Category Review: Juices

Juice Expected to Suffer a Squeeze

November 27, 2012
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The outlook for juice sales is looking relatively sour. Inflation-adjusted growth of 4 percent is likely through 2016 – with a decline of 26 percent before inflation in private label – according to Mintel Group Ltd., Chicago, which released reports on the category in January and on private label’s prospects in September 2011.

Private label juice and juice drinks sales rose 5 percent to nearly $1.5 billion between 2006 and 2010, while the category overall grew 2 percent during that same period. But private label juice lost sales in 2010 and was expected to again in 2011, Mintel predicted.

The total category grew 1 percent to $15.9 billion in sales in 2011, down 0.6 percent after adjusting for inflation, a slight improvement over 2009 and 2010, said Mintel, which expected similarly flat growth in 2012 “amid rising prices and the proliferation of news about the presence of harmful chemicals in orange, grape, and apple juice.”

But Mintel noted that fruit juice sales slumped to $8.1 billion in 2011, down 10 percent since 2006, although the forecaster predicted growth of 8 percent because

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Juice chart

of the rise of coconut water.

The company’s research shows, however, that nearly one-third of those who purchase fruit juice and fruit drinks express concern about “the alleged presence of harmful chemicals in fruit juice,” specifically arsenic. Refrigerated fruit juice accounted for 57 percent of sales.

Symphony IRI Group in Chicago tracked divergences in fortune for different subcategories within the juice category for the year ending Aug. 12 in supermarkets, drugstores and mass merchandise outlets excluding Walmart.

Juice and juice drink concentrate performed well, up 51.6 percent to $15.9 million in dollar sales overall, and up 17.8 percent to $1.1 million in private label.
Canned juices were up 6.8 percent to $540 million, yet private label dropped 13.4 percent to $32.5 million. Similarly, aseptic juices were up 2.6 percent to $908 million as private label fell 4.5 percent to $18.8 million.

The largest subcategory, bottled juices, did the worst: down 3.9 percent to $3.7 billion overall, while private label fell 7.2 percent to $606.8 million, Symphony IRI reported.

Successful private label companies have put a twist on what major brands are doing to stand out, says Arnold Thorstad, director of sales for Imbibe in Wilmette, Ill., which creates both finished juice products and formulations.

“When you own shelf space, it’s easy to take a risk,” he says of store brands. “Innovation, more than ever, in the private label world, is how to differentiate and thus compete, and sell better than the national brands.”

Although private label once was associated with lower quality, that’s no longer the case, says Adam Isaacs, director of communications and sustainability for Sun Orchard Inc. in Tempe, Ariz., which mostly sells into foodservice operations.

“Whereas in the past people may have expected a lower perceived quality, now I don’t think people think that way at all,” he says. “They expect private label to match or be better than the national brand.”

Isaacs doesn’t expect the private label juice market to grow in the near future.

“It depends on the product,” he says. “There’s not much growth given the nature of the economy. It’s not like everybody’s switching to private label. It’s stagnant and relatively small [market]. For us, from a quality standpoint, because we’re not a big, well-known national brand, we have to be better than the national brands in terms of quality. If we’re anywhere close to them, we’ve lost.”

Fruit juice has lost share to fruit drinks – not made of 100 percent juice – in part because of price differences of 37 percent between the $6.75 a gallon average cost of juice and $4.93 a gallon for juice drinks, Mintel says.

Fruit drinks sales rose 22 percent from $6.3 billion in 2006 to $7.7 billion in 2011, mostly because of refrigerated juice drinks and specifically smoothies. Mintel predicted another 19 percent in sales growth through 2016.

Coconut water has done particularly well among adults ages 25 to 44, Asians, Hispanics and households with children, Mintel says. It’s the most sought-after formula at Imbibe, and a flavor that initially was imported from the Far East and Brazil, Thorstad says.

“It’s trending into different categories, not just as a juice but also as an isotonic, electrolyte beverage, touted for everything from sports-related hydration to hangover relief,” he says. “We’ve developed a number of formulations that compete with Gatorade.”

Thorstad has definitely sensed that trend, which he also attributes partly to the success of Pepsico’s Trop50.

“The reality is, juice is a sugar,” he says. “The connotation of juice is healthy, although a nutritionist would probably tell you otherwise.”

But the health benefits such as vitamin C found in citrus juices draw in parents who are trying to limit soda consumption.

Trop 50 reached $100 million in sales in 2011, growing by nearly 100 percent from 2009-11, “on the strength of its sleek packaging, innovative flavors, and, most important, its 50 percent less sugar and calorie claim.” Mintel says that products such as Trop50 represent “an innovation that private label retailers may want to consider as they seek ways to drive juice sales in an environment in which many Americans are seeking simple ways to lose weight or maintain a healthy weight.”

Even 100 percent fruit juice has an issue with sugar content, with three-quarters of consumers agreeing that sugar should not be added to pure juice products, while more than half say they don’t like the taste of artificial sweeteners, Mintel says.

That makes products that use natural sweeteners such as stevia, which nearly one-quarter of buyers say they have tried and liked, a potential differentiator.
Mintel said it believes that juice sales have declined because the market has reached saturation as the number of households with younger children has dropped off and other competitors, such as fruit-flavored Tazo teas, have arisen.

“It appears that private label RFD tea drinks are undermining growth of juice and juice drink sales,” Mintel says.

Thorstad has seen trends toward combinations of juice and “unique, functional, herbal components” such as chia, sought after for omegas, as well as oats mixed with juice and aloe-based juice, although some debate whether aloe is truly a juice, he says.

“Two years ago, I would have said, ‘Are you kidding me?’ But today, we’ve gotten tremendous requests to develop these [aloe] formulations,” he says.

The prices of fruit juice and juice drinks rose 18 percent and 19 percent, respectively, from 2006 to 2011. Mintel says rising commodity costs and the fluctuation in the dollar against other currencies has increased costs, and the forecaster predicts continued rises in price for apple and orange juices due to greater global demand as well as cold weather in Florida in 2011.

Imbibe has experienced all of the above and reacted to account for those circumstances, Thorstad says.

“It’s understanding how to cut costs while maintaining the efficacy of these products,” he says. “The only way to win is being cost-competitive. That means being 20 percent cheaper than the national brands.”

To succeed, private label brands must find ways to prevent price increases, Thorstad says.

“Having a large team of scientists, 30 of them here at our facility, we can tinker and manipulate formulations on the back end to maintain price points,” he says, usually by reducing the percentage of juice. “We know how to make the necessary changes on the back end. It’s just part of being a good supplier. Nobody wants a price increase.”

Then, he adds, private label brands should urge their retailer to step it up.

“Promote, promote, promote,” he says. “You need a unique package, a great promotional team, a great design team. Sampling is big as well. Probably, in order, it’s a unique package, aggressive sampling, aggressive promotion and then design.”

Sun Orchard constantly tests itself against national brands and looks to make improvements where quality is lower or similar, Isaacs says.

“Quality has got to be a given,” he says. “It’s always a challenge when you go up against a big, national brand that has millions and millions of dollars in marketing resources that they can throw at business and supporting their brand. That’s always a challenge. That’s why you have to beat them with quality.”

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