Sector Insight: Fruit and vegetable juices - Healthy growth

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.