The J.M. Smucker's Coffee Business Surges: Is Growth Durable?

The J.M. Smucker Company SJM has been benefiting from the strength of its Coffee business, which remained a standout in the third quarter of fiscal 2026. The company’s U.S. Retail Coffee business delivered strong growth during the quarter, helping lift overall results even as some other parts of the portfolio remained under pressure.

During the third quarter, U.S. Retail Coffee net sales increased 23% to $908.2 million, aided by higher pricing across the portfolio. That pricing helped offset higher costs, especially in coffee. However, volume/mix slipped 1%, as declines for Dunkin’ and Folgers were partly balanced by growth for Cafe Bustelo. Despite the sales growth, segment profit declined 5% to $199 million due to higher commodity costs, tariffs, weaker volume and mix, and the comparison with favorable property taxes last year.

A big reason coffee continues to hold up is that consumers have so far absorbed the higher prices better than expected. The J.M. Smucker raised coffee prices in May and again in August because of higher costs, though demand trends after the price hikes were favorable to expectations. This points to the strength of SJM’s coffee lineup and the resilience of the at-home coffee category.

Cafe Bustelo was an especially strong contributor in the quarter. The brand posted 46% net sales growth within the U.S. Retail Coffee segment, including a 20% increase in volume/mix. At its third-quarter earnings call, management stated that Cafe Bustelo gained both dollar and volume share in every segment where it competes in the latest 13-week period, including mainstream, pre-pack, one cup and instant coffee.

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Is More Growth Brewing in SJM’s Coffee Business?

For fiscal 2026, The J.M. Smucker expects Cafe Bustelo to exceed $500 million in net sales, which would mark a rise of more than $100 million from the prior year. For the fourth quarter, management expects U.S. Retail Coffee sales to remain strong, with about a 20% increase from pricing, partly negated by a high-single-digit decline in volume/mix.

Taken together, the third quarter showed that coffee remains a powerful sales driver for The J.M. Smucker. The business is benefiting from pricing strength and standout brand performance, especially from Cafe Bustelo. At the same time, costs and softer volumes remain part of the picture, making coffee a story of strong demand support, but one that still faces ongoing pressure on profitability.

Shares of this Zacks Rank #3 (Hold) company have dipped 4.2% in the past three months compared with the industry’s decline of 9.4%.

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