Go organic - How the juice category can counter sugar charges - Research in Focus
On a global basis, juice faces mixed fortunes, with Asia Pacific, North America and Western Europe recording volumes declines in the off-premise. In Latin America, meanwhile, the segment's growth rates are slowing down, according to Euromonitor International's Soft Drinks database.
Juice is traditionally considered a healthy alternative to carbonates, and the segment has taken share accordingly for many years. However, concerns surrounding juice's sugar content have prompted some consumers to change their drinking habits, drinking less juice less frequently, but opting for higher quality and higher-value products. To exploit this trend, drinks companies are adapting their strategies and a new wave of new products has emerged. Some strategies include:
- Reformulating the brand by adding vegetables to reduce the sugar content (China Juiyuan 5+7 new blend), or adding fruits with distinct health benefits (coconut water)
- Using technology, for example, HPP or cold pressed juices (the UK's Coldpress)
- Adding probiotic ingredients, such as Suja Juice Pressed Probiotic Waters
- Taking an ethical position, through local sourcing, organic, country of origin, transparency in the supply chain and labelling, to establish trust between brand and consumer. Coca-Cola Co-owned Innocent has long traded on ethical cues
Some manufacturers have tried to stress product "goodness" in labelling, including GMO-Free, organic, sustainable sourcing and cold pressed virtues in a single brand. Euromonitor's Ethical Labels database shows that juice carrying the "GMO Free" logo will see positive growth in sales in both Western Europe and North America in the next few years.
However, while there is much discussion about reformulation, HPP and functional labelling, there is little analysis on organic juice.
Retail value sales globally of commercially-packaged organic juice in 2015 totalled US$2bn, with the top ten markets combined accounting for 90% of sales. Unsurprisingly, sales are concentrated in developed countries. Euromonitor's Health & Wellness database shows that the US accounts for the highest share of sales, at $840m, with France ranked second at $242m. By 2020, the US is set to exceed $1bn, while Argentina will overtake the Netherlands to be the fifth-largest market. Our field analysts have noted that Russia, Brazil and India will also grow quickly in the next few years, but sales in China will remain negligible. However, given the health image of organic food and beverages - and the importance of organic farming as a sustainable agriculture model - both volume and value opportunities exist for organic juice in the long term.
Compared to the highly-concentrated carbonates market, organic juice is very fragmented, and the maturity of demand is low. Britivic, through its French subsidiary Fruité Entreprises, leads sales globally, albeit with just a 3% share. Arla Foods ranks second with 2%. Globally, juice's major players such as Coca-Cola, PepsiCo, Ting Hsin and Deutsche SiSi-Werke GmbH & Co KG have no single brand covering several markets or regions. In this respect, organic brands are mostly national and local, with limited geographical stretch. In 2015, Britvic's Pressade organic juice brand reached retail sales of US$52m, essentially focusing on France. This market-reliance is partially due to problems in supplying produce: For example, highly regulated organic plantation and inadequate financial support for organic farming in some countries may limit the mass production of organic fruit and vegetables. While the European Union has its own organic labelling rules and certification, other countries may have their own rules, which may not be mutually recognised. This situation makes it difficult to cultivate and sustain a globally-viable brand that can carry organic certification.
Differences and similarities: France and Germany
All major markets demonstrate some similarities and differences. France has a much larger organic juice market than Germany; France ($242m last year) is seven times higher than in Germany. In France, 100% organic juice is the most significant product area, accounting for 40% of overall value sales in 2015.
Compared to the US, both France and Germany have a relatively consolidated market, with private label contributing significant sales. In France, private label made up 37% of value sales of organic juice thanks to the high penetration of supermarket-owned brands and the well-developed retail environment, compared to some emerging markets. Many leading grocery retailers are keen to offer a wide range of organic food and beverages, partly due to consumers' growing interest in these products, and partly because such ranges help to convey a premium and healthy image. In addition, the high price of branded organic beverages results in many price-sensitive consumers being attracted by the cheaper prices on offer from private label ranges. Private label notably dominates a number of product areas, accounting for a 54% value share in organic black tea, a 63% share in organic non-cola carbonates and 76% of organic juice drinks.
According to Agence Bio (the French agency for the development and promotion of organic farming), the country's organic food sales are set to rise by 20% in 2016, the fastest pace in seven years. This is very meaningful, as France is the EU's largest agriculture producer. The expansion of organic farming in the country is likely to have an influence on EU practices as a whole. Euromonitor's Natural Resources database shows that France recorded the highest increase in the number of organic farms and hectares in the past five years, growing at 35% between 2010 and 2015.
Organic food and beverages are becoming mainstream in France, rather than an occasional purchase. Around 200 new specialist organic stores opened in the first half of 2016; supermarkets also reported double-digit growth in organic sales. Carrefour, Europe's biggest retailer, is developing stand-alone organic food stores in Paris, as well as selling organic brands in its supermarkets. Earlier this year, the group acquired e-commerce organic supplier Greenweez. Utilising this increasingly-popular shopping model, organic juice will benefit from increased exposure and opportunities for repeat purchases.
In Germany meanwhile, packaged organic juice has to compete with fresh, home-made organic juice as consumers are increasingly showing a strong preference for fresher produce, rather than packaged food and beverages. Consumers are becoming more likely to use organic fruit and vegetables to produce smoothies or juices at home. Despite this battle, the positive forecast for organic juice broadly, will encourage further market entrants. Small- and medium-sized brands are also taking share from established brands; smaller brands now account for around half of all organic juice sales.
US highly fragmented and fighting for 'healthy' share of throat
Euromonitor's Health & Wellness database shows that organic juice sales in the US are set to grow by US$242m between 2015 and 2020. The Coca-Cola Co's investment in Suja Juice last year illustrates the growth potential of this niche category. Nevertheless, organic juice brands have had to deal with macroeconomic difficulties, given the premium nature of the product. Florida's Natural, Tropicana and Ocean Spray have all discontinued their organic juice extensions. Only Welch's offers an organic variety of its grape juice. The market exit of these popular brands began in 2008, and smaller, niche companies and private label have experienced more success in juice than larger manufacturers. This shift coincided with the beginning of the economic crisis in the US.
On a positive note, as the economy recovers and consumer confidence rises, a lot of venture capital firms and investment arms of major FMCG players are looking at natural, organic and functional foods and beverages. The number of start-up brands, then, is currently mushrooming. This is reflected in the combined overwhelming sales of small brands and the fragmentation nature of the US market.
In terms of rival products, organic juice faces competition from other healthy beverages such as sparkling water, natural mineral water and premium RTD tea. New natural and organic juice brands may be fighting for investors' funding and attention from other emerging drinks segments, as the hunt for the next big coconut water intensifies. Meanwhile, we are seeing a rise in organic fruit, vegetable or herbs being used to flavour water: This mix can be marketed as organic flavoured water, and hence positioned as a super-premium product. Ayala's Herbal Water, which contains organic herbs, is certified organic, yet it is marketed as a flavoured water with health benefits. The emphasis of "clean label" plus organic label makes Ayala appear a trustworthy, honest and marketable brand; It has certainly proved a good selling point.
In terms of overall share of throat, organic juice is facing strong competition from other drinks as soft drinks consumption diversifies. While the segment will remain a niche category globally until 2020, the longer-term growth prospects are clear.
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