Bottled Juice: Juiced Up For Action

April 25, 2008
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The shelf-stable juice market is under attack from within and outside the bottled juice category perimeter.

The total shelf-stable juice category in the food, drug and mass merchandising channel reached nearly $3.6 billion in 2006. This was up 3.2 percent in dollar sales over the previous year, according to Chicago-based Information Resources Inc. (IRI). Private label, valued at $600 million, achieved a 16.8 percent market share, representing a growth rate of 0.8 percent compared to 2005.

Superficially, both the overall juice category and its private label component appear to show healthy growth. But head below the surface and the view grows murkier. What emerges is a picture of powerful competitive pressures swirling around the category.

An analysis of the various fighting forces shows national brands battling among themselves as well as collectively competing with private label brands, and the whole shelf-stable juice category defending its market position against the incursions of such new invaders as energy and so-called sports drinks, health beverages and new brands of bottled water.

Even industry insiders tend to use military terminology when describing the situation. “Several new brands have recently emerged on the scene,” says Jason Krause, director of marketing of Dunkirk, N.Y.-based Cliffstar Corp. “They have been aggressively battling for shelf presence.”

The fact that some retailers have given these new brands an opportunity will, in Krause’s view, “hurt their overall private label business.”

One reason for the upheaval in the juice market is the changing appetite of beverage drinkers. “Consumers are looking for alternative formats. Juice drinks are declining,” suggests Shawn O’Connell, marketing manager of Seabrook, N.J.-based Clement Pappas. “Sports drinks drove the market in 2006 and [bottled] waters are exploding as a share of stomach.”

Krause agrees. The total shelf-stable juice market is shrinking, “because of the growth of alternative beverages. Consumers are utilizing functional beverages to satisfy their needs.”

In a countervailing viewpoint, Bill Fletcher sees the juice drinks segment continuing to grow, though in a different outward appearance.

As director of sales and marketing for Lodi, Calif.-based Pacific Coast Producers, Fletcher sees the blended juice market surging. “People want healthier fruit juices, such as kiwi-grape. There are infinite varieties of fruits becoming available, including some very exotic fruits that are just reaching the market.”

Many of these exotic juice formulations, such as pomegranate, acai (a Brazilian berry) and mangosteen, are referred to sometimes as “superfruits,” since they pack a powerful antioxidant punch. Recent research has shown a variety of health benefits relating to the consumption of fruit juices that we were unaware of several years ago, notes Lorenzo Nicastro, senior vice president of research and development for Naked Juice Co., based in Azusa, Calif.

Particularly popular at the moment are juices that contain lycopene, an essential health ingredient found in tomatoes. “Lycopene is probably now the fastest-growing nutrient ingredient in the United States and it has helped to propel the tomato juice segment into the top ranks of the juice category,” says Craig Coulon, trade marketing manager for corporate brands at Orestes, Ind.-based Red Gold Inc. “The tomato juice segment represents a $130-million business. Private label accounts for 31 percent of the total tomato juice segment and, while the tomato juice segment was flat compared with 2005, the private label share was up 1 percent in dollar terms.”

The Fight for Market Share

Many industry executives view the total shelf-stable juice category as being in a state of flux, with the private label segment coming under intense pressure. “Private label faces tougher competition than before,” Krause acknowledges. “With the range of product offerings now becoming available, private label has to grab the opportunity and address consumer needs.”

National brands, with their deep pockets, have been slugging it out at every available opportunity, with the cola battle in particular taking center stage during the Super Bowl. Brand wars have dominated the retail aisles, too. “Brands dominate C-stores,” says Clement Pappas’ O’Connell, partly because cost of shelf placement is not an issue.

In the supermarket channel, juice profit margins seem to motivate supermarkets more strongly than whether the more patient pricing of private label has any long-term future. “Retailers tend to be focused on the profit margin,” Fletcher says. For example, he suggests that a number of supermarkets will sell private label juice as close to the national brand price as they can in order to maximize their gross margin, even though they’re making more money with private label to start with. “The gross return on private label is 40 percent, compared with 35 percent for the average national brand. Consumers want a decent price for a store brand juice and this is getting lost in the shuffle,” Fletcher says.

Combat Strategy

Developing weapons with which to fight back is the primary concern of private label juice producers. Particular assemblages of tactics have evolved. One such defensive grouping surrounds the ability of private label producers to be nimble and move faster than national brands to exploit a gap in the market. An example is the neglect by the overall market of certain types of health juice.

“Because people are clamoring for health and nutrition drinks that also come with less sugar or no sugar,” O’Connell says, “the market is ignoring the ‘light’ drink segment that private label could be developing. This includes any light juice with reduced sugar or using alternative sweeteners, like more light cranberry-based juices, for example. Private label has a huge opportunity to get into the forefront of the health and wellness juice market.”

Another example O’Connell is quick to mention is the healthy kids’ juice segment, with much-reduced sugar content, as well as the all-natural sports drink segment. “Private label can quickly produce parallel brands for any juice drink available. Private label doesn’t have to create a market - it’s already there,” O’Connell says.

Developing blends based on a new or exotic fruit could be an important marketing arrow in private label’s quiver, Krause says. “Private label as a whole needs to increase its efforts in offering these new items. Private label suppliers and retailers need to offer consumers some fresh ideas. It can bring great success to growing a business.”

It doesn’t have to be a completely new product for private label to make a significant impact. A very low-sugar or a very low-sodium content, or an all-natural line extension may be all that’s required for private label to fill the gap on a grocery shelf.

This is the case in the vegetable juice segment. Red Gold Inc. is introducing a no-salt tomato juice item the company contends will push up its private label market share. “In 2006, the vegetable juice segment was up 16 percent over 2005, while the private label share rose 2 percent. So, any new private label introduction, if successfully marketed and merchandised, will noticeably push up private label share.

“In the future, the strength of the category will be based on what we take out in the form of undesirable ingredients, and how much we can do on the sodium issue plus organics and all-natural,” Coulon says.

Fletcher sees private label’s strength in evolving products that benefit from the juice market’s continuing “fractionalization” - exploiting the gaps benefits private label’s profitability. But he sees the new generation of drink products as having a serious impact on the traditional juice category and even on private label, unless it is ready to respond aggressively.

“Water is here to stay,” Fletcher says. “It has good growth prospects. Health drinks have a solid core base. But I think many consumers see energy drinks as being unhealthy.”

Private label’s biggest advantage over national brands, Krause contends, is speed, in essence reaction time. “National brands are just not fast enough. Take pomegranate, for example, private label had a pomegranate beverage out on the shelves in 2004, three years ahead of Ocean Spray.

“Private label has a better relationship with its customer, but it has to be aggressive. This will involve some risk, but it will succeed,” Krause claims.

In the choice of products and in the channels in which it competes, O’Connell says, private label has some big advantages. “Private label has a huge opportunity in C-Stores, where there is strong growth in the overall category,” O’Connell notes. “Cost is not an issue as a barrier to entry. What matters is private label making the right choice with the right product.

“Another area of good possibility is the organic arena, which is still growing at double digits. In fact it now has its own segment,” he adds. In the future, O’Connell says, “big investment is coming to the healthier juice segment. Light will grow even stronger as consumers seek other beverage alternatives.”

The battle for market share is obviously heating up. And private label is making sure it will emerge strong enough to fight in future wars.

For more information on the beverage segment, visit our sister publication Beverage Industry at

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