"J.M. Smucker Co, the maker of Folgers coffee, said on Wednesday it made a “misstep” with its most recent price increase, which caused sales volumes to drop sharply as customers delayed purchases and shifted to cheaper private-label brands."
J.M. Smucker Co. (NYSE: SJM) was not alone. Last month, according to the Chicago Tribune:
Kraft Foods, maker of Maxwell House coffee, said Wednesday it will raise prices on most of its U.S. single-serve coffees for the first time, extending its price increases to the more lucrative market.
Kraft raised the price of its Maxwell House, Gevalia, McCafe and Yuban K-Cup packs by about 9 percent, effective Dec. 28, due to sustained price increases in associated raw materials, a company spokeswoman said.
For Kraft Foods Group Inc. (NASDAQ: KRFT) and others, the price increase has been blamed mostly on droughts that have hit growers in Brazil, the largest producer in the world. That means the problem could not be anticipated well in advance.
It is still too early to say whether rising coffee prices will hurt American demand for coffee. It is one of the few beverage products in the United States for which there is no direct competition. Of course, people could turn to tea. In many cases, the price of tea has fallen.
The drought it Brazil has not abatted and it is likely that the crop of Arabica beans will not return to 2012 levels. As coffee consumption continues to rise globally the potential shortfall of raw product to the major retailers will force further price increases. It's anyone's guess whether consumption will drop and retailers are being forced to monitor sales very closely for any sign that the market has softened. If you come across coffee on sale in the grocery store we would suggest that you buy a little extra. It might not be on sale too many times this year.
Ray Williamson Posted on: 2015-01-07 12:00 AM 
