The J.M. Smucker Company, a household name behind iconic brands like Folgers, Dunkin’, and Café Bustelo, is facing a bitter brew in 2025. The Orrville, Ohio-based food giant, known for its coffee, Jif peanut butter, and pet foods, reported a tough first quarter for fiscal 2026, with its stock taking a hit after a significant loss driven by soaring coffee costs and new trade policies. As tariffs imposed by the Trump administration disrupt the supply chain for green coffee beans, Smucker’s coffee division—a cornerstone of its business—has been hit hard, raising questions about the company’s ability to navigate a challenging economic landscape.
A Tough Quarter for Smucker
In its first-quarter earnings report for the period ending July 31, 2025, J.M. Smucker posted a net loss of $43.9 million, a stark contrast to the $185 million profit it recorded the previous year. This translated to a GAAP net loss of $0.41 per share, compared to earnings of $1.74 per share a year ago. Analysts had expected a profit of $1.42 per share, making the miss a jolt to investors. The company’s adjusted earnings per share came in at $1.90, slightly below the $1.93 anticipated by Wall Street, according to LSEG data. Revenue also disappointed, dropping 1% year-over-year to $2.11 billion, just shy of the $2.12 billion forecast.
The coffee division, which includes heavyweights like Folgers, Dunkin’, and Café Bustelo, saw a 22% profit decline despite a 15% increase in net sales to $717.2 million. The culprit? A perfect storm of higher commodity costs, unfavorable volume/mix, and increased marketing spend, which more than offset the benefits of price hikes. Smucker’s stock reflected the market’s unease, falling 5% in midday trading on August 27, 2025, and dipping as much as 7% after the earnings release. Despite the quarterly stumble, the stock has eked out a 3% gain year-to-date, showing some resilience amid broader market challenges.
Tariffs Stir the Pot
At the heart of Smucker’s struggles lies a significant policy shift: a 50% tariff on Brazilian coffee imports, up from 10%, implemented by the Trump administration in July 2025. Brazil, alongside Vietnam, supplies the bulk of the 500 million pounds of green coffee Smucker purchases annually. As a natural resource that cannot be grown in the continental U.S. due to its tropical climate requirements, green coffee is a critical input for Smucker’s brands. The tariff hike has driven up costs, with the company’s cost of products sold rising 23% to $1.64 billion in the first quarter. This increase has squeezed profit margins, even as Smucker has raised coffee prices to offset the impact.
The company isn’t sitting still. During its August 27 earnings call, a Smucker executive announced plans for additional price increases in early winter to counter the tariff-driven cost spikes. These hikes, averaging 5–7% per brand, aim to recover 80–90% of the increased costs. However, the strategy isn’t without risks. Higher prices have already led to weaker demand, with coffee volumes dropping by about 2% despite the sales boost from price increases. The company’s price elasticity factor—where a 1% price increase leads to a 0.5% volume drop—suggests consumers are feeling the pinch, particularly in a market where inflation and economic uncertainty are already curbing spending.
A Mixed Bag Across Segments
While coffee remains a bright spot with its 15% sales growth, other parts of Smucker’s portfolio are struggling. The sweet baked snacks segment, impacted by the 2023 acquisition of Hostess Brands for $5.6 billion, saw a 24% sales decline, or 10% on a comparable basis excluding divested brands like Voortman. Pet foods and spreads, including the iconic Jif peanut butter, also reported declining sales as consumers cut back on discretionary purchases. The company’s free cash flow turned negative at $94.9 million, compared to a positive $49.2 million the previous year, and its net debt climbed to $7.95 billion, pushing the leverage ratio to 4.3x from 3.6x.
Despite these challenges, Smucker remains optimistic. The company raised its full-year net sales growth guidance to 3–5%, up from 2–4%, reflecting confidence in its pricing strategy and the resilience of its coffee brands. It reaffirmed its adjusted EPS outlook of $8.50–$9.50, aligning with analyst expectations of $9.24. CEO Mark Smucker emphasized the strength of the at-home coffee category, which accounts for 70% of U.S. coffee consumption, noting that brands like Café Bustelo, up 36% in net sales, are driving growth through increased marketing and new product launches, such as new roast profiles.
Navigating a Changing Landscape
Smucker’s challenges are emblematic of broader trends in the consumer packaged goods sector. Tariffs, inflation, and shifting consumer behaviors are creating a volatile environment. The company’s reliance on coffee, which generates about 25% of its revenue and 38% of its segment profit, makes it particularly vulnerable to trade disruptions. The International Coffee Organization projects a 12% price increase for green coffee in 2026 due to supply constraints, adding further pressure. Smucker is responding with a three-pronged approach: aggressive pricing, alternative sourcing strategies, and supply chain optimization. For instance, it’s exploring ways to diversify its coffee sourcing to reduce reliance on Brazil and Vietnam, though this shift will take time.
The Hostess acquisition, while initially seen as a growth driver, has added complexity. Higher interest and amortization costs, coupled with a $260.8 million pre-tax loss from the Voortman divestiture, have strained finances. Yet, Smucker sees long-term potential in streamlining operations, having cut Hostess’ SKU count by 25% to improve profitability. The company is also prioritizing debt reduction, targeting a 3x leverage ratio by 2027, and leveraging legislative benefits to boost cash flow.
Consumer Trends and Future Risks
One wildcard is the rise of GLP-1 drugs, which some analysts fear could reduce snacking and impact Smucker’s sweet baked snacks and spreads. CEO Mark Smucker downplayed this concern, noting that 70% of consumers still snack twice daily, and the company has seen no significant impact. However, analysts like Bernstein’s Alexia Howard warn that pressures on the Hostess brand could intensify if GLP-1 drugs, particularly in pill form, gain traction in 2026. State-level cuts to SNAP funding and scrutiny of highly processed foods could further challenge sales.
On the coffee front, Smucker’s brands remain a stronghold. Café Bustelo, in particular, is a standout, with 19% volume growth and strong retailer acceptance for new products. Folgers and Dunkin’ have seen more modest gains, with Folgers up 6% in net sales despite volume declines. The company’s focus on innovation, such as Dunkin’ cold brew concentrates, and increased marketing spend are aimed at maintaining market share in a category where Smucker holds a 26% stake.
Looking Ahead
For J.M. Smucker, fiscal 2026 is shaping up as a test of resilience. The company’s ability to balance price increases with demand retention will be critical, especially as tariffs and commodity costs continue to weigh on margins. While coffee remains a reliable engine, the struggles in snacks and pet foods highlight the need for diversification. Smucker’s updated guidance—projecting 3–5% sales growth and $975 million in free cash flow—reflects cautious optimism, but the market’s reaction suggests investors remain wary.
As Smucker navigates this turbulent landscape, its focus on core brands like Jif and Uncrustables, alongside coffee, could provide stability. The company’s 55-year dividend streak and 4.15% yield make it appealing for income-focused investors, but operational challenges and tariff uncertainties pose risks. For now, Smucker is brewing a strategy to weather the storm, but only time will tell if it can keep the pot from boiling over.
