Sector Insight: Fruit and vegetable juices - Healthy growth

Consumers are shifting to premium chilled and enriched juices as they focus more on wellbeing.

THE BACKGROUND

As consumers focus more on healthy eating, the fruit and vegetable juice sector is reaping the benefits. Last year, off-trade volume sales grew by more than 4% and value sales by more than 8% in current terms, taking it to £2.69bn, according to Euromonitor. Consumers are increasingly trading up, with premium chilled fruit juices and smoothies accounting for a growing share of the market at the expense of long-life juices. Demand for juices enriched with nutrients is also on the rise, fuelled by the UK's ageing demographic.

Fruit juice is part of the biggest FMCG category, soft drinks, which had a market value of £5.1bn last year, according to Britvic. The category's off-trade sales grew by 1% in 2004, which fruit juices outperformed considerably, with an 8% value rise.

As with other drinks markets, fruit juice sales are affected by the weather.

So while the hot summer of 2003 led to a significant rise in sales, the poorer weather last year meant a similar boost failed to materialise.

The market is divided into three subsectors: 100% juice, nectars (25%-99% juice) and juice drinks (up to 24% juice). One of the fastest-growing areas is not-from-concentrate juice, part of the 100% juice category - sales rose 13% in value last year. But this switch in consumer preference led to a 3% fall in volume sales of reconstituted 100% juices in 2004.

Non-chilled variants account for a greater proportion of the market than chilled, although the latter's share of the sector rose from 18% in 2003 to 20% last year.

Orange is the most popular flavour variant in the UK, accounting for 60% of volume sales of pure juices, according to Euromonitor. But it is losing share to apple. Flavours introduced more recently, such as pineapple, grapefruit and mango, are also increasing in popularity.

In the on-trade, the choice of flavours is far more limited, as the focus remains firmly on alcoholic options. Orange has a volume share of more than 70%.

Cranberry juice has been heavily promoted and is easily mixed with alcohol, but it remains very much a niche flavour, with less than 1% volume share.

Smoothies expanding

Smoothies are doing particularly well in the juice market, growing 19% in value to an estimated £82m in 2004.

New variants from companies such as Innocent and PJ Smoothies have extended this category and ensured wider listings in multiples and independent stores.

Their healthy credentials have meant they appeal to consumers aiming to eat five portions of fruit and vegetables a day. While the drinks were originally single-serve bottles, Innocent has extended its range to one-litre take-home smoothies to compete more directly with major juice manufacturers.

Other developments in the smoothies sector have included the addition of extra vitamins or 'detox elements' to drinks, and products aimed at children. As the market becomes more segmented, smoothies are being positioned as fruit, dairy and functional.

Own-label products account for 80% of pure fruit juice volume sales, according to Mintel. PepsiCo's Tropicana is the leading branded juice, followed by Del Monte.

PepsiCo has given significant backing to its Tropicana orange juice and Copella apple juice brands this year. The company has invested £7.7m in Tropicana, introducing new packaging and a TV ad claiming that it is New Yorkers' favourite juice. Copella introduced a 330ml bottle and made its TV debut. Its ads focused on its 'Englishness' and used the endline 'For the juice connoisseur'. The campaign was supported by ads in the national press.

Ocean Spray, Ribena, Capri-Sun and Sunny Delight feature in the juice drinks category. Own-label products account for 41% of this sector by volume.

Britvic Soft Drinks is the UK's second-biggest soft-drinks firm behind Coca-Cola. Its brands in the juice sector include J2O and Robinsons Fruit Shoot, and it also distributes PepsiCo's drinks.

J2O is a 50% fruit juice drink aimed at 18- to 45-year-olds. It comes in five flavours, following the addition of a raspberry and apple variant in May.

Although originally launched in the on-trade, it is now available for take-home.

Robinsons Fruit Shoot is aimed at the children's market. Launched in August 2000, it became the leading childrens' juice by value within three years. Robinsons brand controller Jonathan Gatward says: 'We wanted to create excitement in the children's category and Fruit Shoot was the first time a sports cap and bottle had been used; before it was cartons and straws. As part of the Robinsons banner, it was credible and trusted by mums.'

Gerber Foods Soft Drinks counts Libby's and Ocean Spray, which it acquired from Just Juice Drinks in 1997, among its brands. It also produces own-label drinks for Tesco and Sainsbury's. Last year, Gerber introduced a white-cranberry variant, which it claimed was less tart than red-cranberry drinks. Under the Libby's brand, the company produces Libby's C, Libby's Organic and children's juice drink Um Bongo.

