Squeezing Orange Juice Into Fast Lane

By MELINDA FULMER

May 27, 2000 12 AM PT

TIMES STAFF WRITER

Orange juice has ridden the health food fad of the 1990s to some of its best years ever. Now the question is, can the industry tackle its toughest customers yet, the eat-and-run, junk-food crowd?

With little room to grow in their traditional business of selling family-size cartons, orange juice makers are now having to reach out to customers who probably haven’t sat down to breakfast in years. With customers eating away from home almost half the time, and making fewer trips to the supermarket, getting juice into cars and on desks at work has become increasingly important.

That’s the challenge facing Brock Leach, president of Tropicana Products, a unit of PepsiCo. In his first year at Tropicana, Leach is applying strategies that worked at Frito-Lay, another PepsiCo company, where as president of the development group he helped unveil new flavors, packaging and other innovations such as Wow fat-free chips.

Tropicana is developing a plastic bottle that can easily be chugged in a car, smaller sizes and more exotic juice blends. And Leach is tinkering with products that could deliver quick health fixes like juice pumped up with soy isoflavones and protein-enhanced smoothies made from orange juice.

Tropicana’s rival, Minute Maid, owned by Coca-Cola Co., also is developing more exotic juice blends in its push to get into more convenience stores, gas stations and other places people would normally grab a soft drink.

Both companies face an uphill battle, analysts say, in trying to reach this market, despite the distribution clout of their soft drink parents. Orange juice, typically made from 100% fruit, isn’t nearly as thirst-quenching as its watered-down competitors such as Hi-C and Sunny Delight, says Gary Hemphill, senior vice president of Beverage Marketing, an industry trade magazine. Teenagers are less likely to drink it in the car or at an outdoor sporting event.

“It tends to be somewhat thick and heavy, its not as chuggable as some other drinks,” Hemphill says.

But Tropicana points to New York City as evidence that its strategy can work, at least in urban areas. New Yorkers guzzle more than half of the 6.4 million cases of single-serving Tropicana Pure Premium sold by the company, purchasing the juice from street vendors, bodegas and other quick-service establishments. In that city, 16-ounce containers make up 20% of that brand’s overall sales.

“The carton business is kind of a legacy business, it’s how the business was begun,” Leach said in a recent interview. “But it’s not the most convenient packaging. It doesn’t fit in the cup holder.”

And it’s certainly not as profitable, analysts say, as smaller sizes, which consumers are buying more of and are willing to shell out more for.

Tropicana also is taking over the $225-million distribution agreement Pepsi had with Ocean Spray, rolling out a line of juice blends next year in plastic bottles with the licensed Dole name, a move that should gain Pepsi even more shelf space in convenience stores, analysts say.

“This is the growth story for next year [for Tropicana],” said PaineWebber beverage analyst Marc Greenberg.

If a product can replace a full meal, Leach says, that’s worth even more to consumers. Beginning early next year, the company will launch a line of fruit-flavored protein smoothies that Leach says have all the nutrition of a bowl of cereal, and much fatter margins than traditional juice products.

Tropicana’s health-food push started three years ago with its calcium-enriched juice in cartons. Sales of these products have doubled each year for the past two years, Leach says, convincing the company to start experimenting with all sorts of other health-enhancing ingredients like soy isoflavones and anti-oxidants.

Tropicana doesn’t plan to tamper with its core business of selling large cartons to families, even though sales growth in that category is starting to slow. Rather it’s making a bigger push in certain areas such as the Midwest and Los Angeles, where it has a much smaller share of supermarket sales.

A big part of its Southern California push will be a $3-million ad campaign focused on steering more Latino customers away from juice cocktails and to 100% juice drinks, Leach said.

But analysts say the real growth will come to those who can tap into the convenience market, whose younger customers see juice as just another drink to sandwich in between Diet Cokes.

“If you look at the market it’s growing, but not in leaps and bounds. Adding extra pieces of nutrition or flavors is a way to get better growth out of the category,” Hemphill said.

Leach knows the importance of holding shoppers’ attention with new flavors and packaging. At Frito Lay, he says, a key part of keeping your product in stores was rolling out new flavors with catchy names and more convenient packaging.

“All [consumers] need is to be tempted, to be given another reason to enjoy that brand,” Leach said. “Frito perfected the art of giving them another reason.”

Although the orange juice business lacks the pizazz of the snack world, it has been on the upswing for the last five years, boosted by news of its cancer-fighting qualities. Indeed, in a recent study by Health Focus, a Des Moines-based health research group, orange juice and broccoli topped the list of foods that consumers thought would reduce their risk of disease.

The growth has been focused entirely in the refrigerated case, as Tropicana and others have begun introducing new fresh-squeezed products.

Sales of refrigerated orange juice have climbed 22% in the past five years to $5 billion, according to ACNielsen, while sales of frozen concentrate dipped 23% in that period.

Although Tropicana’s Pure Premium orange juice outsold Minute Maid Premium more than four-to-one last year, the gap has been slowly shrinking. But neither company seems to be harmed by this competition.

Minute Maid sells mostly juice from concentrate while Tropicana’s emphasis has shifted to fresh, nonreconstituted products.

Both companies, however, realize that supermarket aisles aren’t where most of their growth will come from.

“The calories that are moving out of [grocery] stores and away from home is incredible,” Leach said, “and companies that are in the right place in that business are going to win big time.”

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Pulp Facts

Sales of orange juice have surged over the past five years, partly on news of its health benefits. The beneficiaries of this success have been soft drink giants Coca-Cola Co. and PepsiCo who own Minute Maid and Tropicana respectively. But while Minute Maid has cornered the market in frozen orange juice, Tropicana is dominant in the faster-growing chilled beverage category.

Orange juice sales are up. . .

Sales of frozen, shelf-stable and chilled orange juice in food, drug and warehouse stores, in billions*

2000: 3.6 billion

. . .especially chilled juice.

Top-Selling brand in each category for the year ending Feb. 27, 2000:

Sources: AC NIELSEN and Information Resources

Chilled Orange Juice

Tropicana Pure Premium: $1.1 billion

Store private labels: 611 million

Minute Maid Premium: 597 million

Frozen Orange Juice

Minute Maid: $226 million