SQUEEZE PLAY 2006

LUCIA MOSES

With sports drinks and bottled water pumping out double-digit sales growth, it's hard to blame retailers for not getting, er, juiced up about the juice category.

"We grow our isotonic business 15%-20% per year," said Jim Goodfellow, category manager for the wholesaler Associated Grocers, Seattle. "Juice by comparison has been flat." His explanation? "People are being more health conscious."

Juice makers would certainly argue that their product is healthy. But the fact remains that the category's image has suffered because of juice's high-sugar, high-calorie content at a time when people are watching carbs, calories and sugar. Juice still ranks No. 3 in volume among refreshment beverages, behind soda and water. But that volume (in millions of gallons) declined 1.6% from 2004 to 2005, while that of bottled water increased 10.7% and energy drinks grew 80.5%, according to Beverage Marketing Corp.

Manufacturers are trying to revive the category by introducing products that serve consumers' demand for health and convenience and throwing more marketing support behind them.

Recovery won't be easy, though. When the low-carb craze and concern about obesity and diabetes gave sugar-laden juices a bad name, consumers substituted low- or no-sugar beverage alternatives.

"When the carbohydrate craze hit, juice took a lot of negative press," said Larry Martin, vice president of sales for Ocean Spray. "Juice took longer to recover."

Indeed, sales of shelf-stable and refrigerated juice have been essentially flat from 2002 until this past year, when shelf-stable sales increased 5.4% and refrigerated inched up 1.3%, according to ACNielsen. Meanwhile, frozen juices decreased 8.4%, continuing a trend of sharp declines as consumers seek more convenient options.

At Russ's Market in Lincoln, Neb., "We're cutting into frozen sections right and left," said beverage buyer Kelly Coday, adding that refrigerated juices and aseptic juice boxes are selling well.

In looking for growth avenues, big juice makers have adopted the tactics that have scored big in other food and beverage categories. Juices calling out their health attributes or making low-sugar or fortified claims have recently helped reverse sales declines of years past. So, too, have new flavors and grab-and-go single-serve bottles.

So while total apple juice sales declined 4.9% in the past year, sales of Ocean Spray light cranberry juice cocktail jumped 20.3% and V8 vegetable juice cocktail rose 11.5%. Sales of Sunny D's Baja single-serve line for kids have exploded, as has Langers' fortified grape juice sales. (Sales are in food, drug and mass outlets, excluding Wal-Mart, as measured by Information Resources Inc.)

Welch's has launched new light products, white grape juices and juice blends, and six-packs of single-serve bottles - sort of an adult version of the juice box. "The retailer has established within the aisle a section for the single-serve products," said Kathleen Mirani, marketing director, Welch's. "That availability in a single-serve size tends to be incremental to our business. There was an occasion that was not being fulfilled from the multi-serve juice."

The company also is promoting grape juice's antioxidant content, and it's tested a grape juice with added calcium.

"In shelf-stable, we have a strong trend toward focusing on healthy beverages, whether it be in the form of fortification or the emphasis on communicating the healthy benefits of juice," Mirani said.

Ocean Spray, too, has focused on light and enhanced juices. "In the end, juice is not the growth segment," Martin explained. "What we're trying to do is introduce the benefits of other segments."

To support these new introductions, the major manufacturers also have pumped up their marketing activity. Ocean Spray's "Straight from the Bog" campaign, launched last fall, uses humor to extol the health attributes of its juices. Ocean Spray has credited the campaign with growing its cranberry juice 6% year-over-year. For Welch's part, it's increased ad spending this past year in support of its antioxidant message, hired Regis Philbin as its new radio pitchman and put a bigger emphasis on in-store media. "In general, there has been increased spending to turn around the category declines," Mirani said. "You need to tell consumers about the benefits of juice."

Historically, juice has been categorized by flavor and their associated brands. Over time, a so-called cradle-to-grave or lifestage approach has taken hold, so juices that are popular with families, like apple and grape, are grouped together, followed by juices aimed at older adults, like prune and vegetable, Mirani said.

