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Price hike ‘misstep’ brewed up coffee challenges, J.M. Smucker says

February 13, 2015, 1:07 PM UTC
J.M. Smucker Company Announces Its Raising Coffee Prices By 9 Percent
SAN RAFAEL, CA - JUNE 05: Packages of Folgers coffee are displayed on a shelf at a grocery store on June 5, 2014 in San Rafael, California. Ohio-based J.M.Smucker announced that the increase in coffee bean prices due to severe drought in Brazil is prompting them to raise the price of Folgers and Dunkin' Donuts coffee by 9 percent. J.M. Smucker's fourth quarter earnings slipped 9 percent with profits of $118.5 million, or $1.16 a share, compared to$130.3 million, or $1.22 a share, one year ago. (Photo by Justin Sullivan/Getty Images)
Photograph by Justin Sullivan — Getty Images

J.M. Smucker said Friday it saw a 3.5% drop in quarterly profit as demand for its coffee products, including the Folgers brand, declined after price increases in the United States.

The company raised prices on many of its packaged coffee brands by 9% in June to keep pace with rising bean prices.

In November, the company said it was a “misstep” to hike prices, which led to a sharp drop in sales volumes as customers delayed purchases and shifted to cheaper private-label brands.

However, Smucker (SJM) extended the price hikes to its higher-profit brands such as Folgers Gourmet Selections and Millstone in January, raising the prices of its K-Cup packs sold in the United States by about 8%. This followed a 9% increase in K-Cup prices by competitor Kraft Foods (KRFT), which makes Maxwell House coffee.

Smucker, which also makes Jif peanut butter and Smucker’s jams, said net income fell to $160.9 million, or $1.58 per share, in the third quarter ended Jan. 31, from $166.7 million, or $1.59 cents per share, a year earlier.

Net sales fell 1.7% to $1.44 billion.

Investors are also looking at Smucker’s integration plans for its $3.2 billion acquisition of pet food maker Big Heart Pet Brands.