The gloves are off in the juices and smoothies category. Ever since Innocent moved into chilled juice in 2010, it has been eroding Tropicana’s market-leading position with a relentless bombardment of promotions. So ferocious has the onslaught been that today, its juice business is more than treble the size it was a year ago and poised to break through the £100m mark [SymphonyIRI 52 w/e 8 December 2012].
Sales of the PepsiCo brand, meanwhile, are suffering as consumers flit between the two heavily promoted brand leaders and challenger brands such as Welch’s, Pomegreat, Rubicon and most notably Princes, which has endured a staggering 33% slide in sales on volumes down 36.7% [SymphonyIRI], are struggling to compete in such a price-driven market. As one supplier notes ruefully: “You can’t get around the fact that two of the biggest brands in the world are at war.”
There are also suggestions that with its guns trained firmly on Tropicana, Innocent has taken its eye off the ball in its smoothies business. Smoothies sales have slumped 11.2% [Kantar Worldpanel 52 w/e 25 November 2012], with the bulk of those losses suffered by Innocent. In fact, in a case of role reversal, it is PepsiCo’s Naked brand that has wrestled some share from Innocent, having more than doubled its sales in the past year, albeit from a much smaller base.
So just how sustainable are Innocent’s tactics and what can juice and smoothie suppliers do to remain competitive?
The growth of Innocent’s juice portfolio since it entered the market is staggering. From a standing start in 2010, it is already worth £91.7m, making it the clear number two player in fruit juice behind Tropicana.
While Innocent has fully exploited the loyalty towards the brand built through its smoothies business, it has also pursued an aggressive promotional strategy. Innocent’s commercial director Dave Pickup claims that about 60% to 70% of Innocent’s juices are sold on deal, but does not believe the reliance on promotions is cause for concern. “We are not at all worried about the level of product sold on promotion and the main reason for that is that when people go and do their main supermarket shop, the ideal is that you want to enable them to buy enough product to get them through to their next main shop.”
The question on rival suppliers’ lips is whether Innocent is turning a profit on its juices business. “Innocent has had a lot of volume success with the brand but I’d be surprised if it were at a profitable level,” says one supplier source. “The only way Innocent can compete is because it’s 50%-owned by Coke.”
“Innocent has had a lot of volume success but I’d be surprised if it were at a profitable level” Supplier source
In fairness to Innocent, value sales have broadly tracked volume sales, suggesting that it is far from giving its juice products away. Pickup adds that in the past year Innocent has significantly increased both its range -from five to 15 SKUs - and distribution, which, coupled with strong marketing, is what has resulted in such substantial growth. Through its aggressive pricing strategy, it has also narrowed the price differential between chilled and ambient juices, making it easier for consumers to switch to chilled.
Meanwhile Tropicana, the brand that has dominated the branded NFC segment of the market during the past two decades, is coming under intense pressure, as not only Innocent but PepsiCo stablemate Copella encroach on its core orange juice territory.
Perhaps surprisingly, PepsiCo marketing director Patrick Kalotis dismisses Tropicana’s loss of £32.6m in sales over the past year [SymphonyIRI] as nothing more than a “short-term blip” and suggests that to some extent it was the result of a calculated move by the brand owner. “We’re taking a longer term view of it,” he explains. “Sometimes the decisions we’ll take about how we’re investing our money will be very relevant in the short term and sometimes we’ll prioritise our long-term health. We might choose to push one brand more than another in a particular moment of time given the market landscape.”
The implication being that more focus was placed on developing the Copella brand in 2012, which Kalotis rightly notes has shown “exceptional growth”. SymphonyIRI puts the brand’s growth at 36.2% over the past year on volumes up 65%, making it the second-fastest grower in the category after Innocent. Such a performance is certainly eye-catching and while the extension into orange juice last summer has played a key role in delivering that uplift, the introduction of innovative new products, such as Winter Warmer, and the strong performance of the brand’s single-serve formats have helped.
- The juice market has seen slight value growth at 0.9% driven by price inflation. As average prices rise, shoppers are buying less often and less per trip, causing a volume sales decline of 2.9%.
- From Concentrate juice is responsible for the bulk of this volume fall. The biggest sector in volume and second-biggest in value, it is also the sector with the cheapest average prices. FC began declining around May 2012 and has seen poor performance since. In particular, it is losing out to juice drinks and NFC, which consumers are switching to.
