GlobalData recently published a report on the Dynamics of the Global Fruit Juice Market. Philip Coverdale, GlobalData’s Director of Consulting, Beverages, presented an overview of the report’s findings at the recent Juice Summit. Such was the interest in our review of the session in the November/December edition of Fruit Juice Focus that Philip has written an expanded extract for this issue. Here Philip looks at two key areas of interest – the global performance of fruit juice and nectars, and the seven top trends affecting the industry.
At GlobalData we collect information on volumes and the markets in every single drinks and food category in 100+ countries and send out half a million surveys every year to consumers globally, checking their views on shopping habits and drivers to consumption. It is from these responses that we are able to draw on to form the basis of the trends that I am focussing on in this article. Not only to say what is going on in the market but predicting what we think is going to happen in the future.
FRUIT JUICE AND NECTAR PERFORMANCE GLOBALLY
Although our research is focused on the EU we have provided some context by including Fig 1 which covers all the major regions of the world. This is based on consumption per capita in 2016 on the X axis and average growth rates for the past three years on the Y axis. The size of the bubble is the volume of juice and nectars produced in that market. Any bubbles that are to the right of the chart are the higher per capita consumption markets and the opposite are the bubbles towards the left. And likewise the bubbles that are higher up the chart are those regions in growth and those low down are in decline.
What immediately becomes apparent is that Europe and North America are quite heavily in decline, despite the fact that they are quite high per capita consumption markets. It’s the emerging markets of Middle East and North Africa (MENA) and the Asia Pacific (APAC) and African regions that are portraying the opposite picture and are growing extremely quickly. There are many of reasons for this, growing middle classes is one of them, an expanding economy is another. There is also the influence of changing demographics where growing migration is contributing towards growth and usage of juices and nectars in those areas. APAC being so large in physical size is quite a high volume market, but in terms of the per capita consumption it is very low.
Therefore the opportunity for these bubbles to move to the right to get more up towards Europe is huge and if I was a juice producer I would be looking towards those emerging markets as a real opportunity for growth.
Latin America (LATAM) is an interesting one because the slight decline in the region is primarily driven by a disastrous state of the economy and large unemployment with people choosing to trade down from drinking juices to drinking squash and powdered concentrate. Essentially the decline in Europe and North America is primarily driven by health concerns, whereas the decline in LATAM is primarily driven by the economic situation. We actually think that the prospects in juice in LATAM are looking up and are reasonable.
In the EU our volume data shows that the market has declined by about 2.5% just between 2015/16 but the main point the research is trying to get across is that this downward trend hides the real opportunity in Europe where certain brands are doing particularly well. For example cold-pressed brands are focusing on value growth rather than volume growth. We know that consumers are drinking less but drinking better quality juice and are willing to pay more for this. Successful brands are very much aligning themselves with these changing consumer trends which I cover later in this piece.
Nowadays if you walk into a café, maybe not a ‘greasy spoon’ but any mainstream cafe the shelves are full of cold-pressed juices and freshly squeezed juices. You wouldn’t find any from concentrate or ambient juice – and if you did you would wonder what is going on! So there is a massive change from what was common place 15 years ago. Similarly in retail, in terms of volume, 15 years ago there used to be huge consumption of juice drinks but a great deal of it was from concentrate. The ambient and from concentrate side of the market has gone down substantially and it’s now all about the Tropicana’s and the Copella’s to name just two brands as examples.
I like to draw the comparison between old juice and new juice. When you look at shelves 15 to 20 years ago it was old juice, it was rectangular packs of basic juice, and now you look at the shelves and it’s beautiful packaging, it’s delicious juice. Another point to mention is one of the reasons why I think there’s a decline in Europe is changing consumption occasions. I look at my own situation where 10 years ago breakfast was a real occasion and we used to sit down as a family and everyone would have their cereals and everybody would have a glass of orange juice with their cereals. Now everyone is in such a mad rush and a lot of people are consuming breakfast on the go that the family breakfast occasion with people drinking juice is much less than it used to be and I think that is very much contributing to juice declines.
