Netherlands coffee and tea group JDE Peet’s has raised its full year forecast as it looks to increase pricing amidst ongoing “volatility” in green bean coffee prices.
In its latest half year results, the group raised its total company full year performance from mid-single-digit growth to a forecasted increase in organic adjusted EBIT of “around” 10%.
The coffee roaster and supplier’s organic sales growth is now expected to be in the higher end of its medium range of 3-5%. It was previously in the lower end.
In its half year results for 2024 for the six months ended 30 June, JDE Peet’s posted revenue of €4.2bn ($4.6bn), increasing 3.6% organically year on year and 5.6% on a reported basis. The group booked a profit increase of 86.5% to €360m.
“Given our strong performance in the first half, and our expectations for the remainder of the year – including the ongoing inflation and volatility in green coffee prices, along with the additional pricing that this will require - we are confident in raising our full-year outlook across top-line, profitability and cash flow,” JDE Peet’s interim CEO Luc Vandevelde said.
Robusta coffee bean prices in the second half of JDE Peet’s financial year were up by 54% on the year prior, while Arabica was up 13%.
Speaking to investors on an earnings call last week, Vandevelde explained that the company would look to increase prices to defend its future gross profits.
He said: “The green coffee inflation of the last quarters will hit our P&L [profit and loss] in the coming quarters and thus inevitably [requires] additional price increases and continued cost discipline which I think are essential in protecting our gross profit so we can ensure that we can maintain the right investment levels behind our brands, products, channels, which is crucial for driving growth and shareholder value, both short-term and long-term.”
He added: “The negotiations are actually ongoing right now. We seem to be getting better reception this time around than we did on previous occasions. Actually the first quarter of this year was hit by some retailer retaliation, as we call it, but that levelled out quite nicely in the second quarter.”
A report from GlobalData, Just Drinks’ parent company, showed coffee futures prices surged in March and early April, with cheaper Robusta beans closing as high as $3,700 per tonne and more premium Arabica hitting $2.10 per pound, the highest level in over a year and a half.
Weather condition concerns in the key coffee growing regions of Vietnam and Brazil are driving the surge in prices, alongside the impact of ongoing conflicts in Ukraine and Gaza.
More recent analysis from the data analytics and consulting group suggested that prices stablised in June but are still “at still-high levels”. It said the supply of Arabica beans was in “surplus”, although “another Robusta deficit” looked likely.
In March, JDE Peet's announced the departure of its 2020 CEO appointment, Fabien Simon. No reasons were given for the change at the top of the business.
Vandevelde was the former Marks and Spencer chairman and CEO and is now a lead independent director at JDE Peet’s. He took over the CEO role on an interim basis while the company looks for a permanent replacement for Simon.
JDE Peet’s has said the search for its CEO successor is still on going. Vandevelde added that the company had brought candidates down to a “very short” list.
“The search and selection process is progressing very well and I do intend to contract my successor before the end of the year,” Vandevelde said.
When asked by an analyst if he was on that short list Vandevelde responded: “I'm really thoroughly enjoying the role of CEO, but I've learned in life not to climb the same mountain too many times. So I'll be very happy to hand over to my successor.”
