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J.M. Smucker Absorbs $75M in Tariff Costs, Reverses Coffee Price Hike Plans
J.M. Smucker has decided to reverse its initial plans for a third price hike on coffee this fiscal year. Instead, the company will absorb $75 million in tariff-related costs that have accumulated so far. This decision was announced during a Nov. 25 earnings call.
Despite previous price increases aimed at offsetting the impact of tariffs, coffee demand has remained strong, according to CFO Tucker Marshall. Recent changes in U.S. trade policy, which exempt green coffee and other agricultural products from tariffs, also played a role in the company’s choice not to raise prices further. CEO Mark Smucker expressed confidence that commodity prices will normalize over time, as they have historically.
Impact on Coffee Industry
J.M. Smucker had raised coffee prices earlier in the year due to tariffs on imported green coffee beans, a commodity not produced in the U.S. Despite the price hikes, demand did not decrease as much as expected. The company anticipates a 16% increase in coffee revenue for the current fiscal year, with only a 6% decline in volume compared to initial projections.
The company annually purchases 500 million pounds of unroasted beans, primarily from Brazil and Vietnam, which face country-specific tariffs of 50% and 20%, respectively. In a positive development for the industry, President Trump issued an executive order in November exempting coffee from tariffs on agricultural products.
Future Outlook
While other coffee importers have raised prices to cope with rising sourcing costs, J.M. Smucker’s decision not to implement further price hikes means it will not fully recover green coffee tariff expenses incurred this fiscal year. This is expected to have a negative impact on earnings, with estimated costs reducing earnings per share by $0.50. However, the company remains optimistic about long-term sustainable growth and expects to overcome these challenges in the coming fiscal year.
CFO Marshall indicated that the unrecovered tariff costs will not have the same adverse effect in the next fiscal year, provided there are no additional changes to U.S. trade policy for green coffee. Overall, J.M. Smucker believes its portfolio is well-positioned for future growth.