Ohio-based The J. M. Smucker Company (SJM) has announced that it will slash its packaged coffee prices by an average 6% owing to continuous decline in green coffee costs.
Smucker, which is slated to release its fourth quarter and fiscal year 2012 earnings on June 7, is cutting prices of coffee products sold in U.S. under the brand names of Folgers, Dunkin' Donuts, Millstone, and Cafe Bustelo. However, this does not include coffee or other products sold in the Dunkin' Donuts restaurants, as they are not marketed by the company.
Earlier in August 2011 too, Smucker had cut the coffee prices by 6% for its coffee brands, including Folgers, Millstone and Dunkin' Donuts. Kraft Foods, Inc (MDLZ) also followed in Smucker's footsteps and slashed the price of popular coffee brand Maxwell House by 6%, resulting from a drop in the prices of roast or ground coffee as weather conditions favored the coffee crops.
The prices of green coffee, on the contrary, were very high in 2010 and early 2011. Smucker and other coffee companies like Starbucks Corporation (SBUX) and Green Mountain Coffee Roasters (GMCR) raised their prices that time due to high green coffee cost inflation and other factors like higher demand for the product and changing weather.
The profitability of Smucker largely depends on the prices of green coffee. Coffee prices are highly volatile and are affected by weather and pest damage and also from political decisions in the coffee-producing countries. Moreover, worldwide supply and demand, the relative strength of the dollar, and speculative trading also influence the coffee prices.
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