Coffee lovers may soon be feeling the pinch as J.M. Smucker Co. plans to increase coffee prices for the fourth time since June 2024. This decision is due to the impact of tariffs on the cost of importing coffee beans, as revealed in a recent earnings call on June 10.
The primary driver of direct material costs related to tariffs for Smucker is sourcing coffee beans. The company mainly acquires its unroasted coffee beans from countries like Brazil and Vietnam, as these beans are not readily available domestically. According to CFO Tucker Marshall, the current U.S. tariff impact on green coffee is the company’s largest exposure, which they are actively managing amidst record-high commodity costs.
Smucker purchases around 500 million pounds of green coffee annually, with most of their U.S. production being sourced domestically. While specific pricing details for brands were not disclosed, popular Smucker coffee brands include Folgers, Dunkin’, and Café Bustelo.
In addition to coffee, Smucker faces tariff exposure in other areas such as exports to countries with retaliatory tariffs, foreign-made products imported to the U.S., and capital items manufactured outside the country and used in U.S. production facilities. To mitigate these cost increases, the company is implementing alternative sourcing strategies, optimizing supply chain operations, and employing responsible pricing practices.
Retaliatory tariffs from countries like Canada, where Smucker sells various products like peanut butter, ice cream toppings, and coffee, contribute to higher costs. Furthermore, products co-manufactured outside the U.S., such as liquid coffee and wet cat food, are also impacted. Capital goods purchased for manufacturing plants, primarily from the European Union, are subject to tariffs as well.
The company acknowledges the need for price increases across their business to offset rising costs. They anticipate that consumer demand may continue to be affected by broader inflationary pressures, leading to a higher price elasticity of demand well into 2026.
The food and beverage industry as a whole has been grappling with pricing challenges due to uncertainties surrounding tariff negotiations between the U.S. and its trading partners. Companies like Campbell’s Co. are exploring strategic pricing actions, while collaborating with suppliers to minimize the tariff impact. Other industry players like General Mills, Tyson Foods, and Coca-Cola have also raised concerns about potential impacts on their bottom line.
In conclusion, the increase in coffee prices by J.M. Smucker Co. reflects the broader challenges faced by companies in the food and beverage sector due to tariff-related issues. Consumers may need to brace themselves for continued price adjustments as companies navigate these economic challenges.