J.M. Smucker (SJM) has implemented some of the steepest price increases of the year, though it did so on products that typically only cost a few dollars to begin with.
The company raised prices on its coffee products -- which include popular brands such as Folgers and Dunkin' Donuts (DNKN) -- four separate times in the past year, including a steep 11% increase in May this year. The company pinned these increases on the rising cost of coffee beans, due both to rising demand and a poor harvest.
For some, coffee may well qualify as an essential that warrants the extra cost, but at the end of the summer, Smuckers announced it would lower the price of its coffee products by an average of 6%, perhaps hinting it had reached the limit of how much it could charge consumers, at least for now.
Smuckers isn't the only food company raising prices. It was revealed this summer that Coca-Cola (KO) would implement a 3% to 5% price increase on its sodas to compensate for the higher cost of transportation as well as the corn and plastic used to make their products. It might be tough to argue that Coca-Cola's sodas are really an essential, but as we reported at the time, the price increase came during the summer, when beverages of any sort are in high demand.
Netflix (NFLX) is the classic example of how not to go about raising prices. The company nearly doubled what it cost to stream movies and rent DVDs in July by separating the features into two services that now cost at least $16 to bundle together, compared with $10 before. At the time, analysts said the price hike was intended to put more of a premium on its streaming services. Indeed, a few months later the company announced plans to split in two, effectively annexing itself from the DVD side of its business by placing it under a sister company with a different name. Needless to say, the changes did not go over well with customers. "Netflix tried to raise prices and you immediately saw the blowback that followed," Baumohl says. "Consumers were furious." Eventually, the company decided not to split, but the price changes remained in effect. As a result, Netflix lost 800,000 subscribers in the third quarter alone, and its shares plummeted by 35% after it announced quarterly earnings on Monday, including a grim outlook: The once and recent high-flying company won't be profitable for several quarters -- not even coming close to meeting Wall Street expectations in the fourth quarter of 2011.
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