Smucker, Kraft Cut Coffee Prices

Published in CSP Daily News

Folgers, Maxwell House makers react to declines in green coffee market

NORTHFIELD, Ill, & ORVILLE, Ohio --  Major U.S. roaster Kraft Foods Group Inc. followed the maker of Folgers coffee in late February and cut the price of its flagship coffee brand Maxwell House by a relatively modest amount compared with the arabica coffee market's decline, reported Reuters.

Kraft reduced its Maxwell House and Yuban roast and ground coffees by approximately 6%. It cut its Instant Maxwell House and soluble Sanka decaffeinated coffees by about 5%.

The price cut is due to "sustained declines in the green coffee market," Kraft spokesperson Russ Dyer told the news agency, adding that this only affects coffee sold in the United States.

Kraft's Gevalia, Maxwell House International, Tassimo and Gevalia and Maxwell House Single Serve Cup brands are not included in the price change, he said.

The company's move follows The J.M. Smucker Co.'s move to cut its U.S. list retail prices for Folgers coffee by approximately 6%, for the same reason.

Smucker, Orrville, Ohio, announced that it decreased the list price for the majority of its packaged coffee products sold in the United States, primarily consisting of items sold under the Folgers and Dunkin' Donuts brand names. Prices decreased an average of 6% on impacted items in response to sustained declines in green coffee costs.

Dunkin' Donuts brand is licensed to Smucker for packaged coffee products sold in retail channels such as grocery stores, mass merchandisers, club stores, dollar stores and drug stores. This pricing change does not pertain to Dunkin' Donuts coffee or other products for sale in Dunkin' Donuts restaurants.

Folgers holds the biggest market share for fresh and instant coffee in the United States, having reached 11.8% in 2012, falling from 13.2% in 2011, according to Reuters, citing Euromonitor International data. Maxwell House holds the fourth biggest market share, after Keurig and Starbucks, at 6.8% in 2012, down from 7.3% in 2011.

It was the third round of coffee price cuts in the United States for both roasters in the last year and a half, said the report, with both Smucker and Kraft last lowering their coffee prices by approximately 6% each time in May 2012 and August 2011.

The cost of the raw product, in this case arabica coffee beans, which are typically roasted for brewed blends, recently fell to its lowest level in more than 2-1/2 years.

Smucker and Kraft raised their retail list prices four times between May 2010 and May 2011, the report said, but only a fraction of the rise seen in arabica beans with the maker of Folgers increasing its list prices by 38% during this time.

Coffee importers and analysts have said that many roasters increased the percentage of the less-expensive robusta coffee in their blends to cope with the soaring cost of arabica beans, according to Reuters. Robusta coffee has traditionally been made into instant coffee.

Northfiels, Ill.-based Kraft is a food products company with iconic brands including Maxwell House, Oscar Mayer and JELL-O. It became an independent company last October after a corporate split of legacy Kraft's business and its global snacking business, now called Mondelez International.

Smucker is a leading marketer and manufacturer of fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk and health and natural foods beverages in North America. Its family of brands includes Smucker's, Folgers, Dunkin' Donuts, Jif, Crisco, Pillsbury, Eagle Brand, R.W. Knudsen Family, Hungry Jack, Cafe Bustelo, Cafe Pilon, White Lily and Martha White.