Kraft Cuts Coffee Prices by 6% - Analyst Blog
August 24 2011 - 12:19PM
Zacks
Kraft Foods Inc. (KFT) has cut down the prices
of its flagship coffee brand Maxwell House by roughly 6% in the US,
effective immediately, driven by a decline in the prices of coffee
beans.
Accordingly, the price slit converts to 20 cents per pound on
roast and ground coffees and 2 cents per ounce on instant coffees,
while Kraft covers its Maxwell House and Yuban brands, excluding
Gevalia, Tassimo and the Maxwell House International line of
specialty soluble beverages.
Kraft is following its rival company, The J M Smucker
Co. (SJM) in lowering the coffee prices, which had dropped
its list prices by about 6% on August 16 for most of its brands,
including Dunkin' Donuts, Folgers and Folgers Gourmet Selections
lines.
The attempt to lower coffee prices by Smucker came after 15
months of price increases within the industry. The roasters across
the board like Smucker, Kraft, Starbucks Corp.
(SBUX), Peet's Coffee and Tea Inc. (PEET) and
Green Mountain Coffee Roasters Inc. (GMCR) have
increased the prices for coffee beans in recent years due to
growing demand and harsh weather. The prices also increased on the
back of higher fuel and packaging costs, which forced the companies
to charge higher from their customers.
Both Smucker and Kraft raised their list prices for coffee four
times between May 2010 and May 2011, with Smucker's increase
reaching a total of approximately 38% for shoppers, while for
Kraft, the total increase was nearly 56%.
On August 9, Kraft posted robust second-quarter 2011 earnings of
62 cents per share, ahead of the Zacks Consensus Estimate of 58
cents. Management credited the benefits of increased investments in
marketing and innovation, and focus on End-to-End Cost Management
for strong results in the quarter.
The company is also planning to spin off its North American
grocery business to its shareholders and split into two independent
public companies. One would focus on international snack brands,
and the other on its North American grocery business.
Kraft is stated to drive confidence from the belief of
continuing strong business momentum in the challenging environment
of weak consumer and category growth as well as significant input
cost inflation.
We remain encouraged with the company’s investments in quality
upgrades, promotions and marketing as well as initiatives taken to
improve margin and productivity by reducing manufacturing and
overhead costs and enhancing operational efficiencies by
modernizing plants and information systems.
Currently, we prefer to rate the stock as Neutral. Further,
Kraft Foods holds the Zacks #2 Rank, which translates into a
short-term Buy rating.
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
PEETS COFFE&TEA (PEET): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
SMUCKER JM (SJM): Free Stock Analysis Report
Zacks Investment Research
Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
Historical Stock Chart
From Aug 2024 to Sep 2024
Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
Historical Stock Chart
From Sep 2023 to Sep 2024