ACID REFLUX 2004-02-02 (2)

KAREN DEMASTERS

The citrus juice category is finding its glass half empty.

Low-carb diets and a record-setting crop in both Florida and Brazil have left too many oranges lying around and not enough consumers to eat them or drink their juice. The news isn't much better for grapefruit juice, which has been suffering through a slump already several years old.

As a result, supermarket retailers and citrus marketers are reaching into their bag of tricks, trying everything they can to boost sales. In some markets, the effort is preventing further drops.

"We have dedicated more space to the category, started promotions and, in some cases, installed endcaps that feature a weekly juice near the refrigerated cases," said Jim Veregge, purchasing manager for frozen and deli in the Southern California division of Unified Western Grocers, based in Commerce, Calif. "Some of our recent numbers show the category coming back a little. In Southern California in November, refrigerated juices were up 4.2%, which gives us a 3.4% increase for the 12-week period and a 1% increase for the 52 weeks ending November."

Those numbers reflect a hopeful sign compared to ACNielsen's figures for the last few years. The two major refrigerated citrus juice beverages, orange and grapefruit, have suffered -- although grapefruit is faring worse (see chart).

The slide is, in part, due to a bumper crop of fruit this winter. Florida, the top orange-growing state in the country, will harvest a record 250 million, 90-pound boxes of oranges in 2003/04, surpassing the old mark of 244 million in 1997/98, according to the U.S. Department of Agriculture. Also, just last month, Brazil said it anticipates producing 450 million boxes of oranges in 2004/05, up nearly a quarter from the current crop.

Yet, the biggest squeeze on the citrus industry is probably coming from the popular Atkins and South Beach diets, which spurn high-carbohydrate foods and beverages. Both plans note an eight-ounce glass of orange juice has 100 calories, 22 grams of sugar, and 26 grams of carbohydrates.

The combination of oversupply and diet restrictions is giving growers and marketers a sour stomach, according to Andrew W. LaVigne, executive vice president of Florida Citrus Mutual, an industry association.

Veregge of Unified agreed. "The greatest impact on citrus juice sales has been the proliferation of [low-carb] drinks, including bottled water. This is a 'share-of-stomach' issue. You do not go into a supermarket now without seeing two or three end displays and pallets on the floor with water, which has had explosive growth."

Low-carbohydrate diets are having an effect on all areas of the supermarket, according to Brad Lindsey, director of sales and merchandising for Town & Country Markets, which has six stores in Seattle. Juice sales haven't declined much, but that's because each of the stores is enjoying overall growth, he told SN.

"I think the low-carb trend is here to stay," Lindsey said. "Scientific data seems to support it. Supermarkets are a reactive business, so we reflect what people want. We have devoted a fair amount of space, up to 12 to 16 feet, for all juices because the health claims seem to counter the low-carb trend to a certain extent. Orange juice is still seen as nutritious, and it continues to be a profit generator for us."

Convenience is also an issue, Veregge added. "There was a time when opening a can of frozen juice and stirring in water was seen as convenient. Now, that is the last thing some people want to do. They want to grab and go."

To counter that trend, Unified has taken several proactive steps.

"We make sure citrus juices have their due share of space in the weekly ads and promotions. We feature it as a draw a few more times during the year than we used to," Veregge said. "You can't cross merchandise it very well because it is refrigerated and adding refrigerated displays is expensive, but we try to make it an aggressive price point so it is a destination for shoppers."

Veregge added that the retailer has toyed with the idea of putting a 4-foot refrigerated unit with orange juice near the liquor displays.

The stores also feature the newer products.

"Vitamin-fortified has been out for a while, and the organic players are now starting to make some headway, and we are starting to display some calcium-fortified [stockkeeping units]," he added. "Orange juice still carries a message that it is good for your kids."

At Town & Country, "we embrace the new drinks, and put them front and center because these are in the top of the minds of the consumer," Lindsey said. "New products are the lifeblood of our business, and if you are not embracing them, you are going to lose the consumer."

Likewise, Superior Super Warehouse, based in Santa Fe Springs, Calif., puts its newest products out front in its stores, and removes those that are not selling, according to Rick Fry, vice president of purchasing. The stores are large, with 16 to 24 feet of space for juices, but the number of varieties is limited.

"We use trial and error, and limit the SKUs to those that have holding power," Fry said. "We promote 'everyday low prices' for Tropicana, Minute Maid and Florida Natural. For some, that's two 64-ounce containers for $4, and some it's two for $5. We started doing that about a year and a half ago, and we saw dramatic increases."

Low price is also the drawing point for Tom Winter, vice president of marketing for Dorothy Lane Markets, Dayton, Ohio. The high-end chain uses in-store and newspaper advertisements to promote the price specials.

"As the distributors come out with new products, we put them in and get rid of something old," he added.

Processors are eagerly developing new lines catering to changing lifestyles. Tropicana has come out with a number of new Pure Premium Essentials, including Healthy Kids, Low Acid, Light 'N' Healthy with fewer calories, Healthy Heart and Immunity Defense orange juices. Minute Maid has introduced Heart Wise to lower cholesterol, and Sunkist has undertaken an aggressive advertising campaign to promote the benefits of orange juice for fighting cancer and helping with weight loss.

Retailers are working with the distributors to increase sales where possible. Queen Anne Thriftway, in Seattle and Tacoma, Wash., has set up a kiosk with taste demonstrations in cooperation with the distributors, said Ilga Westburg, a spokeswoman for the three-store company.

For Buhler's Food Markets in Wooster, Ohio, refrigerated orange juice sales have not been a problem, but grapefruit juice sales have been off dramatically, prompting the 11 stores to discontinue their private-label line of grapefruit juice, according to Mary McMillen, director of consumer affairs.

"There are so many factors that go into sales that it is difficult to determine how to affect sales in a given category," Tim Huffman, owner of Huffman's Market in Columbus, Ohio, said. "I think people have New Year's resolutions to lose weight, and low-carb is the trend now, so we have two big displays with low-carb items."

Huffman added that all independent markets in Columbus have been picking up more business since the closing of the Big Bear stores, so juice sales, and almost everything else, is up.

PULP FRICTION

Until recently, sales of orange juice were on the upswing, buoyed by healthy-heart claims and endorsements, while sales of grapefruit juice were already falling, plagued by tartness issues and medicine-interaction advisories

Orange Juice

Year $ Volume % Change vs. Year Ago

1999 $2.67 billion n/a

2000 $2.81 billion 5%

2001 $2.84 billion 1.2%

2002 $2.79 billion -1.6%

2003 $2.71 billion -2.9%

Grapefruit Juice

Year $ Volume % Change vs. Year Ago

1999 $130.7 million n/a

2000 $127.8 million -2.2

2001 $117.2 million -8.3

2002 $105.6 million -9.9

2003 $94.2 million -10.8

NOTE: Includes all food stores (except supercenters) with $2M in sales.

SOURCE: ACNielsen