Shares of J.M. Smucker (NYSE:SJM) have rebounded nicely after bottoming below $92 in February. Recognizing value, investors drove shares above the $100 mark in May. The company's impressive fourth-quarter results on June 5 further restored investors' confidence and confirmed that the company is poised for growth in the coming year and beyond.

Lower peanut prices
J.M. Smucker will benefit from lower peanut costs as they have reset down to normalized levels. In fact, Vince Byrd, J.M. Smucker's Chief Operating Officer, said during the company's fourth-quarter conference call that the company is no longer at a cost disadvantage and can now compete with its peers that had previously realized a cost advantage.

The issue at hand was the fact that J.M. Smucker carried peanut hedges that covered longer periods than those of its competitors. As such, the company failed to benefit from lower sprout peanut costs and this resulted in higher selling prices for consumers and soft sales volumes.

The company is currently investing an additional $40 million in its peanut butter facility in Memphis, which will impact the segment's near-term profit, as the company expects to complete the factory by the fourth fiscal quarter of 2015. The decision to invest in the facility rather than close it clearly signals confidence that the company believes in the potential of long-term returns for the segment.

Looking forward, the company has implemented several innovative peanut butter products that should stick out on the grocery aisles and drive longer-term growth. During the company's fourth-quarter conference call, Paul Wagstaff, the company's President, told analysts what to expect from its peanut butter business:

When you look at some of the innovation that we have coming out in that area, we have Jif Whips, which is a snack-type item. Their snacks is growing category and certainly have been doing well. Our Jif Whips continue to do well and we are pleased that. With Jif Hazelnut, we are relaunching that product in the plastic jar at a similar size for competition, we are investing behind all of these so we feel very, very good and comfortable with our peanut butter business and where it's heading in fiscal year coming up, so we are pleased with that.

J.M. Smucker will have lower peanut costs as its hedges roll off, which should improve its competitive offering within the category and generate higher sales volume in the coming years.

Coffee: a key battle ground
Throughout 2014, J.M. Smucker saw a volume gain of 3% in its Folgers brand and a 7% volume gain in Dunkin' Donuts packaged coffee. Single serve K-Cup pods, intended for use in Keurig Green Mountain (UNKNOWN:GMCR.DL) coffee brewers, made a strong contribution to growth as Folgers Gourmet Selections saw 10% volume growth.

However, by the company's own admission, the K-Cup business fell short of expectations in fiscal 2014. Nevertheless, despite an increase in the selling price of the bagged coffee, J.M. Smucker opted not to raise the price of its K-Cups to remain competitive in the crowded space.

Additionally, the company recently amended its agreement with Keurig Green Mountain and launched a K-Cup version of its Cafe Bustelo. It also "re-packaged" or "re-staged" several Folgers items.

J.M. Smucker could also benefit from the coming shift to the Keurig 2.0 machines, which will not be compatible with generic brands that have gained market share over the past few years.

Manufacturers of generic brands such as Treehouse Foods (NYSE:THS) will see their single-serve coffee pods "locked out" of the Keurig 2.0 system while Keurig will phase out earlier generations of its brewing machines.

Treehouse Foods is engaging in a desperate lawsuit against Keurig Green Mountain on the basis that the Keurig 2.0 represents an anti-competitive behavior.

Treehouse Foods faces the legitimate and potential threat of being locked out for good from selling coffee pods compatible with Keurig 2.0. On the flip side, J.M. Smucker has a close working relationship with Keurig Green Mountain and could act as a substitute brand for consumers who previously purchased Treehouse Foods' coffee.

Bottom line
Part of J.M. Smucker's growth over the previous years has come through sizable merger and acquisition deals. There has been a recent pause in M&A deals, but management continues to play it smart and shop around for a top brand that can add value to the company. If the company does not engage in any M&A activity in fiscal 2015, the company is likely to use its cash on hand to either pay down debt or repurchase shares, as it has done in the recent quarter by buying nearly over $280 million of its own stock.

J.M. Smucker is an attractive purchase for any portfolio given its portfolio of leading brands such as Jif and Folgers and the company's potential growth in single-serve and packaged coffee. Additionally, favorable input costs should help drive expanding margins in other segments such as peanut butter over the coming years.