Ocean Spray's Martin said that over time, the emergence of private label and regional brands has made it tougher for people to shop the aisle. The company is proposing as a remedy that retailers put a heavier emphasis on consolidating brands within a given segment, such as apple or vegetable.

"Overall, the juice category has been declining over the past couple of years, and some of that's due to water and other beverages," Martin said. "We also believe we've lost a lot of household penetration due to the way it's positioned in front of the consumer. Over a 10-year period, the shelf has become almost a shotgun approach, creating a situation that, if you're a brand shopper, made it very difficult to find the brand you're shopping. It just became a lot of brands competing for a lot of shelf space. It's frankly very difficult to shop."

Darrell Jursa, managing partner at Liquid Intelligence, a beverage consulting company, said marketers need to do more to emphasize how their products address specific needs, as other packaged goods makers have done.

"I think what manufacturers need to focus on is the need states," he said. "People are more than willing to drink things that have calories, as long as they're good for you. They just need to step up their marketing efforts."

This heightened promotional activity in the juice category underscores a breakdown of traditional beverage category lines, according to beverage consultant Tom Pirko. At the same time that juice makers are jazzing up their sets with new flavors, soda companies are introducing juice drinks to balance out their core carbonated offerings, whose sales growth is slowing, noted Pirko, president of Bevmark, Santa Ynez, Calif.

A recently announced alliance between Ocean Spray and PepsiCo illustrates the overlap. The agreement would let Ocean Spray expand into more supermarkets and convenience stores by piggybacking on PepsiCo's enormous distribution system. It's designed to help PepsiCo develop new healthy-positioned products at a time when soda consumption is declining.

While juice may never grow at an energy-drink pace, retailers said new products are helping recreate interest in the aisle.

Ready-to-drink juices are selling well for Associated Grocers, Seattle, as are blueberry and pomegranate juices, Goodfellow said. "I think it's the health angle, being heart-healthy and antioxidant-rich."

Diane James, grocery manager at IGA Village Market in Hannibal, N.Y., said she sees a strong future in diet and organic juices as well as on-the-go packaging. "Mott's and Welch's have ready-to-drink little bottles. Ocean Spray has four or five. They haven't really taken off right now, but I think they will, because they're convenient. And people today are time-starved."

Beverage Watch

As drug stores seek to become a stop for grocery fill-in needs, their sales of staples like soda, milk and juices are outpacing those in other channels.

Category: FOOD; DRUG; FDMX

Sales*; % Change vs. year ago; Sales; % Change vs. year ago; Sales; % Change vs. year ago

Bottled Water: $3.7B; 17.4; $350.7M; 13.8; $4.3B; 17.3

CSDs: $11.9B; -1.3; $849.6M; 2.8; $13.4B; -0.9

Milk: $10.3B; -4.2; $407.9M; 8.1; $10.9B; -3.5

RFG Juices/Drinks: $4.0B; -0.2; $48.1M; 5.5; $4.0B; 0.2

Beer: $7.7B; 1.8; $1.0B; 0.7; $8.8B; 1.7

Wine: $4.3B; 9.5; $392.7M; 3.5; $4.7M; 9.0

*Sales in food, drug and mass (for wine sales, food and drug only) for 52 weeks that ended July 16.

Source: Information Resources Inc.

CHILL IN

Shelf-stable juice sales have trailed those of refrigerated, but the segment has started to recover.

Segment: 2003 Sales (millions)*; 2005 Sales (millions, est.); % Change

Refrigerated: $3,957; $3,942; -0.4

Bottled: $3,527; $3,449; -2.2

Aseptic juice/juice drinks: $868; $812; -6.5

Canned: $695; $665; -4.3

Frozen juice/juice drinks: $586; $451; -23.0

Shelf-stable liquid juice concentrate: $40; $23; -42.5

*In food, drug and mass merchants, excluding Wal-Mart. Source: Information Resources Inc., via Mintel International Group