- J.M. Smucker Co. announced it would cut prices on a majority of coffee products sold in the U.S. due to lower coffee costs, but Reuters reports that lower prices are a move to stave off supermarket brands, according to experts.
- On average, the price cuts will be around 6% for Folgers and Dunkin' Donuts brands.
- Folgers has seen a four-year dip in market share in the U.S. coffee market.
Coffee prices may come down across the board as other companies decide to follow Smucker's lead to remain competitive. They can afford to, because coffee commodity prices are significantly lower than they were at the time of these industry-wide price hikes. The USDA released a report in December that forecasts record quantities for global coffee exports and consumption, as Indonesia and Honduras have increased their output, which offset declines in Brazil.
With this price reduction, Smucker is continuing its recovery from the hit it took after raising coffee prices by 9% in 2014, which the company later called a "misstep." Smucker raised prices to maintain profitability amid coffee bean supply issues in Brazil. After the price hike, sales volumes for Smucker's coffee brands declined sharply as consumers turned to cheaper brands and private labels.
In July of last year, Smucker began its recovery from the dent in sales volumes by lowering prices for most Folgers and Dunkin' Donuts by about 6%. That quarter, Smucker's U.S. coffee sales increased by 12%, the first improvement in 11 quarters, due in part to the price adjustment.
In the latest reported quarter, Smucker announced a 37% increase in net sales, attributed mainly to its acquisition of Big Heart Pet Brands but also to lower prices on Folgers products.
Coffee supply issues due to the 2014 drought in Brazil threatened more than just Smucker, and other companies raised their prices around the same time. Pre-merger Kraft Foods Group raised prices on its Maxwell House and Yuban ground and roast brands by about 10% in 2014. Kraft then lowered those prices again by 5.8% soon after Smucker's announcement.