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P&G boosts price of Folgers by 14 percent

Folgers, a unit of Procter & Gamble Co., raised the price of its roast-and-ground coffee by 14 percent Thursday.
/ Source: The Associated Press

Procter & Gamble Co. on Thursday announced a 14 percent price increase for its Folgers roast and ground coffee, the biggest rise in a decade, because of sustained increases in the commodity cost of green coffee.

Effective with shipments Thursday, the price increased to $2.28 per 13-ounce equivalent of Folgers roast and ground, from $2. That product accounts for more than three-quarters of Folgers’ business, company spokeswoman Tonia Hyatt said.

Meanwhile, P&G chief executive A.G. Lafley told analysts and investors in Boston that health and beauty products and developing markets are the company’s biggest money-making opportunities for its consumer products. The markets are in Latin America, China, Asia, Eastern Europe, Middle East and Africa.

Folgers’ price peaked in May 1997 at $3.36, but had been going down since then as world coffee prices declined.

P&G says it increases product prices when it is apparent that commodity price increases will be sustained. The list price of Folgers generally reflects the price of green, or unroasted, coffee sold on the commodity market.

In November 2002, P&G increased Folgers’ price by a quarter.

Folgers, which has annual sales of at least $1 billion, is sold in North America. It is the market leader in the United States with a share of more than 30 percent.

Investors and analysts have expressed concerns that profit margins in the consumer products industry are being squeezed by rising commodity prices and increased spending to take market share from competitors.

Lafley said he is optimistic, however, because the company is taking a balanced approach of increasing sales across its major brands and product categories. P&G products include Tide and Ariel detergents, Pampers diapers, Clairol and Wella hair care items and Pringles snack chips.

Health and beauty makes up 47 percent of P&G’s business portfolio and will increase to more than 50 percent by the end of the decade, chief financial officer Clayton Daley said.

The developing market that includes 185 countries worldwide already is a $70 billion market for all consumer products and could reach $100 billion by 2010, bigger than either the Western Europe or North American markets, said Robert McDonald, vice chairman of global operations. Consumers in developed markets on average use about 3.5 times the amount of consumer products as consumers in developing markets, offering big sales opportunities, he said.

P&G sees major opportunities in China and Russia, where it already operates, but also in other countries where it has no presence, McDonald said.

P&G said Wednesday that it expects the volume of products shipped to increase by as much as 7 percent for the quarter that will end Dec. 31. P&G also said it is comfortable with analysts’ projections that the company will earn 71 to 72 cents per share for the quarter, which would be an increase of 9 percent to 11 percent from a year ago.