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100% OJ and out? Rabobank sees US potential in Trop 50-style nectars

By Ben Bouckley+

13-Jun-2013
Last updated on 13-Jun-2013 at 15:59 GMT

PepsiCo's Tropicana Trop 50 range of orange-juice based drinks promises 50% fewer calories and no artifical sweeteners
PepsiCo's Tropicana Trop 50 range of orange-juice based drinks promises 50% fewer calories and no artifical sweeteners

With orange juice sales sliding in the US, PepsiCo’s Tropicana Trop50 brand is one of the ‘few notable successes’ in the space, although its status as a nectar signals the potential of this category.

That’s according to Brazil-based senior analyst, beverage and dairy, Andres Padilla from Rabobank Food & Agribusiness Research, writing in the new report ‘Brazilian Orange Juice: Rebalancing After a Crushing 2012/13’.

He told BeverageDaily.com today: "What we see is more potential for nectars in the US due to lower sugar/calorie content. Consumers nowadays are more aware of the natural sugars contained in 100% juice products, and are willing to compromise on juice content in return for lower calories.

"Hence the positive performance of Trop 50. Also the orange juice segment has seen little innovation compared to other fruit flavours, therefore PepsiCo managed to re-engage the consumer that buys orange juice regularly," he added.

Discussing tough economic times for Brazilian orange producers given falling demand in major export markets the EU and the US (and thus lower prices) Padilla wrote that many smaller growers in Sao Paulo were exiting the category, with a 20%+ smaller orange harvest expected in 2012/13.

RTD beverage consumption tumbles

Today, Brazil accounts for 80% of global orange juice exports, but large 2011 and 2012 harvests also hit spot prices for oranges, he added, while EU private-label growth squeezed supply chain margins.

Meanwhile, in the US, Padilla noted that, more broadly, RTD beverage sales have suffered recently.

Consumption of packaged non-alcoholic beverages fell from 270 liters in 2007 to 263 liters per capita in 2012, while specific figures for orange juice are 18 liters and 14 liters respectives, a 25% fall.

Padilla explained that consumers have switched to other juices and the consumption of other drinks, such as bottled water and tea-based drinks, has increased, while innovation and advertising of orange juice-based products has “remained sluggish with few notable exceptions”.

“Consumers are being bombarded with marketing for new categories, such as coconut water, tea-based fruit drinks and low-calorie nectars,” he wrote.

Coke and Pepsi push non-orange juice lines

In addition, both Coca-Cola and PepsiCo had positioned their non-orange lines of juices in both on-trade and off-trade outlets, the analyst noted, with Naked (PepsiCo) and Odwalla (Coke) gaining space within their distribution systems.

Identifying PepsiCo’s Tropicana Trop50 (43% juice) as “one of the few notable successes in orange juice in recent years”, Padilla said its $150m sales in 2012 showed the potential in juice nectars.

“The successful launch of Trop50 is an indicator of the potential for nectar sales in the US, which currently stand at 1bn liters versus 5.9bn liters in sales of 100% orange juice,” he wrote.

A shift away from 100% orange juice could also impact on sales of frozen concentrated orange juice (principally shipped from Brazil and Florida), he added.

“The increase in sales of nectars and the decline in sales of 100% juice could mean slightly weaker demand for FCOJ,” Padilla wrote.