- However, smoothies are struggling the most as shoppers migrate to other formats. Smoothies have lost 3.6% penetration points, which equates to over 950,000 households that have stopped buying.
Ksenia Shagabutdinova, Kantar Worldpanel
The trend for consumers to have a single-serve juice with their lunch, often as part of a meal deal, has played to Copella’s advantage, according to Kalotis. “apple juice is a slightly more refreshing drink and is perhaps more suited to consumption with food,” he says.
As more juice consumption occurs out of the home, the opportunities to sell more single-serve formats will continue to grow. Kalotis says PepsiCo is currently considering launching a breakfast deal involving a Tropicana juice and a Quaker porridge pot, which would be a new version of the crisps, drink and sandwich lunch deal PepsiCo launched years ago.
PepsiCo knows, however, that in order to guarantee Tropicana’s long-term superiority in chilled juices, growth in sharing formats will be key. The brand’s January launch of Trop50 - a stevia-sweetened fruit juice containing half the calories and sugar of conventional juices - is viewed by PepsiCo as the most exciting innovation in juice in the past decade.
Experts agree that the product is likely to strike a chord with UK consumers. “With the rising concerns over obesity, consumers are looking for a healthier alternative and Trop50 seems to fit nicely,” says Meg Patel, account director of consumer brands at Dragon Rouge.
Although 24 to 44-year-old women are the “bullseye consumer” for Trop50, Kalotis believes the product will have broad appeal. “Two thirds of the population have responded very favourably when put in front of the lower calories variety,” he says.
However, with the market for stevia-based products still in its infancy in the UK, Kalotis acknowledges that encouraging trial will be crucial to Trop50’s success and to this end the product has been heavily promoted in the multiples during its first few weeks on the market.
Other brands are also benefiting from growing demand for healthier juice drinks. “Within the chilled juice and smoothie fixture, the coconut water category has exploded in the last few years and is already living up to its billing as the next big thing in healthy drinks,” says Giles Brook, CEO of coconut water brand Vita Coco, which since launching at the beginning of 2010 has won listings in all the major multiples and last year racked up sales of £20m, boosted by the launch of a coffee variant.
“Space is controlled by one or two co-packers. There’s lots of repetition and it stifles creativity” Supplier
One company looking to capitalise is Purity soft drinks, which is relaunching its flagship Juice Burst brand and adding several new flavours in a bid to make the predominantly foodservice brand more relevant for grocery.
“Despite its success in the independent sector and foodservice, where it has experienced strong growth, Juice Burst is something of a hidden gem in the wider market,” says Purity marketing director Jon Evans, who believes it will plug the gap in the multiples for a “competitively priced health-orientated brand.”
Price will be even more important for health-orientated brands following the launch of Trop50. The sight of the new brand on promotion in the multiples will certainly not be welcomed by smaller brand owners, who are already struggling to compete in such a fiercely competitive environment.
“Our category has probably been more dominated by promotions than any other and when you have got an average of 80% to 90% of product sold on deal, that makes it very difficult for brands to perform,” says Malcolm Parkinson, UK managing director for Welch’s. Indeed, Welch’s saw its sales dip 1.9% in the past year, on volumes that remained more or less flat, slipping by just 0.2% [SymphonyIRI]. Welch’s has to some extent been sheltered from the worst of the bombardment by specialising in grape juice. Look at the £7.3m wiped off Princes’ sales and the 11% decline, worth £2.5m, endured by Rubicon to see how bad things could have been.
But, still, Parkinson says he’s feeling the pinch of the growing promotional activity. “We’ve certainly got a very loyal following of consumers who buy us week-in week-out, but equally the level of promiscuity is so high that even our loyal consumers are tempted to buy orange juice when it’s on half price because why wouldn’t you?” adds Parkinson.
As a brand that straddles both chilled and ambient products, much of Welch’s focus is on growing its juice drinks business, which along with NFCs is the only sub-category in growth, with sales up 3.9% on volumes up 2.6% [Kantar Worldpanel]. “The consumer is looking for something that doesn’t have too much sugar in it but is not going to cost them a fortune,” reasons Parkinson.
