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Kraft follows J.M. Smucker in cutting coffee prices 6%

Coffee bean prices, after reaching multi-decade highs earlier this year, have dropped with improved harvests.

August 24, 2011|By Tiffany Hsu, Los Angeles Times
  • Kraft Foods' roughly 6% wholesale price cut on coffee will shave about 20 cents off each pound of the companys roast and ground coffees, while making instant coffee about two cents cheaper per ounce. Retailers will set the final price seen by consumers. Above, Kraft's Maxwell House coffee jars and cans are displayed at a store in Waco, Texas.
Kraft Foods' roughly 6% wholesale price cut on coffee will shave about… (Tony Gutierrez, AP )

Coffee prices continue to get easier to swallow.

Kraft Foods Inc., which owns the Maxwell House and Yuban brands of packaged coffees, is lowering its wholesale prices roughly 6%.

The cut will shave about 20 cents off each pound of the company's roast and ground coffees, while making instant coffee about 2 cents cheaper per ounce. Retailers such as grocery stores will set the final price seen by consumers.

Kraft's price cut, announced Tuesday, follows that of competitor J.M. Smucker, which a week ago slashed the cost of its Dunkin' Donuts and Folgers packaged lines 6% because of a drop in coffee bean prices.

Unfavorable weather conditions for growing coffee compounded by high energy costs had pushed prices to multi-decade highs earlier this year. Kraft raised its prices more than 50% over a 15-month period.

But improving conditions led to better harvests. The price cut by Smucker and Kraft is likely to put pressure on rivals such as Starbucks Corp. and Nestle to follow suit. Starbucks could not be reached for reaction and Nestle declined to comment.

Kraft's price cut doesn't include its Gevalia brand nor its Tassimo coffee sold in discs used in single-serving machines, spokeswoman Bridget MacConnell said. The price drop also does not apply to Maxwell House International's line of powdered, flavored drinks. Revenue from Kraft's U.S. beverage business slipped to $779 million in the second quarter ended June 30, down 12.1% from the same period a year earlier.

The Northfield, Ill., company is in the process of splitting into two independent parts, with one portion dedicated to its global snack brands such as Oreo cookies and Trident gum, and the other focusing on its North American grocery business.

tiffany.hsu@latimes.com

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