Sunday 21 July 2024
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Coffee price hikes dent J.M. Smucker results

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J.M. Smucker reported Thursday a net loss for the fourth quarter compared to a profit last year, despite a sales growth, hurt by one-time financing costs associated with the Big Heart Pet Brands acquisition as well as higher commodity costs and a lower U.S. demand for its Folgers and Dunkin’ Donuts packaged coffee, after it raised prices.

The Orrville, Ohio-based company, which owns brands such as Dunkin’ Donuts and Pilsbury besides coffee labels Folgers and Keurig, unveiled a loss of $90.3m or $0.82 per share for the February-to-April quarter, compared with earnings of $118.5m or $1.16 per share a year before.

Excluding special items, adjusted net loss for the quarter was $45.3 million or $0.41 per share, compared to income of $125.2 million or $1.22 per share in the year-ago quarter.

Net sales rose 17 percent to $1.45 billion, topping the Wall Street consensus of $1.36 billion.

U.S. retail coffee sales edged down 1 percent to $468.6 million in the fourth quarter, the 10th straight quarter of decline, as demand was weak for its Folgers and Dunkin’ Donuts packaged coffee. The business accounted for about a third of Smucker’s sales.

Smucker and other coffee makers raised prices last year after a drought in Brazil hurt coffee production in the world’s top Arabica grower. The company admitted in November that it had made a “misstep”, since the increase in prices affected sales volumes, which drop sharply.

Besides, the price hikes did not offset the impact of higher green coffee costs, the company said on Thursday.

“The Folgers brand volume decline was attributed to consumer response to higher promoted price points on shelf for its roast and ground coffee offerings,” besides “competitive activity and reduced promotional effectiveness”, Smucker stated.

“The Dunkin’ Donuts packaged coffee volume declined 18% in the quarter as it was also impacted by similar factors.”

Smucker said in February that it expected improvement in its U.S coffee business later this year as bean prices stabilize and it launches smaller Folgers cans.

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