How Tariffs are Impacting Coffee Prices: Insights for Food and Beverage Professionals
Dive Brief:
- J.M. Smucker Co. plans to hike coffee prices for the fourth time since June 2024 as tariffs raise the cost of coffee bean imports, according to a June 10 earnings call.
- Coffee bean sourcing is the primary driver of direct material costs related to tariffs for Smucker, per the earnings call.
- The company primarily procures its unroasted coffee beans from Brazil and Vietnam, alongside other countries, as it is “an unavailable natural resource” domestically, CFO Tucker Marshall said on an earnings Q&A.
- “The current U.S. tariff impact on green coffee is our largest exposure that we will manage on top of navigating record-high costs for the commodity,” CEO Mark Smucker told investors.
Dive Insight:
Smucker buys about 500 million pounds of green coffee annually, making it the company’s largest tariff-impacted import, according to the earnings call. Outside of coffee, most of the company’s U.S. production is sourced domestically.
In August, the company plans to hike coffee prices for the fourth time since June 2024, per the earnings call. Smucker did not discuss pricing for specific brands, but the company’s most widely distributed coffees include Folgers, Dunkin’ and Café Bustelo, according to the company’s website.
Smucker’s areas of tariff exposure also include exports to countries with retaliatory tariffs, foreign-made products shipped to the U.S. and capital items made outside the country and used in its U.S. manufacturing plants, Marshall said.
“This has been factored into our outlook, and we are working to mitigate these cost increases through a combination of alternative sourcing strategies, supply chain optimization, and responsible pricing,” Smucker added.
Retaliatory tariffs from Canada, where Smucker sells peanut butter, ice cream toppings and coffee, contribute to higher costs, along with products co-manufactured outside the U.S., such as liquid coffee and wet cat food, Marshall said.
Also, capital goods bought for manufacturing plants carry tariffs, since they largely come from the European Union, the CFO said.
“The higher costs have required price increases across our business, and we anticipate the price elasticity of demand could remain elevated into 2026 as consumers continue to experience broader inflationary pressures and are selective in their spending,” the company said in a securities filing.
Industry Insights:
- Food and beverage companies are facing pricing challenges due to tariff-related negotiations between the U.S. and its trading partners.
- Companies like Campbell’s Co. are considering “surgical pricing actions” to mitigate the impact of tariffs, while others like General Mills, Tyson Foods, and Coca-Cola have warned of potential impacts on their bottom line.
Industry Analysis
The impact of tariffs on coffee prices by J.M. Smucker Co. sheds light on the challenges faced by food and beverage companies in navigating supply chain disruptions and pricing pressures. Here are some key points to consider in the global food and beverage industry:
- Supply Chains: Companies heavily reliant on imports, like Smucker, are vulnerable to fluctuations in tariffs and trade dynamics. Supply chain optimization and alternative sourcing strategies will be crucial in mitigating these risks.
- Pricing: Price increases due to tariffs can affect consumer demand and purchasing behavior. Companies will need to carefully manage pricing strategies to maintain competitiveness while covering increased costs.
- Trade Dynamics: Retaliatory tariffs and trade negotiations can disrupt supply chains and impact pricing strategies. Food and beverage companies must stay informed and agile to navigate these challenges.
- Strategic Outlook: Strategic planning, including diversification of sourcing and proactive cost management, will be essential for food and beverage companies to adapt to the evolving trade landscape and maintain profitability.
In conclusion, the impact of tariffs on coffee prices highlights the need for food and beverage professionals to stay vigilant and proactive in managing supply chain risks and pricing pressures. By leveraging alternative sourcing strategies, supply chain optimization, and responsible pricing practices, companies can mitigate the impact of tariffs and navigate the changing dynamics of the global food and beverage industry.
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