(Reuters) - Price cuts may hurt J.M. Smucker Co’s earnings this year, but the company hopes to win back customers who ditched its brands such as Folgers coffee and Jif peanut butter for cheaper alternatives.
Smucker, which reported higher-than-expected quarterly results on Thursday, has been trying to strike a balance between passing on record high costs of raw materials to shoppers and keeping its market share — with limited success so far.
Prices for Folgers remain much higher than last year, despite the company cutting prices twice since last August, including a 7 percent reduction last month. Other brands like Jif and Crisco oils are also pricier.
After higher prices led to a 7 percent decline in overall volumes for the quarter ended April 30, the company indicated it was ready to make its brands more affordable.
“While higher food prices continue to pose a challenge to consumers, we believe that softening commodity costs should provide some relief to improve volume,” operations chief Vince Byrd said in a statement.
Costs of coffee, a key raw material for Smucker, have declined after rallying to 34-year highs in 2011 because of tight supplies of washed arabica beans and speculative buying.
The company forecast mixed results for the year ending April 2013. It projected earnings below expectations, while its sales outlook was comfortably above.
Smucker’s fourth-quarter earnings rose to $104.1 million, or 93 cents per share, from $94.9 million, or 82 cents per share, last year.
Excluding items, it earned $1.10 per share, trumping analysts’ estimates of 99 cents per share, according to Thomson Reuters I/B/E/S.
Sales rose 14 percent to $1.35 billion.
Along with higher prices, the company’s acquisitions of espresso coffee company Rowland Coffee Roasters Inc and Sara Lee Corp’s North American food service coffee business helped drive higher sales.
Smucker’s shares were flat at $76.07 on Thursday morning on the New York Stock Exchange.
Reporting by Mihir Dalal and Juhi Arora in Bangalore; Editing by Viraj Nair, Maju Samuel