Smucker cuts Folgers coffee prices to woo customers back

Dunkin' Donuts coffee packs are pictured alongside other coffee brands on the shelves of a grocery store in Pasadena, California July 25, 2013. REUTERS/Mario Anzuoni

By Marcy Nicholson

NEW YORK (Reuters) - J.M. Smucker Co <SJM.N> cut prices for most of its Folgers and Dunkin' Donuts coffee brands sold in the United States by 6 percent, the biggest U.S. roaster said on Wednesday, partially reversing last year's price hikes to woo back customers.

The company is the first U.S. roaster to cut prices after a customer backlash following a 9 percent price hike just over a year ago when arabica prices were soaring.

Smucker later described the move as a "misstep" after sales volumes dropped as customers switched to cheaper brands and delayed purchases.

The move by the company, considered an industry trendsetter, is likely to trigger price cuts by other major roasters and follows a prolonged slump in arabica and robusta prices.

For Smucker, it also coincides with other product changes aimed at luring customers back. It has cut canister sizes for 15 of its large cans of Folgers roast and ground coffee by roughly 3 ounces, and is rolling out those smaller cans this summer.

Wild swings in coffee bean prices and changing consumer buying habits, which are sensitive to prices, have forced roasters to be more creative.

But experts questioned whether the latest measures would help Smuckers regain much of the market share it lost over the past year.

"Consumers are getting smarter about recognizing price and package size changes, particularly in coffee, where price volatility is more visible," Ross Colbert, global strategist for beverages with Rabobank International in New York, said in an email.

Relief from the lower prices is largely offset by smaller product sizes.

"This is an attempt to create the illusion of lower prices while not doing so," Shawn Hackett, president of Hackett Financial Advisors in Florida, said by email.

Last year's hike came after a drought in Brazil, the world's biggest producer, caused green coffee costs to soar. Kraft Foods Group Inc <KRFT.O> followed with a 10 percent price hike for Maxwell House and Yuban roast and ground brands.

Wednesday's cut is a fraction of the 25 percent drop in arabica futures prices <KCc2>, typically roasted for brewed coffee, over the past year, and 12 percent drop in robusta <LRCc2>, traditionally made into instant coffee but also used as a lower-cost component in roasted blends.

Coffee prices have been more volatile than usual since the 2014 drought in Brazil boosted prices on supply concerns. Prices have since fallen.

(Editing by Grant McCool and Jonathan Oatis)

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