Will Higher Coffee Prices Derail The J.M. Smucker's Volume Momentum?

The J.M. Smucker Company’s (SJM) coffee prices are influenced by several factors like raw ingredient costs, tariffs, evolving consumer patterns and broader market volatility. The company has been implementing pricing actions across the coffee portfolio. Recent adjustments in coffee prices have been made owing to rising import costs, particularly those stemming from tariffs.

The primary driver of the pricing increase is the company's green coffee portfolio. Additional pricing actions in the Frozen Handheld and Spreads categories were implemented to offset rising costs. Such actions will cover green coffee commodity inflation as well as recover tariffs related to green coffee. In fourth-quarter fiscal 2025, the U.S. Retail Coffee segment’s sales grew 11%, backed by higher net price realization, while volume/mix was neutral.

Management, at its last earnings call, cited that earnings per share (EPS) growth for fiscal 2026 would have exceeded algorithmic expectations if not for elevated green coffee costs. It further noted that excluding the 80-cent impact from coffee inflation and pricing, as well as the 25-cent impact from tariffs, EPS would be down year over year at the midpoint.

Rising coffee costs pose a risk to volumes. The fiscal 2026 outlook incorporates approximately 20% net pricing, which is likely to result in a 10% decline in volumes due to price elasticity of demand. It projects a 0.5 elasticity factor across the coffee portfolio. While Folgers continues to deliver stable performance, the company is seeing early signs of stabilization in K-Cups supported by increasingly normalized relative pricing dynamics. These, coupled with SJM’s diversified brand portfolio and proactive strategies, might offer some cushion to volumes.

SJM’s Competition

Keurig Dr Pepper Inc. (KDP) and Starbucks Corporation (SBUX) are the key companies competing with The J.M. Smucker.

Keurig Dr Pepper is gaining from a sturdy Refreshment Beverages unit and solid market share growth. Keurig Dr Pepper has been witnessing sluggishness in its coffee segment for a while now. In first-quarter 2025, sales in the company’s U.S. Coffee segment dipped 3.7% year over year, reflecting net price realization improvement of 1.5%, somewhat offset by volume/mix decline of 5.2%. However, Keurig Dr Pepper’s consumer-centric innovation model, portfolio expansion into high-growth categories and solid route-to-market capabilities appear encouraging.

Starbucks, among the world’s leading coffee brands, is advancing its turnaround efforts through 'Back to Starbucks' strategy, with the goal of revitalizing operations and unlocking opportunities for the future. From espresso to specialty roast and ground coffee to the premium single-serve market, Starbucks commands authority and a leading position in all coffee segments. Starbucks is focused on enhancing its global market share through strategic store expansion, store remodeling, technology deployment, cost control, aggressive product innovation and robust brand building.

SJM’s Price Performance, Valuation and Estimates

Shares of The J.M. Smucker have lost 1.9% year to date compared with the industry’s decline of 3.9%.

From a valuation standpoint, SJM trades at a forward price-to-earnings ratio of 11.16X compared with the industry’s average of 16.04X.

The Zacks Consensus Estimate for SJM’s fiscal 2026 EPS implies a year-over-year decline of 9.7% while that for fiscal 2027 indicates growth of 8.7%. The company’s EPS estimate for fiscal 2025 and fiscal 2026 has moved downward in the past 30 days.

The J.M. Smucker stock currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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