Focus - Juices and Nectar Outlook to 2015
Globally, Euromonitor International projects that the fruit/vegetable juice category will maintain this strong growth trend through 2015
Having returned to pre-recession rates, the fruit/vegetable juice category is set to maintain its current strong growth trend - as long as producers can keep up with consumer needs, reports Richard Haffner.
While the global recession dominated the headlines in 2009, 2010 was a year of recovery for fruit/vegetable juices and drinks. Off-trade volume trends in 2009, affected by the global recession, increased by only 2% vs 2008, but in 2010 growth at 5% was back to pre-recession growth rates.
Globally, Euromonitor International projects that the fruit/vegetable juice category will maintain this strong growth trend until at least the end of 2015.
However, whlie it might appear that the category is back to business as usual, that is not the case. There are many changes happening, driven by health trends and an increasingly affluent world.
100% juice fuels a dominant value share of the global fruit/vegetable juice market in 2010, but to maintain that position it is likely to need a new global strategy. Specifically, due to its high price it depends disproportionately on developed markets where, due to maturity of the business, it has experienced little growth in the past five years. Unless manufacturers are successful in channelling new investment behind value-protection spin-offs in the high-volume developed markets, 100% juice is projected to lose its leadership position in the future. By 2015 the juice value leader is projected to be juice drinks (with up to 24% juice content).
Although China surpassed the US as the leader in off-trade fruit/vegetable juice volume in 2008, the US maintains a strong lead in value, generating over 20% more revenue than China in 2010. The main reason for the difference between value and volume is the preference in China for relatively low priced juice drinks (with up to 24% juice content) and in the US consumers prefer the relatively high priced, perceived to be more healthful 100% juices. However, by 2015 China is projected to also surpass the US in value.
Euromonitor International projects more changes by 2015 in the countries where value will be generated in fruit/vegetable juice. Almost US$20bn (in constant 2010 US$) in new sales will be generated globally by 2015. China accounts for over half of the global value growth and as previously stated goes from number two in value in 2010 to the global lead in 2015. The next highest growth country, Russia accounts for an additional 10% of the global growth. Brazil is a distant third in global value growth, contributing less than half of Russia's growth to 2015.
Russia and China each have a different juice culture. China is dominated by a juice drink culture. The majority of Russia's value growth to 2015, however, will be contributed by 100% juice. China has a strong preference for juice drinks. In 2010, juice drinks comprised more than 80% of total fruit/vegetable juice off-trade expenditures. Juice drinks enjoy a healthy image and are about half the price per litre of 100% juice and two thirds the price of nectars.
In China, one important driver of soft drinks volume is that consumers are searching for healthy drinks. Unlike in developed markets, juice drinks are considered healthy drinks. Consumers tend to focus more on the sugar content as well as the amount of vitamins and minerals than the juice content. To stimulate sales growth, manufacturers have not only relied on marketing and promotion of their products to maintain their shares, but have also emphasised product segmentation through different aspects to spur stronger demand for soft drinks overall. In 2010, the leading players were all active in new product launches. However, merely refreshing the packaging or adding new flavours to existing products is no longer enough, and consumers are searching for more interesting new launches.
The multi-national Coca-Cola is the leading fruit/vegetable juice manufacturer in a highly fragmented market with almost an 11% off-trade value share. Coca-Cola is highly focused on its major fruit/vegetable juice brand Minute Maid which is primarily a juice drink. Minute Maid successfully differentiated itself from other juice brands by adding fruit pulp, which helped to bring fruit pulp back on trend.
The marketing activities of Minute Maid are varied, which has contributed to the brand's success. In addition, new launches like the lemon and grape flavours seen in 2009, and the new nutritional juice Minute Maid ShifenV, launched in 2010, keep Minute Maid's brand image fresh. Minute Maid ShifenV was one of the most notable new products in 2010. Minute Maid ShifenV is differentiated from other fruit/vegetable juice products through the addition of ten functional ingredients, including vitamin B6, vitamin C and taurine. The packaging is simple and clear, making it appealing to young adults, and the new product is targeted at the high-end market, with a high retail price of around RMB4.50 for a 420ml bottle. This
relatively high price may limit Minute Maid ShifenV's sales volume, but it is likely that the trend in fruit/vegetable juice towards premiumisation and multifunctionality will continue.
Juice drinks with a juice content of up to 24% will remain the major battlefield for fruit/vegetable juice manufacturers, and are expected to witness the strongest volume growth between 2010 and 2015. There are many manufacturers in juice drinks, with none holding a substantial share, hence there is little chance that the leading players will exert a strong influence on juice drinks as a whole. The intense competition in juice drinks will spur growth and innovation through 2015. Further
contributing to the growth of juice drinks will be the fact that Chinese consumers tend to prefer the light taste of juice drinks compared to that of 100% juice and nectars.
In Russia 100% juice growth depends on the economy. Fruit/vegetable juice returned to growth in 2010 and is expected to continue to see a positive performance in the 2011-2015 period. Russians continue to be focused on health issues and a healthy diet, which limits the growth of carbonates, but gives good opportunities for fruit/vegetable juice.
Over the past five years, 100% juice has been the fastest growing fruit/vegetable juice category based on value in Russia. 100% juice has grown almost 90% in value since 2005 and now accounts for half the value of all juice sold. Fruit/vegetable juice consumption depends a lot on the overall economic situation in Russia, which
has a different culture of juice consumption than other countries. Juice in Russia is not a commodity of daily demand. Many families buy juice just for the holidays. That means that in the case of dramatic changes in the economy, juice consumption can vastly decrease, as happened in 2009.
Unlike in China, however, in Russia 100% juice is perceived to be a higher quality product than other fruit/vegetable juices due to its higher juice content. During the global economic crisis, which also hit Russia, consumers traded down to more economical nectar brands (containing 25% to 99% juice). Now that Russia is recovering, consumers are going back to their preferred varieties. Capitalising on the health trend and the desire for higher quality products enabled by an improving
economy, Ya was introduced by PepsiCo through its Lebedyansky OAO subsidiary. Ya is pasteurised 100% not from concentrate juice that is positioned as a high-quality product, supported by the use of glass packaging. The new product attracted to the market consumers of freshly squeezed juices.
Driven by the improving economic climate 100% juice will be responsible for 60% of the value gains in the fruit/vegetable juice category comprising 55% of the category value by 2015. 100% juice is the fruit/vegetable juice category forecast to produce the best performance in the 2010-2015 period. More and more people in Russia are focused on their health and consumption of healthy products, and 100% juice is a good choice for a healthy diet. Not from concentrate 100% juices are also gaining in popularity. Several years ago they were represented by premium imported brands, available mainly in expensive supermarkets (Azbuka Vkusa), but PepsiCo with Ya 100% juice in glass packaging and Tropicana Pure Premium are attracting more and more consumers to this category.
Consumer's desire for healthier soft drinks across the world along with increasing disposable incomes in developing countries provides opportunity for fruit/vegetable juice. However, ‘healthy' can have different connotations in different cultures. What is perceived as healthy in one culture may not be perceived as healthy in another culture. This may provide opportunity for manufacturers to open up new avenues by slightly modifying existing products. For example, while a juice drink may be off-trend in one culture, it may be possible to find a new market and add a few ingredients to make it particularly attractive to a different culture. Perhaps, in the future we will see more strategic alliances among second-tier companies to take advantage of globalisation opportunities.
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