ORRVILLE, Ohio (TheStreet) -- J.M. Smucker (SJM) cut the price of its Folgers and Dunkin' Donuts (DNKN) brands of packaged coffee as commodity prices for green coffee beans came off decades-long highs.
The move to decrease consumer prices for packaged coffee sold in U.S. supermarkets reversed a trend seen earlier this year when Smucker raised coffee prices on four separate occasions in response to soaring Arabica costs. Smucker's latest coffee price hike, announced in June, was the steepest at 11%.
The very next day Starbucks (SBUX) announced a 17% price hike in bagged coffee, underscoring the pressure coffee retailers were facing amid soaring coffee costs. It was Starbucks' first price increase on café-sold bagged coffee in two years. In March, Starbucks hiked the price of bagged coffee sold at supermarkets by 12%.Smucker said Tuesday it decided to cut prices by an average of 6% as futures for green coffee prices have fallen, leaving investors wondering if Starbucks, Maxwell House maker Kraft Foods (KFT) and Green Mountain Coffee Roasters (GMCR) would follow suit.
In May, Kraft hiked the price of its Maxwell House coffee by 22%, or 70 cents a pound, the largest of four price increases in a year. Green Mountain said in May it had already passed on higher costs to its customers after raising consumer prices by 10% to 15% last September, adding that it would raise coffee prices by another 10% by mid-2011. Coffee futures hit a 34-year high of $3.0615 per pound on May 3 but have come down since then, with September contracts most recently trading at $2.4525. In December, Starbucks CEO Howard Schultz called the 50% spike in coffee futures "tragic," blaming financial speculators for the run-up in prices. Peet's Coffee & Tea (PEET) lowered its profit guidance by 10 cents a share earlier this year as coffee prices skyrocketed. Canada-based coffee shop chain Tim Hortons (THI) did not specifically mention how rising coffee and commodity costs affected its results last quarter, but reported that its cost of sales jumped 15.9% last quarter to a 62.5% share of total revenue, up from 59.6% share in the year-earlier period. Shares of J.M. Smucker fell 1.2% to $74.97 in morning trading Tuesday. Starbucks lost 0.2% to $38.34; Kraft was lower by 1% at $34.35; Green Mountain shed 2.3% to $99.98; Peet's fell 0.4% to $56.83; and Tim Hortons lost 0.7% to $46.47. Dunkin' Brands gained 0.5% to $26.75.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV