Strange Journey For Juice Brands: Disease Hurts Supply, But COVID Raises Demand

In the throes of pandemic lockdowns and concern over personal health, juice sales – which had been slumping amid the broad consumer rejection of sugar – saw a significant resurgence as demand for immunity and wellness beverages led a return back towards traditional fridge staples like Orange Juice.

Now, a little over two years later, consumers are returning to pre-pandemic routines. Although juice sales may not compare to the 2020 boom, they remain elevated, and health and wellness continue to be top consumer concerns.

Data firm IRI reported that refrigerated juice sales in MULO plus convenience were up 4.8% to $7.8 billion in the 52-weeks ending June 12. Within that space, orange juice – which makes up around $3.3 billion on its own – grew 1.4%. Top brand Tropicana (sold last year to private equity firm PAI Partners) saw sales decline -8.2%. Comparatively, shelf-stable bottled juice was up 5% to $8.1 billion, aseptic juices grew 14.8% to $1.7 billion and canned juices were down -1.6% to $1.3 billion.

But the category has also been impacted heavily by supply shortages – not only due to labor and shipping complications, but also because of a citrus greening epidemic that began long before the pandemic and has been exacerbated by worsening climate change. As well, while pandemic-era functional trends like immunity and focus are continuing to hold, there’s still the question of how long they’ll continue to fuel category expansion.

The Green(ing) Monster

While the pandemic impacted supply chains across all consumer goods sectors, juice – in particular orange juice – has also had to reckon with worsening citrus agriculture. According to an April 2022 report by Rabobank, the global orange juice market is experiencing its lowest inventory levels in five years, with “diminishing output from Brazil and Florida impacted supply and demand in developed markets.” In both regions, citrus greening has plagued orange trees while unexpected frosts have further devastated crops. The report noted that Florida was on track to produce a record small crop for the 2021-22 season, producing around 41.2 million boxes – down from 52.8 million the year before. Currently, Mexico has served as a lone “bright spot” providing consistent supply.

Brands and consumers are still feeling the impacts of supply disruption in different ways. Florida’s Natural, a co-op owned brand which for decades has marketed its orange juice as being locally sourced and “not from concentrate,” began sourcing concentrate from Mexico earlier this year and reformulated its flagship drink to be a blended product. An updated label explained the change, noting that the co-op’s harvests are now 70% lower than a decade prior and declaring the harsh truth that “There’s just not enough juice in Florida.” Despite the shift, the brand is still performing; according to IRI, Florida’s Natural’s refrigerated juice sales were up 8.2% year-over-year and its shelf-stable orange juices grew 82.8%.

The Rabobank report suggested that there are some positive early signs for the 2022-23 growing season, particularly in Brazil where more favorable weather patterns bode well for orange production. Nevertheless, a recovery for Florida “continues to be an uphill battle” due to rising costs.

Matt McLean, founder and CEO of Florida-based Uncle Matt’s Organic, said the supply issues in Florida have greatly impacted the industry. A fourth generation citrus grower, McLean said he made the decision in 2015 to diversify Uncle Matt’s supply chain to source oranges from Texas, California and Mexico in addition to his own farm – which was already facing significant declines from citrus greening.

“We’re watching the citrus industry in Florida really decline rapidly right in front of us,” McLean said.

Outside of citrus, Todd Putman, CMO of juice and smoothie maker Bolthouse Farms, noted that his company’s supply chain is vertically integrated, which has been integral to weathering the slow shipping and labor shortages that have created hurdles over the past year. While he said the freight issue has steadily improved over the past six months, the brand – which produces a wide array of juices including carrot, daily green, berry and orange – has been quick to seize on empty shelf space that has opened up as competitors still struggle to meet fulfillment demands.

“Without that vertical integration, we’ve seen other competitors in the space not doing nearly as well,” he said. “We’re aggressively sapping up that space.”

Juice on the Table

Despite the supply side challenges, many brands are continuing to see strong demand from consumers for multiserve juice drinks – particularly functional drinks, with immunity chief among category trends.

Uncle Matt’s is now one of the fastest growing brands in the category – up 43.1% year-over-year to $18.6 million, per IRI. After the 2020 rush for immunity-rich products, McLean said the company’s vitamin-fortified Plus and Ultimate Immune lines are continuing to be top sellers.

“I don’t think anything’s at COVID levels anymore [in terms of sales], but it’s got a nice foothold in the market, and I think immunity is here to stay at a new level,” McLean said. “It’s fallen off since COVID, but it’s definitely still front and center in the mind of the consumer, and I think it’s basically attached to health and wellness. It’s just a functionality of health and wellness. So immunity is always in the mindset of the new customer.”

But as inflation remains volatile, many retailers may not be looking to overhaul or radically expand their juice sets at the moment. McLean said that, in his conversations with buyers, most retailers have been making little to no adjustments to their juice sets during recent resets, which he attributed to the uncertainty of pricing as well as a lack of labor to actually restock shelves.

“The ones that are willing to make a change, it’s still got to be high quality, it’s got to be stuff that has a functional purpose,” he said.

Meanwhile, Putman offered a more optimistic outlook and suggested that retailers are still taking in new products. He said the brand is currently selling in nine new SKUs of functional juices and smoothies for the fall, including a new energy product that is looking to offer consumers a balanced and nutritious buzz.

According to Putman, premium products are still selling well despite the impact of inflation on consumers. The calculus: a refined preference for taste and nutrition wins out over savings – so long as consumers feel they’re getting more bang for their buck in the form of clean label, function, or just better flavor. Bolthouse, which closed on its acquisition of HPP brand Evolution Fresh this summer, has seen strong sales growth across its product portfolio – including a 20.1% increase on its core refrigerated juices and smoothies and 4.6% growth of its refrigerated vegetable juices, per IRI.

“A really important thing about shelf space is oftentimes there’s an intab of an aisle that’s premium space, and so [retailers] want to see a lot of velocity and a lot of profitability coming out of that space, which they should,” Putman said. “And so what we see across that taste and nutrition fulcrum, if you will, is consumers wanting more and more value, more and more functionality, and better taste with that functionality.”

Nick McCoy, co-founder and managing director of Whipstitch Capital, also suggested that despite the air of an economic recession hanging over the industry, there’s still major signs that consumers are continuing to spend on and stick to healthier habits. Unlike the Great Recession in 2008, low income workers are currently outpacing middle and upper class consumers in wage gains, helping them to maintain certain spending habits and putting more cash back into the economy. As well, he noted that the continued strength of health trends like low sugar – and even the rise of alcohol alternatives – bode well for categories
like juice, as long as consumers are continuing to prioritize wellness.

“People like managing their health through food and beverage choices,” McCoy said. “There’s this very real cost around health care, like deductibles, which is across the population…. So if you can cut sugar, and you don’t have to go buy insulin, well, that’s a lot of money you saved. So I think there’s a very good economic case for wellness.”

However, in addition to warning about supply challenges, the Rabobank report also threw some cold water on the outlook for continued sales growth, noting that the boost in immunity and Vitamin C rich beverages lingering after the 2020 explosion should be considered temporary “rather than a permanent reversal of the long-term trend of decreasing consumption in developed markets.”

“Aging populations, smaller households, less time spent at home during breakfast hours, and competition from other beverage categories like coffee, tea-based drinks and other juices continue to be powerful drivers that play against orange juice consumption growth,” the report stated.

The report noted that 100% juice volume sales in the U.S. fell by nine basis points from 2016 to 2019 before rebounding seven points in 2020. However, as many consumers began re-emerging into the world, volumes fell by three basis points in 2021.

But from the brand perspective, juice makers are hoping that consumers who returned to the category during pandemic lockdowns have been reminded of all the things they loved about it in the first place.

“The whole demonization of orange juice and sugar was leading a lot of people away from fruit juice, in particular orange juice,” McLean said. “And I think when COVID came, it was ‘Okay, wait a minute. Vitamin C, antioxidants, Vitamin B – orange juice has all those things.’ So it checked a lot of boxes for people, and they realized, ‘Hey, we need to put that back into our diet.’ And now it’s just one of the things that you really enjoy; orange juice just tastes great. So the products that I think coming out of COVID that actually taste great, and do have a true benefit around health and wellness, they have a better chance of sticking.”