Dive Brief:
- The J. M. Smucker Co. is scaling back prices for many of its coffee products, including most of the Folgers and Dunkin' Donuts brands, by 6%.
- These price cuts come more than a year after an approximately 9% price increase the company instituted when the prices for arabica were up due to the drought in Brazil, a major coffee producer. Smucker later deemed this move a "misstep" as it lost customers to cheaper brands and delayed purchases.
- Smucker may be the first in a line of price drops for coffee on the consumer end.
Dive Insight:
Smucker wasn't the only brand to raise its prices last year due to soaring green coffee prices, as Kraft Foods Group also raised prices on its Maxwell House and Yuban ground and roast brands by about 10%. Keurig Green Mountain raised K-Cups' prices by 9% as well.
However, futures prices for arabica, typically used in brewed and specialty coffee, have dropped about 25% and futures prices for robusta, typically used for instant coffee, about 12%.
However, Smuckers' price cuts may not benefit consumers in the long run. At the same time, the company is also rolling out smaller packaging sizes, about 3 ounces less per can, to be released this summer. "This is an attempt to create the illusion of lower prices while not doing so," Shawn Hackett, president of Hackett Financial Advisors in Florida, told Reuters by email.