Get ready for peanut butter prices to go up...a lot
Posted by
Brian (aka trav007)
Oct 11 '11, 10:45
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OCTOBER 10, 2011
Peanut-Butter Makers Face Crunch
Hot, Dry Summer Roasts This Year's Crop, Propelling Prices and Forcing Smucker and Major Producers to React
The Wall Street Journal
By PAUL ZIOBRO
Choosy moms will have little choice but to pay more for peanut butter.
Another hot, dry summer has devastated this year's peanut crop, sending prices for the legume skyrocketing and forcing peanut-butter brands including J.M. Smucker Co.'s Jif, Unilever NV's Skippy and ConAgra Foods Inc.'s Peter Pan into startling price increases.
Wholesale prices for big-selling Jif are going up 30% starting in November, while Peter Pan will raise prices as much as 24% in a couple weeks. Unilever wouldn't comment on its pricing plans, but a spokesman for Wegmans Food Markets, the closely held supermarket chain in the Northeast U.S., said wholesale prices for all brands it carries, including Skippy, are 30% to 35% higher than a year ago.
Kraft Foods Inc., which launched Planters peanut butter in June, is raising prices 40% on Oct. 31, a spokeswoman said.
Smaller peanut butter producers may be feeling the crunch more.
Lee Zalben founded the New York peanut-butter sandwich shop Peanut Butter & Co. in 1998, and now sells jarred peanut butter in more than 15,000 stores, include Whole Foods Market Inc. and Wal-Mart Stores Inc. He's had to raise prices, too, though not as much as the larger brands. The company sells is peanut butter in flavors like Dark Chocolate Dreams through distributors, which adds additional costs to each jar. So Mr. Zalben is cutting costs in other areas, including shipping and warehousing, to try to keep the retail price below $5.
"We don't have the same luxury of passing on cost increases in the same way as some of the larger brands," said Mr. Zalben, who said he has secured enough peanut supply through 2012.
The U.S. Department of Agriculture estimates the current spot price for a ton of unprocessed Runner peanuts, commonly used in peanut butter, at about $1,150 a ton, which is up from about $450 a year ago. A pound of shelled peanuts, meanwhile, would fetch $1.20 currently, one broker said, up from 52 cents a year ago.
The tight peanut supply means peanut-butter costs will eventually make their way to consumers, who are facing higher prices on just about everything they buy in the supermarkets. While prices for food consumed at home are broadly up 6% versus a year ago, the increase in peanut butter should be immediately noticeable and take a bite out of disposable income. A 30% increase on an 18-ounce jar of Jif would add 94 cents to the $3.14 price at a Target Corp. store in Jersey City.
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