Temporary Refreshment: Juice Sales Are Up During COVID-19 — But Will That Last?

The fact that the juice category has struggled in recent years is hardly news. Despite a mid-decade peak in the cold-pressed trend, sales have since slumped as consumers have turned against sugary drinks and turned to other beverage categories for their functional and wellness needs.

But with the COVID-19 pandemic, the category has seen a renewed relevance as consumers forgo their sugar concerns, demanding Vitamin C and other immunity charging ingredients. Despite the challenges facing the economy, for some companies, the pandemic has been the booster shot the juice category has long needed. But is this sudden interest a sign of renewed growth, or a passing fad?

Immunity Meets the Moment

This spring, in the wake of Dean Foods’ bankruptcy, Uncle Matt’s Organic founder and CEO Matt McLean paid $7.25 million to buy back the juice brand he founded in 1999 with the intent of once again running the business as an entrepreneurial venture. McLean had sold the company to Dean in 2017, and now (after months of paperwork and realignment) the brand is heading out into a radically changed marketplace.

According to market research firm IRI, Uncle Matt’s orange juice has reported double digit sales growth, up 15.1% to $12.9 million in the 52-week period ending July 12. The sales spike comes as the orange juice subcategory has seen a resurgence amid the COVID-19 pandemic, as older consumers seek food and beverage products traditionally associated with immunity. Orange juice as a whole is up 7.7% to $6.8 billion for the year, though McLean said his company’s internal data shows orange juice sales up roughly 20% in the shorter term.

Per IRI, other mid-size brands have reported similarly significant increases for the year, including Natalie’s Orchid Island Juice Company (up 27.6% to $26 million) and Tree Ripe (up 39% to $11.2 million). Even category leaders are seeing double digit increases amid the pandemic — Tropicana (10.7% to $996.7 million) and Florida’s Natural (17.3% to $302.7 million) have both benefitted.

“Orange juice is back on the breakfast table and in the refrigerator for a lot of consumers that may have left it over the last, say, five years,” McLean said. “Orange juice had been flat and declining for the last decade. But it’s nice now that retailers and consumers have remembered that this should be an essential item and it should be an essential part of your diet.”

McLean said the company has maintained its business during the transition out of Dean, but has had to restructure some of its distribution without access to the former dairy conglomerate’s DSD network. However, as Uncle Matt’s heads into the fourth quarter, the brand has a stable of immunity-focused functional SKUs to drive buyer and consumer interest — including Orange Defense, fortified with turmeric and probiotics, and Orange Energy, made with coffeeberry.

But even as demand for immunity provides a short term burst in sales, the challenge facing Uncle Matt’s and other juice makers is how to ensure it isn’t just a fad that dissipates once the pandemic comes to an end.

“I think the entire industry is focused on that right now,” McLean said. “Trade groups are spending most of their marketing dollars on the health pitch and are focused around educating consumers on what is in orange juice — and any citrus juice for that matter. I think we need to continue to put that front and center, but it was the message from the beginning.”

Cassandra Troy Walker, co-founder of California-based cold-pressed juice brand Little West, said she’s “never used the term ‘immune boosting’ so much in my life since the pandemic.” The pandemic has had a direct impact on the brand’s on-premise focused business model, with the company needing to furlough some employees as sales dropped 70% with the shuttering of hotel, corporate campus and restaurant accounts shuttered.

However, the company has now embraced a direct-to-consumer model using immunity as its leading draw. Walker said Little West had to swiftly build an ecommerce platform and brought in new outside marketers to help build the brand’s online presence.

“We realized we don’t want to just showcase pretty bottles,” Walker said. “Instead, we’re using our social media platform to inform customers of health and wellness and have become a source of information to our consumer and to our customers.”

As well, Little West has now placed an increased focus on grocery accounts, including expansions into the Arizona and Nevada markets. Walker said the brand is currently in discussions with several distributors to break into new territories, using immunity as its foot in the door with new accounts.

“Although a lot of our day to day isn’t what it used to be, we’ve been able to reach out to dream distribution companies and have started to create a strategy with them on how we can launch into their marketplace,” she said. “Because the reality is the juice is immune boosting and we can only do so much with our ecomm.”

Juice Sells, But Who’s Buying?

