A dramatic rise in citrus prices has been blamed for the collapse of Sunjuice, the UK's largest own-label juice drinks supplier. Nick Hughes reports

The situation at Serious Food Ltd could scarcely have been more serious. On Wednesday 28 January the company was placed in administration and 129 of the 400-plus staff were given p45s.

Owned by Jamaica Producers Group, a Jamaican-based group whose subsidiaries include shipping firms, banana producers and overseas food companies, the UK-based subsidiary itself consisted of a number of businesses.

It’s understood that soup manufacturer Serious Soups and foodservice operator Serious Food Distribution are not affected by the administration, and Serious Desserts, the loss-making chilled desserts business, was sold to Noble Foods last July.

But it was in the largest subsidiary of the group, Sunjuice, that the cause of the problems at Serious Food Ltd appeared to emanate.

Sunjuice is the UK’s largest provider of own-label juice drinks, with customers including Tesco, Morrisons, Sainsbury's and M&S. It also bottles smoothies for Innocent.

JP’s 2007 accounts – the most up-to-date available – show its fresh and processed food division, of which Sunjuice was the largest contributor, deteriorating from a profit of £1.7m in 2006 to a loss of £6m in 2007, with one Sunjuice insider suggesting losses in 2008 escalated still further, to £13m.

The insider claims Sunjuice employees were told last November that JP planned to reduce operational losses to £5m in 2009, with a further cut planned for 2010, and that JP was prepared to inject £7m.

The press in Jamaica, meanwhile, reported last week that JP was eager to cut its ties with Sunjuice. As one supplier puts it: “It lost so much money last year it just couldn’t keep funding it through Jamaica.”

Even in its 2007 accounts, JP alluded to the challenges facing Sunjuice. “The juice and smoothie business was buffeted by significant increases in raw material commodity prices that we could not pass along,” it noted. It attributed the dramatic rise in citrus prices to increased transport costs, growing demand from Russia and Eastern Europe and adverse weather.

With supermarkets looking to reduce the shelf price of juices and smoothies, Sunjuice was forced to absorb these costs and ended up defaulting on supplier payments late last year, according to one supplier. “They had a lot of problems with the big boys,” he says. “The supermarkets wouldn’t allow them to push up prices and what with fuel prices rising and raw ingredients going up, it ran out of cash.”

The Sunjuice source is less generous. “The managers didn’t react quickly enough,” he says. “A bad run of weather pushed orange prices in particular up significantly. We weren’t quite as pushy with the retailers as we should have been.” The supplier says he is owed hundreds of thousands of pounds, while other suppliers are owed considerably more, he claims.

The Sunjuice business is continuing to trade as normal, according to administrator Pricewaterhouse-Coopers, with supplies to retailers thus far been unaffected.

As buyers are sought The Grocer understands the own-label juice business is attracting interest from chilled food producer Daniels Group, which is said to have visited the factory in South Wales, according to a Sunjuice source.

“Daniels Group is committed to the freshly squeezed juice sector, is aware of recent developments in the market and is currently considering all of its options,” says a spokesman.

The smoothies bottling and packaging business, meanwhile, remains profitable and is expected to be sold as a going concern. One city source suggests Innocent, Sunjuice’s biggest smoothies customer, could be a frontrunner. But the Sunjuice source says: “The packing business could end up being a buyout by the Sunjuice management. It would be a convenient way of extracting themselves from a difficult situation.”