"Our rapid ascent of coffee prices to reflect higher green coffee costs took its toll on volume," said Chief Executive Richard Smucker, in a statement.
CLEVELAND, Ohio -- The J.M. Smucker Co. says a 20-percent drop in sales of Folgers Coffee because of higher coffee prices hurt its sales and profits for the second quarter of fiscal 2015. The company raised prices in reaction to higher raw green coffee costs, but was also hit by greater competition from rival coffee brands.
The Orrville company's coffee business, including best-selling Folgers, Millstone, Cafe Bustelo, Cafe Pilon, and Dunkin' Donuts brand coffee sold in supermarkets, generates 46 percent of its sales and more than half of its profits.
For the second fiscal quarter that ended Oct. 31, Smucker said it expects net sales to decrease 5 percent and profits-per-diluted-share to increase 9 cents per share to $1.55, compared to the same period last year. Both results were "significantly impacted" by an 18-percent drop in sales volumes and a 10-percent decline in overall sales of its U.S. retail coffee segment.
Folgers' 20-percent decline in sales volume was "due primarily to consumer response to higher promoted price points for its roast and ground coffee offerings" compared to the first quarter.
As a result, Smucker's coffee profits are expected to be 16-percent lower for the second quarter of fiscal 2015.
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View full sizeJ.M. Smucker CEO Richard Smucker. "Our rapid ascent of coffee prices to reflect higher green coffee costs took its toll on volume," said Chief Executive Richard Smucker, in a statement.
"The balance of our businesses performed well," he added, referring to its U.S. retail consumer foods such as Smucker's fruit spreads, Jif peanut butter and Crisco oils and shortenings, and its international, foodservice and natural foods brands such as Robin Hood flour, TruRoots quinoa, and Golden Temple ethnic foods.
In an unrelated announcement last quarter, Smucker discontinued its "Life is good" brand coffee, launched last summer as the company's first UTZ certified sustainable coffee.
Richard Smucker said he expects coffee sales to pick up in the second half of fiscal 2015, but that "the pricing impact of higher green coffee costs will continue through the remainder of the fiscal year." J.M. Smucker's fiscal year ends April 30, 2015.
For fiscal 2015 as a whole, Smucker expects a 1-percent decline in net sales compared to last year, instead of the 3 percent to 4 percent growth it had previously projected. It also expects adjusted profits per diluted share of $5.45 to $5.65, instead of the previous range of $5.95 to $6.05.
Smucker made its announcement ahead of its regularly scheduled earnings report at 8:30 a.m. on Nov. 19.
