Rising coffee prices have hit profits at Strauss Group, the Israel-based food and beverage maker.

Strauss, which makes dips and spreads alongside PepsiCo for the North American market, today (18 May) reported a 34.4% fall in first-quarter net income to NIS55m (US$15.6m).

For the first three months of 2011, Strauss’s operating income was also lower, down 22.6% at NIS131m.

Operating income from Strauss’s coffee business fell amid rising input prices and the difficulty the company faced in passing on the entire increase in costs to its customers.

However, operating income from the company’s international dips and spreads unit was also lower. Strauss blamed the drop in profits on the “simultaneous operation of two production sites”.

Nevertheless, sales from the dips and spreads business – and from Strauss’s domestic arm in Israel – did increase. As a whole, the company’s turnover was up 4.5% at NIS1.77bn.

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During the quarter, Strauss and PepsiCo announced plans to build on its current partnership and set up a venture to market salads, dips and spreads worldwide.

Click here for the complete release from Strauss.