* Smucker lowers Folgers, Dunkin' list price by 6 pct
* Arabica futures down 55 pct from 2011 peak
* Smucker has cut coffee list prices by 17 pct in 1-1/2
By Marcy Nicholson
Feb 19 Top U.S. packaged coffee maker J.M.
Smucker Co cut retail prices on its flagship brand,
Folgers, and on most of its packaged coffee for the third time
in 1-1/2 years on Tuesday, setting the stage for other roasters
to follow suit.
The retail price cuts are relatively modest compared with
how steeply the raw-product market - in this case, arabica
coffee - has fallen. Arabica, one of the types of coffee that is
roasted for brewed blends, is now at its lowest level in 2-1/2
On Tuesday, Smucker reduced the list price for most of its
packaged coffee products sold in the United States by an average
of 6 percent, effective immediately. The cuts, mainly affecting
the well-known Folgers and Dunkin' Donuts brands, are due to
"sustained declines in green coffee costs," the company said in
Smucker, based in Orrville, Ohio, is often the trendsetter
for coffee prices in the United States. A spokesman for Kraft
Foods Group Inc, maker of Maxwell House coffee, told
Reuters in an email that it had "no news to share at this time"
when asked about coffee price changes.
Arabica coffee futures trading on ICE Futures U.S.
have tumbled by 55 percent from the 34-year high above $3 per lb
reached in May 2011. On Tuesday, the market closed at the lowest
level in more than 2-1/2 years, down 1.3 percent on the day at
$1.3840 per lb.
Arabica coffee is typically purchased when the beans are
green, and then roasted and blended for brewing.
Both Smucker and Kraft lowered prices on many of their U.S.
coffees by an average of 6 percent in August 2011 and then again
in May 2012. Both times, Kraft's price change followed a move by
Smucker within days.
Smucker's three consecutive retail coffee price cuts tally
up to a 17 percent price decrease, a fraction of the more than
50 percent drop since the futures market fell from its 2011
"Movements in single commodity prices do not necessarily
mean supply chain margins improve or worsen to the same
degree," said Matt Incles, strategic insights manager at
Leatherhead Food Research in Leatherhead, United Kingdom.
"A whole host of factors influence production costs
throughout the supply chain such as the performance of other
commodity items such as energy, movements in foreign exchange
rates, labor costs, length of production chain, competition
dynamics and the ability to pass increased costs on to
In its fiscal 2013 third-quarter results released on Feb.
15, Smucker said the majority of the lower green coffee costs
"offset the unfavorable impact realized earlier in the year. On
a year-to-date basis, the net impact of lower prices and green
coffee costs has been relatively neutral to segment profit."
The less-expensive robusta coffee, which has traditionally
been processed into instant coffee, has increasingly been used
as a lower-costing option in brewed blends, analysts have said.
This shift took place as arabica coffee futures
prices more than doubled in an 11-month rally that ended in May
2011 at a 34-year high of $3.0890 per lb. In response to the
price surge, roasters raised prices four times, with Smucker
increasing its list prices by some 38 percent between May 2010
and May 2011.
The price of robusta, which is seeing increased global
demand, is down only slightly from its previous highs.
"While arabica prices have certainly come off quite
significantly the past couple of years, robusta prices haven't,"
said Keith Flury, senior analyst for Rabobank in London.
"The outlook for robusta is potentially fairly bullish,
meaning that a share of their coffee purchases haven't
necessarily gone down as much and might go up in the coming
Robusta coffee futures trading on the London
exchange Liffe settled down 0.6 percent at $2,044 per tonne on
Tuesday, down only 23 percent from their highs reached in March
2011 at $2,672 per tonne.
"Certainly there was an increase of usage in robusta," Flury
said, noting the arabica rally pushed its premium over robusta
futures to nearly $2 per lb.
"I think there was a lot of shifting out of arabica into
robusta, and shifting of blends because of that."
Last week, this premium dropped to around 43
cents per lb, the lowest in four years.
While the list price for Dunkin' Donuts brand bagged coffee
sold in grocery stores went down with Smucker's announcement,
Dunkin' Brands' global public relations director, Michelle King,
said this "has nothing to do with our Dunkin' Donuts
The Dunkin' Donuts franchisees are responsible for their own
pricing decisions, King added.
Calls and emails to other major U.S. roasters were not