Fig 2 really just reiterates the point. I have looked at the stats for chilled versus ambient fruit juice in the EU and you will see that for ambient the five-year average decline is 4.3% and that decline has stayed the same between 2015/16 at about 4.3%. But if you look at chilled the opposite is happening. The five year growth is 1.6% but interestingly if you look at the growth between 2015/16 there is a 4.8% increase which in a quite a high per capita region is actually quite substantial. Something has really happened over the past couple of years which is really driving this chilled juice area of the market. Perhaps it is because the economies are generally picking up in Europe. A similar scenario is from concentrate versus not from concentrate. It’s the identical picture. With from concentrate juice going down by over 5% over the last five years, average per year, and not from concentrate 3.3% average growth for the last five years and that has picked up dramatically between 2015/16 at 5.3%.
To bring the previous figs to life I have included fig 3 which looks at a couple of important juice markets in Europe – France and the UK – where if you look at discount volumes (discount is where if 100% is the benchmark for the bestselling brand and pack size produced, then an index below 80 is what we class as discount and an index of over 120 is what we class as premium) you see premium in both France and the UK is growing massively, mainstream is fairly stagnant and discount is going down substantially – especially in the UK.
In my view the key point to take away from this data is that despite that initial chart showing that Europe is in decline, the premium end of the price spectrum is growing strongly and juice producers need to be looking at aligning their product portfolios with this more premium end of the market. In some cases I think they are getting the message. In the UK they definitely are but if you look at a market like Germany this is not necessarily so. Much of the juice that you get in Germany is still old juice.
So how does the future look? Essentially if you look at it in volume terms (see fig 4) the declines that we have seen over the past five years we think are going to slow down slightly over the next five years but still remain in decline, with nectars declining more so than 100% fruit juice. But if you look in value terms, the decline is that much less and if you look at what we are forecasting in the grand scheme of things it is actually not too bad so we think that in value terms in Europe, juice and nectar producers are going to manage to more or less hold their own.
THE SEVEN TOP TRENDS IMPACTING THE INDUSTRY
At GlobalData we track over 100 trends and sub trends of what is going on in the market and these are just seven of those trends which we believe that juice producers and juice brands should be taking note of in order to align more with that premium value growth opportunity.
The first one is Healthy Hydration. Everyone has been talking about healthy hydration for a while but the fact of the matter is the primary driver in Europe for the decline in juice is because of increased health awareness. Juice has received some bad press on how much sugar it contains and people have massively reduced their juice intake. We know that health is a key driver in soft drinks purchasing decisions and ‘better for you’ is really transitioned from a kind of nice to have to a necessity. But a key point here is that juice has a whole range of attributes that consumers associate with health. High in vitamins, high in antioxidants. Functionality – it’s natural, it’s fresh, raw. It’s only got really one ingredient -the fruit – and if it’s organic that’s even better. All of these attributes consumers view as healthy.
It’s a shame that sugar has been the one that has come to the fore but actually there is a lot that juice produces can be doing to counteract this and I think that by producing premium juices using some of these terms it almost trumps and offsets the anti-sugar sentiment. When you go into a Pret a Manger sandwich bar in the UK and you see a beautiful cold-pressed apple and beetroot you don’t really think about the sugar you think about how good it is for you. Forget the whole ‘lower in sugar’ angle on the packaging that has gone before – it is better to focus on the positive side to juice using terms such as raw, pure and clean. Those three words from our surveys really resonate with the consumers, they love the whole raw thing – clean living! I think focusing on the nutritional benefits of fruit juice and developing functional and enhanced juices highlighting the vitamins nutrients and benefits is absolutely key.
The second trend is Gut Happy which is basically digestive health. Although this may appear to be quite niche, if you actually look down the supermarket aisles they are increasingly full of products that aid digestion.
From our 500,000 surveys every year we know that digestive health is the third most desired health benefit in food and drink with the number one and number two positions taken up by generic terms like health and wellbeing. Digestive health is one of the most sought-after benefits in the product.
76% of consumers in our surveys find the claim ‘good for digestion and gut health’ appealing in food and drink products. An example of a product demonstrating this that is now becoming mainstream is Kefir. You only have to go into some of the major supermarkets in the UK and there is Kefir everywhere. Similarly if you go into an outlet such as Leon you have got Kombucha on the menu which is just amazing.
It has always been massive in America and is slowly infiltrating the market in Europe.
The third trend is the Adultification of soft drinks. We know there is massive rise in alcohol avoidance and that is definitely driving demand for more sophisticated adult soft drinks and these are consumed at the occasions where you would typically drink alcohol – in the pub, at home or when you get back from work. We know that over 20% of every age bracket except the over 65’s are actively trying to reduce alcohol consumption and in the UK over 27% of the millennial age bracket now don’t drink alcohol. Which go back 20 years if you’re at university, and you didn’t drink alcohol everybody would think you were a bit weird.
