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.

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,

. 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

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.