While sales may be on the upswing for some parts of the category, not all sectors are rising and former juice entrepreneur and CPG industry veteran Brad Barnhorn said he sees little in the way of M&A and investment opportunity.

Pointing to recent decisions by strategics such as Coke and Campbell’s to discontinue or divest their leading juice brands (Odwalla and Bolthouse Farms respectively), Barnhorn noted that the lack of interest by potential buyers is also leading to limited investor interest in the space. While there may always be angels willing to back a small startup, he said most institutional VCs are looking to other categories to check off their stake in the immunity and functional beverage arena.

“The trend for immunity and functionality is incrementally positive for the juice category, but there are a lot of other well developed product formats existing today versus five or 10 years ago to address that need state,” Barnhorn said. “Whether that is in powder form, in tablet form, in shot form or in other RTD beverage formats — there’s a number of competitive options delivering immunity or other functionalities without the issue of sugar and calories that will continue to serve as a challenging headwind to existing consumers staying in the category or new consumers entering the category.”

Recent M&A activity has indeed shown interest in these alternative formats: this summer, wellness shots maker Vive Organic raised $13 million in a Series B round led by Monogram Capital (a chaser to a round led by PowerPlant Ventures a year earlier) while in September Unilever acquired functional powder brand Liquid I.V. Inversely, single serve HPP juice brand Suja — which received a $90 million investment from The Coca-Cola Company in 2015 — has seen its momentum slow precipitously in the years that followed. Other previous acquisitions of HPP brands are being liquidated — in August, Hain Celestial announced it would seek to sell or discontinue BluePrint, the HPP juice brand it acquired in 2012 amid the height of the cleanse trend.

In addition to these signals from strategics that juice isn’t the future, Barnhorn said he also doesn’t foresee retailers increasing the sizes of their juice sets, particularly as growing categories such as kombucha, cold brew coffee and shots take up more cooler space. This, in turn, creates a more competitive environment for brands that will fight to steal shelf space from one another.

“I think juice benefits short term from the pandemic, but not in a way to me that changes the game for the category in terms of its relative growth to other emerging and higher growth segments in the beverage space,” he said.

Meanwhile PepsiCo, which owns Naked, has kept its juice business in-house and turned to innovation to continue driving growth for the brand, seeing the fastest growth in its Half Naked reduced sugar line (up 132.7% to $6.4 million per IRI) and its protein shakes (up 63.8% to $11.2 million). However, those lines may only be drops in the bucket compared to its core smoothie line, down 4.2% in the 52-weeks ending July 12 to $499 million.

In an email interview, Naked marketing senior director Jim Spalding said the brand is continuing to explore new product launches as a means of driving sales and that immunity “has been at the top of the list in recent months.” With key competitor Odwalla now leaving the market, Spalding said the company is optimistic about the white space in the category.

“Now more than ever there is certainly even more opportunity for growth in the category,” Spalding said. “We know there will be even more consumers looking for choice in their beverages, especially when it comes to a variety of delicious flavors and tastes. Given that, we’re exploring a variety of offerings – including indulgent – that meet the needs of that consumer, perhaps deliver the plant protein they’re looking for and taste delicious.”

As a general trend for the past several years, HPP juice startups have continuously pivoted to minimize their flagship lines and embrace growing categories. Companies such as Forager Project and Sol-ti have turned to trends like plant-based dairy alternatives and CBD to fuel growth.

Rita Katona, co-founder and CEO of Minneapolis-based So Good So You, said her brand’s sales have taken off since introducing functional juice-based shots three years ago and, with a 4,400 store nationwide footprint, the pandemic has likewise led to an uptick across the brand’s product portfolio. She noted that SPINS data reports 335% year-over-year growth for the shot category and the company itself ranked in the top 20% of the 2020 edition of the Inc. 5000 list, with 516% growth over the past three years.

While the company still produces its HPP juice products for select customers, the former core line now only constitutes a fraction of the six-year-old brand’s sales and, though listed online, is not currently sold to retailers.

“Our focus [during COVID] has been on the operational side and figuring out how we better support our wholesale partners that have been put through the wringer as a result of the pandemic,” Katona said. “With this particular category shooting through the roof as a result of this heightened awareness of proactive health and immunity from consumers, our orders have been significantly increased and so our focus has been to make sure that we are impeccable with execution — shipping orders full and on time.”