The price of peanut butter in the United States is expected to rise due to the severe drought encountered this past year. Kraft Foods (KFT, Fortune 500) which carry the peanut butter brand is expected to increase sales by 40% and ConAgra Foods (CAG, Fortune 500) peanut butter will rise by 20%. Due to the increase in price the quantity demanded for peanut butter will fall substantially. Customers will be less willing to purchase peanut butter and in turn will look for a substitute in order to satisfy their personal needs. As indicated by Porters Five Forces, the peanut butter industry is clearly susceptible to the threat of substitutes due to the rise in price. This reinforces the fact that the peanut butter industry needs to come up with a solution to minimize the threat of substitutes.

Most consumers including myself are less willing to pay an extra 20% to 40% for the same quality and quantity of peanut butter. Many consumers will  be more inclined to change their desires for peanut butter and seek an alternate substitute. This other option can fall between the lines of making one’s own homemade peanut butter or purchasing a similar product. Furthermore, the peanut butter industry will face a decrease in sales this year because of the low supply of peanut butter and the resulting increase in its price. It will have to endure these consequences for the time being and hope that next year the whole industry will have a much better harvest.

 Citation: O’Toole. “Get your peanut butter — before prices soar.” 14 October 2011. Web.15 October. 2011.  <http://money.cnn.com/2011/10/14/markets/peanut_butter_prices/>

Picture: Lengeman III,William. “Beyond Jelly: Reinventing the Peanut Butter Sandwich.” Web. 18 October. 2011.<http://www.epicurean.com/articles/beyond-jelly-reinventing-the-peanut-butter-sandwich.html>