expansion.
Smucker currently employs 279 people making an average hourly wage of $24.25, not including benefits, and has agreed to retain at least 90 percent of those workers.
And in New Bethelehem, Pa., Smucker will convert its natural peanut butter facility into a factory solely devoted to the production of its rapidly growing nut butters, including Jif Hazelnut, Jif Chocolate-Hazelnut and Mocha Cappuccino Hazelnut Spreads. The company did not seek or receive any incentives there.
New Bethlehem currently employs 60, but will consolidate to 30 workers by the summer of 2014. The workers losing their jobs can apply for jobs in Memphis.
"The facility in New Bethelem is land-locked and could not be expanded to the required capacity, and is ideal for the smaller run alternative nut butter products," she said.
"We are looking forward to expanding distribution of these products as well as adding to our product offerings in this rapidly growing category," churned out from a peanut-free facility for consumers with allergies.
Gary Hunter, assistant professor of marketing and policy studies at Case Western Reserve University's Weatherhead School of Management, said Smucker's expansion is good news for the company and for the Northeast Ohio economy.
As a former operations manager for Procter and Gamble Co., which used to own Jif, Hunter appreciates how much Smucker has worked to expand and extend the Jif brand since acquiring it in 2002.
"Growth is always good," he said. Although he hasn't studied the peanut butter market, he is confident that Smucker has more than done its homework on the potential for growth here and overseas.
Smucker is also looking to secure Jif's position as the nation's most popular brand of peanut butter, after last month's news that Hormel Foods Corp. is buying Skippy Peanut Butter for $700 million with plans to expand its global sales.
Skippy is the No. 2 brand in the $2 billion U.S. peanut butter market, but outsells Jif in China and other countries.
Smucker, which has no factories overseas, is expanding its factories that produce peanut butter for U.S. consumers.
Devon DelVecchio, associate professor of marketing at Miami University's Farmer School of Business, said it makes sense for Smucker to increase sales of its well-known core brands among its current customers, who might decided to try Jif Hazelnut Spread instead of buying a jar of Nutella.
The company is also appealing to time-strapped consumers willing to pay a premium for products like single-serve Jif to Go.
It's easier for Smucker to innovate and create new products with higher profit margins than to try and gain market share simply on price, DelVecchio said.
"And for retailers, there's a comfort level to putting Jif on the shelf, because if it says 'Jif' on it, it will probably sell."
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