Growth potential

In terms of penetration, there is room for considerable growth in this market. Mintel has estimated that 58% of adults consume fruit or vegetable juice, with only about 17% drinking at least a glass a day. Households with young children are most likely to buy juice.

The juice manufacturers must now now face up to the UK's ageing profile.

Older people often have more disposable income and some manufacturers are starting to target products accordingly. It is with this sector of the market that functional drinks, such as Logic Nutrition's Juice 4 Joints, which has a 24% juice content and supplements to maintain joints, could establish a niche.

Off-trade sales of juice products are expected to grow by almost 6% in volume terms to reach £3.14bn by 2009, according to Euromonitor. Most of the growth will be driven by the not-from-concentrate juices and nectar sectors. The research company predicts that juice drink sales will be driven mostly by products aimed at children.

FRUIT AND VEGETABLE JUICE BRANDS BY OFF-TRADE SALES VALUE SHARE (%) Brand Company 2004 2003 2002 2001 1 Tropicana Tropicana UK/PepsiCo 17.8 15.7 12.8 11.0 2 Ribena GlaxoSmithKline 4.5 5.1 5.9 5.6 3 Ocean Spray Gerber Foods Soft Drinks 3.5 3.2 3.0 2.6 4 Robinsons Britvic Soft Drinks 3.4 2.3 1.8 1.2 5 Copella Tropicana UK/PepsiCo 3.2 2.8 2.3 1.9 6 Del Monte Del Monte Foods 2.8 3.0 3.2 2.9 7 Sunny D Sunny Delight Beverages 2.1 n/a n/a n/a 8 Capri-Sun Rudolf Wild 1.9 2.0 1.8 1.3 9 Tropics Tropicana UK/PepsiCo 1.6 1.7 1.8 1.7 10 Oasis Coca-Cola Enterprises 1.2 1.1 1.1 1.0 11 Princes Princes Soft Drinks 1.2 1.3 1.3 1.1 12 Sunpride Gerber Foods Soft Drinks 1.0 1.1 1.1 0.9 13 Southern Delight Gerber Foods Soft Drinks 0.7 0.8 0.9 0.8 14 J20 Britvic Soft Drinks 0.7 0.5 0.3 n/a 15 Jucee Princes Soft Drinks 0.6 0.7 0.7 0.7 Own label n/a 42.4 42.5 41.6 39.6 Source: Euromonitor ADVERTISING SPEND ON JUICES BY COMPANY (pounds) Company 2005 1 PepsiCo 6,209,807 2 Coca-Cola GB and Ireland 3,694,339 3 Britvic Soft Drinks 2,828,556 4 Unilever 1,780,635 5 Gerber Foods 1,526,234 6 Sunny Delight Beverages 1,217,688 7 Danone 1,112,262 8 Innocent 1,079,751 9 Campbells 467,399 10 Fresh Del Monte Produce 358,961 Total 20,275,632 Source: Nielsen Media Research

ANALYST COMMENT - STUART FOXON, RESEARCH MANAGER, ZENITH INTERNATIONAL

It has been a transitional year, as the shift from long-life fruit juice to premium chilled products and those enriched with vitamins, minerals and fibre steps up a gear.

Niche companies and major players have introduced significant innovations into the market, driven by the food and drinks industry's trend toward health and wellbeing.

Changing consumer preferences, assisted by the considerable promotional activities of the drinks giants, have led to a phenomenal growth in the sales of added-value juice products and other healthy variants. Research on health and, more recently, government policy, are likely to boost the growth of 'healthy' fruit juice and juice drinks.

In 2004, volume sales of higher-priced chilled juice rose by 8.6%, compared with a 0.8% drop in sales of long-life juice. This year, major launches and promotional activities have fuelled sales. Key events include Coca-Cola's launch of Minute Maid and Minute Maid Froot Refresh in June, backed by a £5m advertising campaign, and £4.5m in ad support for PepsiCo's revamped Tropicana juice range. Additionally, Coca-Cola plans to launch its Oasis Fusion premium juice drink in 2006.

There should be a movement away from orange juice to variants associated with health benefits, such as cranberry juice. Tesco has reported a 300% rise in sales of pomegranate juice this year.

'Healthy' juices come at a price and, generally, it is better-educated, better-off consumers who have propelled the market. The sales of premium chilled, naturally 'healthy' and enriched juices have benefited from several influential campaigns this year, backed by celebrity chefs, the Prime Minister and the National Health Service, among others.

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