MNeagle
3rd August 2010, 06:09 AM
NEW YORK (MarketWatch) -- J.M. Smucker Co. said Tuesday morning the company plans to increase prices on an array of products within its coffee line-up sold in the U.S., specifically a majority of those under the Folgers, Dunkin' Donuts, and Millstone brands.
On average, prices tags on impacted products will see a 9% increase. The Orrville, Ohio., food marketer /quotes/comstock/13*!sjm/quotes/nls/sjm (SJM 59.71, -1.72, -2.80%) pointed to higher long-term costs related to green coffee.
In May, the company announced a 4% increase across the same selection of products.
Since June 1, coffee futures have surged nearly 25% as harsh weather led to two seasons of disappointing harvests in key production areas such as Central American and Colombia.
Currently about 80% of Smucker's production efforts are concentrated in New Orleans. In light of the Deepwater Horizon oil spill in the Gulf of Mexico, the company noted in its latest annual filing that it may incur higher transportation costs as green coffee bean shipments come through the Port of New Orleans.
For the full year ended April, sales in the U.S. retail coffee unit rose 99% to $1.7 billion, helped by its Folgers acquisition and fastest-growing Dunkin' Donuts brand. The segment's profit for the year came in at $550.8 million, up 129% from the prior year.
Before the announcement, analysts at Jefferies & Co. downgraded the company to hold from buy, citing sharp increases in coffee costs that could depress margins.
"While [Smucker] successfully led a price increase in May for the category and coffee pricing has tended to be elastic, we have concerns given the economic backdrop that there may be more friction with another price increase," the analysts said in a note on Monday.
http://www.marketwatch.com/story/jm-smucker-raises-coffee-prices-by-9-2010-08-03?siteid=rss&rss=1
On average, prices tags on impacted products will see a 9% increase. The Orrville, Ohio., food marketer /quotes/comstock/13*!sjm/quotes/nls/sjm (SJM 59.71, -1.72, -2.80%) pointed to higher long-term costs related to green coffee.
In May, the company announced a 4% increase across the same selection of products.
Since June 1, coffee futures have surged nearly 25% as harsh weather led to two seasons of disappointing harvests in key production areas such as Central American and Colombia.
Currently about 80% of Smucker's production efforts are concentrated in New Orleans. In light of the Deepwater Horizon oil spill in the Gulf of Mexico, the company noted in its latest annual filing that it may incur higher transportation costs as green coffee bean shipments come through the Port of New Orleans.
For the full year ended April, sales in the U.S. retail coffee unit rose 99% to $1.7 billion, helped by its Folgers acquisition and fastest-growing Dunkin' Donuts brand. The segment's profit for the year came in at $550.8 million, up 129% from the prior year.
Before the announcement, analysts at Jefferies & Co. downgraded the company to hold from buy, citing sharp increases in coffee costs that could depress margins.
"While [Smucker] successfully led a price increase in May for the category and coffee pricing has tended to be elastic, we have concerns given the economic backdrop that there may be more friction with another price increase," the analysts said in a note on Monday.
http://www.marketwatch.com/story/jm-smucker-raises-coffee-prices-by-9-2010-08-03?siteid=rss&rss=1