Coffee Price Hike Can't Stop J.M. Smucker (SJM)

With coffee prices up 13% this year (and another increase on the way), J.M. Smucker Co. (NYSE: SJM) could be headed for tough times. While mostly known for jams and jellies, J.M. Smucker owns Folgers, one of the largest coffee brands in the world.

Folgers accounts for 35% of J.M. Smucker's sales and nearly 50% of profits. But even if coffee revenue remained unaffected – in the October quarter, Folgers revenue rose 7% to $477 million, in the October quarter – the company would still have to deal with a 7% drop in sales volume, Barron's reports.

However, Deutsche Bank analyst Eric Katzman believes that J.M. Smucker could benefit from price-sensitive shoppers who abandon high-end brands like Starbucks Corporation (NASDAQ: SBUX) in favor of cheaper alternatives. Katzman has given SJM a Buy rating and a price target of $70.

Furthermore, Barron's says that investors who focus exclusively on coffee prices could be missing other growth drivers at J.M. Smucker, which earned $494 million last year on revenue of $4.6 billion.