Packaged-food veteran J.M. Smucker (NYSE:SJM) reported earnings Wednesday, and sweet they were not. It missed expectations on profits, cut its guidance, and generally disappointed investors. And while its top line increased slightly faster than inflation, that was before factoring out its M&A activity.

In this segment of the Nov. 28 podcast, Market Foolery host Chris Hill and MFAM Funds' Bill Barker review the situation at Smucker -- which is far less of a fruit-spread-centric operation than you might expect -- and consider what strategic directions management might do well to consider.

A full transcript follows the video.

This video was recorded on Nov. 28, 2018.

Chris Hill: Also falling today, shares of J.M. Smucker, the consumer brand giant. Second quarter profits came in lower than expected. They cut guidance. You could look at Tiffany and say, "Well, they didn't do as well as they wanted to." Smucker's quarter was bad all over.

Bill Barker: When you take the top line, which was only up a couple of percent for the quarter, and net sales were up 5%, that's OK. That's a little bit better than inflation. But one of the reasons it was up 5% all was because of an acquisition. They got Ainsworth, which is a pet food company, a gourmet pet food line, and they sold off the Pillsbury baked goods. We've gone over that Pillsbury exists in a couple of different actual companies. It's the baked goods part that Smucker wound up with. They sold that off. A couple of different things there. The top line is a little bit misleading. Really, a bigger problem for them is the margins came down. They're finding that there's a lot of competitive pricing in coffee, which is good for some of us, the drinkers of coffee. Always happy to hear that people are competing on price there. They still have, surprisingly, the No. 1 coffee brand in America, Folgers.

Hill: Still No. 1.

Barker: Still No. 1. They've also got Dunkin' Donuts, the beans that you buy off the shelf, not the coffee that you're buying in Dunks. They also have Cafe Bustelo and a couple of other coffee brands. They're really, at this point, much more of a coffee and pet food company than jams and peanut butters, which is what you associate the name with more.

Hill: Looking at a stock which is where it was five years ago, long-term shareholders of Smucker have not really been rewarded at all. You look at all of the brands they have, I'm wondering if they need to start taking a very serious look at selling off more of their brands. I went to their website, and one of the first things you see on their website is "Hey, we're hiring." Not that I was looking to take a job at Smucker.

Barker: You weren't looking for one, but, hey!

Hill: I thought, "Hey, I'll click on that just to see." They've got over 200 jobs listed. I get that it's a big company. But I look at the fact that they're doing all this hiring, that the stock hasn't moved anywhere, they have all these brands... it really seems like someone, an activist investor, perhaps, needs to come in and give Smucker a fresh set of eyes. It does not seem like a company that should be hiring hundreds of new people. It looks like a company that should be seriously thinking about getting strategically smaller.

Barker: A lot of openings in the podcast division over there?

Hill: None whatsoever.

Barker: None? Well, that thing is firing on all cylinders. The Smucker podcast, legendary daily discussion of Jif peanut butter. They had to devote a month to the Pillsbury Doughboy leaving and all that.

Hill: Yeah, sure.

Barker: They've got a lot of different things going on. They're actually a very, very large player, I think the No. 7 player, in terms of the center aisle, in terms of packaged foods, store-stable things, the things you put in boxes and cans and stuff and just leave there for however many years it takes to move that product. They do have a direction, and that is coffee and animals, much more so than --

Hill: Jams and jellies.

Barker: -- jams and jellies, and even peanut butter, which was a much bigger part of the equation. Specifically within pets, going more and more high-profile, deluxe sort of stuff. The Nutrish brand, Rachael Ray is one of their big acquisitions. I can tell you, it does cost more and more to feed your pets. They had some interesting details about all of this on a recent investor presentation. There are significantly more people shopping for their pets than for babies, and things like that. There's just a lot of money spent there. That's where they're going.

Hill: Wasn't that the case during the Great Recession? The only part of consumer spending in the United States that did not drop, that actually went up during the Great Recession, was spending on pets?

Barker: Well, you don't want to punish the pets for a housing collapse. It's not their fault!

Hill: No. They're no they're not out there with credit default swaps. Or are they? Because that would be amazing!

Barker: It would be one of the greatest conspiracies all time, if they pulled that off without our realizing it. That is, I think, a better place for them to go. And, of course, devoting a large chunk of their present and future to coffee makes all the sense in the world because as the nutritional and health abilities of coffee get more and more publicized, they're going to be more and more in the right place with that.

Hill: Oh, yeah. They're absolutely on the right side of history when it comes to coffee.

Bill Barker has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.