An increasing number of the soft drink producers are creating these more adult soft drinks and also many of the alcohol companies are producing either no alcohol versions of their beer like Heineken’s zero zero beer. Big alcohol companies are looking to launch soft drinks within the adult space. They see this rising lack of millennial drinking as a real threat to the industry so the point here is that juice producers need to be considering pack design that positions juice as a credible alcohol alternative and currently they just don’t. You would not go into a pub or bar and order a bottle of Tropicana!
Using sophisticated and experimental flavours is one of our main tips here. Emphasising the quality of the ingredients provenance, authentic production methods and heritage – craft drinks essentially – I think will work well for juice.
Cold is Hot is the fourth trend. I didn’t want to concentrate on just cold-pressed juice. I also wanted to touch on the actual term cold because we know from our consumer surveys the term cold addresses this real desire for a cleaner diet and using the word cold is a real consumer friendly way to express that whole clean label concept. And we know that the word cold generates these feelings of freshness natural and raw which work well for juice companies. Where consumers may have negative health perceptions of juice, cold-pressed juice evokes a reaction which overcomes this.
The industry buzzwords which are on trend and which the cold concept taps into are Raw, Fresh, Natural, Real and Pure. You can see this reflected in other consumer products with cold brew coffee, cold brew tea and you are even seeing water with added cold-pressed juice. The brands are increasingly looking to introduce the word cold into their marketing and on-pack messaging and the consumers are snapping it up.
Savoury and Spice. This is the fifth trend and I think it fits into both healthy hydration and the adultification of soft drinks. We know that savoury and spicy flavours are really appealing to consumers. We know that consumers, especially younger consumers, are willing to experiment with exciting flavours, but they are also looking for the health angle. In our global survey 80% of consumers think that ginger has a positive impact on health, with 66% thinking the same for cinnamon and 56% for turmeric. Just three ingredients picked out of an extensive list. Consumers are really valuing those ingredients and as a result we are probably going to see quite a big increase in the number of ginger flavoured juices for example. We know that all the big soft drink companies are looking at how they can introduce ginger into their products.
Next trend – six – is Plant Power. There seems to be this healthy halo associated with plants and botanicals and we are seeing a great many soft drinks companies introducing botanicals into their ranges. From our surveys in 2015 consumers are telling us that they think botanicals and plant extract have an impact on health – 63% was the global average which is notably high. The implications for juice companies – obviously juice comes from a plant – is that they should be capitalising on the naturally functional properties of botanicals and plants by promoting this on-pack.
The seventh and final trend is Beautiful Packaging. As mentioned earlier, in Europe you go into a cafe and the shelves are full of beautifully packaged juices. You cannot release a premium juice without putting it in something that looks pretty good. One of the really big points here is the rise of online and how shoppers scan through everything online when they’re doing their Internet shopping. They pause for a split second to look at a picture and if it doesn’t reach out and grab them they are just going to move onto the next one. The importance of beautiful packaging and imagery that kind of fits with this increasingly visual society in which we live in, is hugely important.
To summarise – if you look at the global level, Europe and North America are still in decline, emerging markets such as MENA and APAC are the fastest-growing markets and offer the greatest opportunity, and although in Europe fruit juice and nectars volumes are declining – value remains fairly strong and this really points to premiumisation in the market.
Out of these seven trends that are covered in this article I think I would distil it down to two major areas. The first is premiumisation – which is high-quality ingredients, better processing techniques, interesting provenance, heritage, beautiful packaging and so on. And the second one is tactics to counter negative health perceptions – such as healthy hydration, promoting digestion, using savoury, spicy, botanical ingredients and trying to cater for alcohol avoiders.
GlobalData is now one of the world’s largest consumer research, market intelligence companies specialising in strategy and consultancy work for fruit juice brands. They work closely with all the major drinks brands, retailers and food service suppliers around the world along with ingredients suppliers and packaging and equipment manufacturers. GlobalData work with companies such as McKinsey and Bain on specialist consultancy projects and worked with the AIJN to produce the 2017 European Fruit Juice Market Report.
Philip Coverdale moved across to GlobalData with Canadean, the drinks industry specialist research and data agency, when the company was amalgamated into GlobalData along with 20 other separate market research agencies
Philip Coverdale can be reached on Philip.email@example.com. 0044 7734 324198. Skype: philipcoverdale