Juice market squeezes the fizz out of carbonates

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Estimated at more than 34 billion litres, the global juice and nectars market has undoubtedly benefited from the general trend towards healthier lifestyles.

And whether the industry likes it or not, these latest trends could spell the end for soft drink producers hoping for a comeback from carbonates.

Even though there are predictions that the sector could reach nearly 39 billion litres by the year 2003, it is still one of the most unstructured segments in the industry.

It is also considered to be a market very fragmented with only a few international names and most companies operating only at either national or regional levels.

Availability and a wider choice of product will naturally help the sector grow in the more developed countries - north US and western Europe are currently the largest and most developed regions for juice and nectars, accounting for some two-thirds of consumption between them. This is unlikely to change in the short-term.

But for the less developed regions, a plethora of local companies (often family-owned) holding a major share of the market means consolidation is probably the only way to push the sector forward.

With such a fragmented and localised market, the best way for any producer looking to make its mark in the juice and nectar sector is to take on board Coca-Cola's "think local act local" strategy.

Producers trying to enhance their growth potential internationally may find things a little awkward. The juice and nectar market is very disjointed and each country has local brands, marketed in totally different ways. No one business model can be used because the markets vary so much. Foreign multinationals will face tough competition in attempting to topple the established brands.

For example, in European countries and other developed markets, concentrated juices are available very cheaply, whereas freshly squeezed juice is still premium-priced.

In less developed countries, however, such as Latin America the situation is the complete opposite. Freshly squeezed juice is far cheaper and readily available, while concentrated juices are retailed at premium prices.

The sector is still very much a commodity market and a category that faces greater competition from fresh fruit and freshly squeezed juice than from other beverages.

Energy drink producers target clubbers, functional drinks are aimed at keep-fit enthusiasts while carbonates target teenagers - juices cannot be pigeon-holed and are promoted in many different areas.

Pack sizes vary as well from individual ready-to-drink cartons targeting consumers in the impulse sector to family size bottles and cartons being promoted in supermarkets and independents as the ideal and healthy start to the day.

Cartons are the most popular pack type with a global share of 50% but there is no evidence that the single-serve size is the key to the juice and nectars market.

Countries attitudes to juices and nectars also vary. In the UK and other parts of Europe, for instance, juice is traditionally consumed in the morning and is seen as a healthy option, marketed towards children with lunchbox size cartons.

In less developed regions, juices are regarded as health boosting but because freshly squeezed juices are sold on street stalls and locally grown fruit is obviously much cheaper and more readily available than imported concentrates, there is no specific market and juice is consumed throughout the day.

The carbonates market is reasonably well-ordered, with prices determined by the two leading players (Coca-Cola and Pepsi), the Canadean Global Juice & Nectar Report claims the juice and nectar sector is far more diverse, with product of varying juice content available in small and large sizes and represented by both local and imported brands.

The US, which is home to soft drink giants, Pepsi (Tropicana) and Coca-Cola (Minute-Maid) is very well developed in terms of being very accepting of orange juice as a healthy beverage and as using it as a functional food.

Some reports by producers even claim research into the properties of juices have shown positive results in cancer prevention.

Globally, orange continues to be the leading single flavour with a 43% share and it claims its highest share of 54% in northern US.

Tropicana, which considers orange juice to be the original functional drink, promotes the health benefits of its products.

"We are seeing more and more demand from consumers to fortify our juices with calcium. Orange juice is rich in vitamins, minerals and elements that we call vito-chemicals which can benefit cardiovascular health," said Kristine Nickel at Tropicana.

Tropicana claims to have had great success in Indian over the past 18 months and is convinced that by concentrating on being market-centric, it has a future in these markets.

"We look at the market and see what makes sense where. For example in India we are in a tetra pack which is more advantageous to those particular markets in terms of logistics and processing," said Nickel.

Nickel would not comment on consolidation opportunities for the sector but said that the company's approach to emerging markets would continue. Tropicana is also looking at opportunities in western US and claims to have some exciting plans for Europe later this year.

With consolidation predicted among some of the regional players and products likely to be positioned more at providing added benefits to consumers the outlook for the sector continues to look good.

But for the multinationals it certainly is not going to be the easiest market and is unlikely to take the world by storm. It is also highly unlikely any of the soft drink giants will be fighting for control of the market-stall proprietor selling fresh juice on the streets of Indonesia.

You can view further details about Canadean's "Global Juice & Nectars Report 2000" by visiting:

Companies: Tropicana, PepsiCo

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