July 8, 2015

The almond’s popularity continues to soar. Americans are now eating approximately two pounds of almonds per person per year – double the amount of only seven years ago. The increase in peanut allergies, the popularity of trend diets such as the high-protein Paleo diet, and a certain level of peanut butter fatigue on the part of consumers have all contributed to an unprecedented growth in consumption of almonds and almond products. However, four years of severe drought in California and smaller crop sizes have driven prices to record highs – threatening to price some almond products beyond what consumers are willing or able to pay, according to a recent article in the Toronto Star Online.

U.S. sales of specialty nut spreads and butters have more than doubled since 2011, and in only last year, jumped 22% to reach $448.9 million, while peanut butter sales fell by 4.1%. These trends have prompted national brands to find entry into the space. In 2013 Smucker introduced an almond butter version of its Jif nut butter in both creamy and crunchy varieties becoming the first national brand to do so.

However, even national brands are not finding conditions easy. Hain Celestial, which sells nut butters and dark chocolate almond spread under the NaraNatha brand is beginning to look outside of California to source its almonds because of increasing prices resulting from the drought.

Smaller producers, such as Justin Gold in Boulder, Colorado, which sells almond butter products at Whole Foods, Kroger, and Target, have seen costs jump by 50% over the past two years, and are finding it hard to compete without raising prices and without losing market share.

“Almonds a year ago were priced at about $3.30, and we thought that was an exorbitant price,” Stephen Smith, Hain Celestial’s chief financial officer, said on a conference call last month. “And here we are looking at prices in the mid-$4 range.”

In November 2014 almond prices reached a new record high after the harvest fell by 7% due to the drought, and the U.S. Department of Agriculture (USDA) estimates that the next crop will be even smaller.

Demand continues to soar, but the industry is left to wonder how close they are getting to the price ceiling before consumers turn away.

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