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J.M. Smucker Co. cuts coffee prices 6%

Maker of Folgers and Dunkin' Donuts brands reverses increases earlier this year, putting pressure on other producers to follow.

August 17, 2011|By Tiffany Hsu, Los Angeles Times
  • Too much coffee, not enough drinking. Theres plenty of coffee around. The pressures come off the market, analyst Robin Rosenberg said of J.M. Smucker Co.'s price cut on Folgers and Dunkin' Donut coffee.
Too much coffee, not enough drinking. Theres plenty of coffee around. The… (Emile Wamsteker/Bloomberg )

Got the jitters over high coffee prices? Some relief is brewing.

J.M. Smucker Co., the nation's top producer of packaged coffee, is slashing prices on its Folgers and Dunkin' Donuts branded lines an average of 6%.

The cut is a turnaround from the spring when Smucker and other major producers raised prices after heavy rains in some growing regions pushed up bean costs. In addition to lackluster harvests, high demand from emerging markets such as China and speculative trading in commodity markets helped drive up prices.

But over the summer, supply expanded, said PFGBEST commodity analyst Robin Rosenberg, causing the cost of beans to go down.

"Too much coffee, not enough drinking," Rosenberg said. "There's plenty of coffee around. The pressure's come off the market."

Because Smucker is such a large coffee producer, the pressure will be on other roasters to follow suit, analysts said, especially when consumers are less inclined to pay premium prices for their brew. But as of Tuesday when Smucker made its cuts, other major producers were staying the course.

"There's no news one way or the other," said Bridget MacConnell, spokeswoman for Kraft Foods, which puts out the Maxwell House brand.

Nestle, the food giant that makes Nescafe instant coffee, declined to comment.

Local producer Jones Coffee Roasters, which sells to retailers such as Whole Foods Market, twice raised its wholesale prices over the last five months for a total of 20%. But a planned third increase may not be necessary, said owner Chuck Jones.

"We're thinking about not doing the last increase because the market's going back down," he said.

Starbucks Corp., the dominant coffee shop chain in the nation, raised prices for packaged coffee 17% in May. The company did not respond to requests for comment on Smucker's move.

May was when Arabica coffee futures hit a 14-year high, exceeding $3 a pound.

Coffee companies spent the year steadily increasing prices to keep up. In May, Smucker raised them 11% after a 10% increase in February.

The Original Pantry, one of Los Angeles' oldest restaurants, started charging 50 cents for a cup of coffee, doing away with a decades-long tradition of free coffee with breakfasts.

Specialty coffee businesses, which often work with small distributors or even directly with farmers, also felt the heat. That's because the prices on the commodity markets can influence the whole industry.

"It's extremely volatile right now," said Jeff Sallee, owner of the Catalina Coffee Co. cafe in Redondo Beach. "We play in a different space than the big boys like Starbucks, but we're certainly tied to commodities."

The independent coffeehouse was able to absorb the rising cost of joe for years without boosting its prices. But increasing costs caused Sallee to consider charging more, even at the risk of alienating price-sensitive consumers.

"Pennies can lose you customers," Sallee said. "So a general trend toward coffee bean prices going down is good for everybody."

Ardent coffee drinkers cheered the price cut, even though it has yet to reach them. Social media specialist Jason Gerdon, who misses the "good-old days" of cheap brew, said that between the Folgers served in his office and the Peet's or Starbucks he picks up on the weekends, he averages more than a dozen cups a week.

"Just to save a few bucks would be nice," said Gerdon, 29, who lives in Brea. "Just to see that prices aren't being jacked up for everything."

But regardless of the price, fanatics will probably stay loyal to their java, Jones said. "Coffee," he said, "is considered one of the last affordable luxuries."

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