“The challenge is to communicate the relevance of ambient ranges to shoppers” James Logan, Gerber
The growth in juice drinks is attracting growing attention from newcomers, too. In January, German supplier MGB International Premium Brands took a majority share in British business Feel Good Drinks, citing the “major opportunities” the deal presented for its juice drink Fruitinio and vitamin water Ganic in the UK. A month later, Eat Natural owner Multiple Marketing added four new juice drinks lines to its Sunmagic range and announced a new national listing in Tesco.
The new entrants face fearsome competition. With the notable exception of Robinsons Fruit Shoot, which suffered a 33.7% sales slump on volumes down 39.8% [SymphonyIRI] thanks to its recall last July (see p59), many of the juice drink category’s power brands are not in bad shape.
Capri-Sun sales climbed 5.1% on volumes up 6.4% while J2O enjoyed an increase of 2.8% on volumes up 14.7 [SymphonyIRI], and even 1980s kids favourite Um Bongo is hoping for a renaissance after brand owner Gerber launched two new variants - orange and tropical - in one litre packs (rsp: £1.29) into Tesco in January.
But it is own label that has really cleaned up in juice drinks, benefiting the most from the Robinsons recall with sales surging 18.2% to £73.1m [SymphonyIRI]. Retailers have been rewarded for innovating with different juice blends and flavours, according to Richard Cawood, UK marketing manager for J Garcia Carrion, a major supplier of own-label drinks to UK multiples and owner of the Don Simon brand. Cawood cites Asda’s Mojito juice drink as indicative of the breadth of range retailers are now offering.
As far as from-concentrate juices are concerned, however, there are accusations that the innovation pipeline has not been nearly so fluid. “Shelf space is controlled by one or two co-packers who have no interest in developing brands,” says one supplier. “There’s a lot of repetition on the fixture and it stifles creativity.”
From-concentrate juices have been leaking sales to NFC juices for some years and there seems little sign of the trend reversing. This is partly due to the heavy investment by NFC brands, says Adrian Troy, head of marketing for AG Barr, but also to consumer confusion about the difference between ambient and chilled and NFC and FC. “Rubicon is in some ways a misunderstood product because our number-one selling product, the mango, is an NFC product but it’s on the ambient fixture,” he says.
One of the main problems for ambient juices is that consumers often see them as less healthy than chilled juices, a view that suppliers of ambient and chilled juices agree is not wholly accurate. “Long-life juice is equally nutritious and has a significantly lower carbon footprint than the chilled version,” says James Logan, commercial director at Gerber. “Therefore the challenge for all retailers and brands within the ambient category is to communicate the relevance of ambient ranges to shoppers.”
In a bid to reverse its dismal performance of the past year, Princes has been running a ‘nothing added’ campaign that aims to dispel the myth that the long-life benefits of ambient juices are down to preservatives. The brand is also undertaking a brand redesign in 2013 that will include the rollout of resealable caps across its range of 100% pure juices and juice drinks.
“Apple juice is slightly more refreshing and is perhaps more suited to consumption with food” Patrick Kalotis, PepsiCo
While concentrated juices are on a long-term downward trajectory, the performance of smoothies is more schizophrenic. Following a prosperous 2011, when sales grew by 10%, this year sales slumped by 11.2% due chiefly to Innocent’s faltering performance.
Pickup blames the fall on the brand’s promotional phasing, which saw it sold on half-price promotion at the end of 2011 but at full price in the same period of 2012 as it geared up for a push in January. “The main reason for that is we made a decision to make the next big push on our smoothie business part of our healthy January campaign,” he says.
Other suppliers believe it is Innocent’s aggressive pricing in fruit juices that is to blame for the decline in smoothies. “The price premium of smoothies in this current recession makes it even more of a special treat, and perhaps the NFC success of Innocent juice has helped make smoothies a victim,” suggests Logan.
With Naked, Happy Monkey and Don Simon each more than doubling their smoothies sales during the past year, Innocent may have to spread its resources more evenly between juices and smoothies during 2013 if it’s to win the war on both fronts. As for juices and smoothies, with PepsiCo planning more support for Tropicana Apple Creations and Trop50 and Innocent showing no signs of easing up, the war’s only just begun.
It looks like it could get messier still.
Innocent closes the gap to Tropicana in juices and smoothies
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When two brands go to war: Innocent closes the gap to Tropicana