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March 5, 2013

Juice in 2013: Building a Better Beverage

Michael SchaeferAnalyst Insight by Michael Schaefer, Head of Beverage and Foodservice, Euromonitor International

Long viewed as a ray of light for an industry dogged by persistent health concerns, prospects for the juice category have grown murkier in recent years, particularly in developed markets where scepticism of sugary beverages of any kind continues to grow. What’s more, the path to growth in key emerging markets remains far from certain, given bruising competition from both unpackaged juices in tropical markets like Brazil and Indonesia, as well as increasingly-sophisticated powdered and liquid drink mix products. As in other categories, finding the right value equation remains vital to achieving durable growth. In more developed markets, functionality offers real potential, as consumers continue to gravitate towards the latest tropical “superfruits” and flavours, while stevia-based products could drive further expansion among consumers looking to control sugar intake. Among emerging market consumers, meanwhile, effective localisation is paramount, with products able to accurately reproduce the flavours and textures of local unpackaged favourites likely to see continued growth.

A tall order

While global sales volumes expanded by 2% in 2012, this represents a slowdown from the 3% annual average seen over the last five years. In three of the world’s top ten markets, volume sales actually fell in 2012, including the United States, the global number two, where volumes dropped nearly 5%. High prices have led many developed-market consumers to cut back on juice purchases, with per-capita volume consumption down nearly across the board in the major markets of Europe, North America, and Japan. Strong competition from energy drinks and other beverages offering well-defined functionality has cut into juices’ share of wallet in many developed markets, while growing concerns about general sugar consumption have blunted the traditional marketing message of juice as a uniquely healthy soft drink.

In emerging markets, the growth picture is more positive, yet the road to growth remains a bumpy one. Per-capita consumption in key markets like Brazil, Egypt, the Philippines, and Indonesia remains remarkably low—average annual consumption in Indonesia remains under one litre per person, to use one example—thanks in large part to the ready availability of fresh juices. Egypt, for instance, is home to thousands of juice bars, small, informal shops where one can enjoy a wide array of freshly-squeezed juice drinks for just a few cents, sharply limiting the appeal of packaged juices for much of the population. Powdered beverages such as Tang are also enormously popular in many markets, with their low prices, wide variety of flavour choices, and added features such as nutrient fortification (often tailored to local deficiencies) proving very appealing to low-income consumers in particular. Powders are also far easier to transport in markets where local infrastructure is limited, retail shops remain small, and car ownership is limited.

Juice redefined?

So should juice manufacturers despair, given this rather-gloomy summary? Certainly not—on a global level, growth opportunities abound, yet getting there requires a certain amount of flexibility. Every market is different, and the most successful brands will be those which serve a very distinct set of needs, which can differ from market to market. In a world of ever-expanding choices, consumers are not exactly clamouring for juice per se—instead, they have a portfolio of desires which are applied across a wide range of categories, and which juice manufacturers are quite capable of serving, given the right products.

China provides an excellent example of this. Already the world’s largest juice market by volume, this US$18.5 billion is expected to average 5% annual value expansion over the next five years. The vast majority of this expansion is expected to come from juice drinks containing up to 24% juice, with both nectars and 100% juice products projected to remain high-priced niche categories. Leading the way is Coca-Cola’s Minute Maid Pulpy brand, the company’s first US$1 billion brand to emerge from China. Combining a thicker texture reminiscent of freshly squeezed juices (the drink’s large pieces of pulp have inspired the tagline, “shake, drink, chew” in some markets) with an affordable price point, the product offers just the right combination of convenience, familiarity, and value to drive repeat purchasing, creating a powerful new force in East Asia.

The brilliance of Minute Maid Pulpy comes less in its intrinsic qualities than its design, in many ways a new beverage designed from the ground up to appeal to the specific needs of Chinese consumers, much like any other soft drink. Looking further afield, one can see many of the world’s highest-impact product introductions of 2011 and 2012 developing along similar lines. In the US, for instance, Tropicana’s blockbuster Trop50 product, which uses stevia to offer a lower-sugar, reduced calorie beverage with the taste and vitamins of pure orange juice, recently cleared US$150 million in annual sales, marking it as one of the most successful new product introductions in the juice category for some time. Here again is a case of a more tailored, more “engineered” juice product, marrying the very real selling points of orange juice with the specific needs of the modern consumer.

Building a better juice

Going forward, these types of products will account for an ever-larger portion of sales among consumers unwilling to compromise on price, sugar content, or flavour. The 100%, not-from-concentrate category will remain important in higher-income markets, but will further evolve into a super-premium, high-end niche. Consumer concerns about sugar can be overcome, but this will come in the form of more-exotic products like coconut water, tropical “superfruits” like acerola or cupuaçu or juices prepared through high-pressure-pasteurisation, like Starbucks’ Evolution Fresh line, which can offer a truly different taste/health benefit equation. The unpackaged juice culture of markets like Brazil, Egypt, and Indonesia will serve as an on-going inspiration/innovation pipeline for markets in North America and Europe, particularly among upper-income consumers looking to make high-end juices part of their lifestyle.

At the same time, juice will become less of a stand-alone product and more of a complement to  RTD teas, sparkling waters, and even energy drinks  as consumers look to transition away from full-flavour carbonated. New fruits and flavours can be expected to often serve less as stand-alone products and more as the building blocks for the next Minute Maid Pulpy. This is especially true in fast-growing emerging markets, where there is strong demand for convenient, affordable soft drinks for in-home consumption, reminiscent of the local flavours one can often find on every other street corner. While juices will retain distinct advantages, they will also in a very real sense become just another soft drink, serving the same laundry list of needs as any other.



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