Tags: Kraft | Cuts | Price | Coffee

Kraft Cuts Price of US Maxwell House Coffee

Thursday, 21 Feb 2013 05:19 PM

 

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Major U.S. roaster Kraft Foods Group Inc followed the maker of Folgers coffee on Thursday, and cut the price of its flagship coffee brand Maxwell House by a relatively modest amount compared with the arabica coffee market's decline.

Kraft reduced its Maxwell House and Yuban roast and ground coffees by approximately 6 percent. It cut its Instant Maxwell House and soluble Sanka decaffeinated coffees by roughly 5 percent, effective immediately.

The price cut is due to "sustained declines in the green coffee market," Kraft spokesman Russ Dyer said in an email, adding this only affects coffee sold in the United States.

The company's move follows two days after Folgers-maker J.M. Smucker cut its U.S. list retail prices by approximately 6 percent, for the same reason.

Folgers holds the biggest market share for fresh and instant coffee in the United States, having reached 11.8 percent in 2012, falling from 13.2 percent in 2011, according to Euromonitor International data.

Maxwell House holds the fourth biggest market share, after Keurig and Starbucks, at 6.8 percent in 2012, down from 7.3 percent in 2011, the data showed.

Kraft's Gevalia, Maxwell House International, Tassimo, and Gevalia and Maxwell House Single Serve Cup brands are not included in the price change, Kraft's Dyer said.

It was the third round of coffee price cuts in the United States for both roasters in the last year-and-a-half, with both Smucker and Kraft last lowering their coffee prices by approximately 6 percent each time in May 2012 and August 2011.

The cost of the raw product, in this case arabica coffee beans, which are typically roasted for brewed blends, recently fell to its lowest level in more than 2-1/2 years.

Arabica coffee futures trading on ICE Futures U.S. have seen a volatile few years. In an 11-month rally that finished in May 2011, the market more than doubled in price, taking it above $3 per lb and to the highest level in 34 years.

Smucker and Kraft raised their retail list prices four times between May 2010 and May 2011, but only a fraction of the rise seen in arabica beans with the maker of Folgers increasing its list prices by some 38 percent during this time.

Coffee importers and analysts have said that many roasters increased the percentage of the less-expensive robusta coffee in their blends to cope with the soaring cost of arabica beans.

Robusta coffee has traditionally been made into instant coffee. The details of coffee blends are highly secretive for most roasters, leaving many guessing about robusta percentages.

While arabica futures have tumbled 55 percent from the May 2011 peak, reaching the lowest in more than 2-1/2 years earlier this week at $2.3760 per lb, major U.S. roasters have cut their list retail prices by roughly 17 percent over the past year-and-a-half.

Robusta futures trading on the London International Financial Futures Exchange settled up 0.3 percent at $2,069 per tonne on Thursday, down only about 23 percent from their March 2011 peak at $2,672 per tonne.

© 2014 Thomson/Reuters. All rights reserved.

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