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SCB EIC ARTICLE
18 June 2018

Health craze and what it means for fruit juice manufacturers

Health craze and what it means for fruit juice manufacturers For several decades, fruit juice has been regarded as a healthy option, especially when compared to the always popular carbonated soft drink. But many credible scientific researches have found that drinking fruit juice is not the same as consuming fruit as fruit juice contains as much sugar as soft drinks or sometimes even more. This new perception of adverse health impact from fruit juice’s consumption among many consumers has been slowly forcing “fruit juice” to lose its crown to healthier alternatives.

Author: Panjarat Kitticharoonwit

Published in Bangkok Post/Asia In Depth: Asia Focus section, 18 June 2018

 

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Health craze and what it means for fruit juice manufacturers

For several decades, fruit juice has been regarded as a healthy option, especially when compared to the always popular carbonated soft drink. But many credible scientific researches have found that drinking fruit juice is not the same as consuming fruit as fruit juice contains as much sugar as soft drinks or sometimes even more. This new perception of adverse health impact from fruit juice’s consumption among many consumers has been slowly forcing “fruit juice” to lose its crown to healthier alternatives.

 

According to Business Insider, the orange juice market in the U.S. is down 50% since 2001, and its sales had not seen any annual increase since 2013. Popular brands such as Tropicana and Minute Maid suffered double-digit sales drop between 2010-15. The similar direction has also observed in western Europe, where consumption of orange juice, as reported by GlobalData, saw a drop of around 25% between 2007-15.     

 

With no exception, this change of consumer behavior has already been felt in Thailand. According to Nielsen, in 2017, the total value of the ready-to-drink (RTD) fruit juice market in the country was at 12,000 million baht, a 6% drop from the previous year. The data indicate that growth in the industry has been stagnant for many years, signaling the fruit juice sales may have reached saturation point. Many of the top domestic juice manufacturers have also recorded revenue drop in the last few quarters.

 

Customer is more educated on healthy consumption

EIC has identified two major underlying factors behind this changing customer behavior. First, consumers can access to information anywhere at any time due to the rise in smartphone penetration and internet access which allow the access to relevant information at a fingertip. And health-related issue is one of the categories that continue to gain traction online. Over the years, we have witnessed bloggers gain their popularity from writing, sharing and reviewing healthy lifestyles and products. It is evident that discussion about the misconception of health benefits from fruit juices have been flooded.

 

The second factor is the negative impact of the 2017 sugar tax hike, which consisted of an ad valorem tax and a tariff for soft drinks with a sugar content of 6 grams and above per 100ml. This amendment has an impact on fruit juice market quite significantly, especially for the non- 100% fruit juice, given it often contains substantial amounts of sugar. This government policy more or less has sparked a spillover effect of concerns on the actual benefits attached from fruit juice consumption. Consequently, juice manufacturers thus start to focus on reducing the sugar level in their products with hope to avoid having to pass on the tax burden to consumers through unit price increase. Nevertheless, many customers have already shifted away to alternatives deemed healthier such as drinking water or specific new segments like coconut water and tomato juice. Reflected by this change, these three segments continue to experience positive sales. Scientific researches have proven that these group of products provides specific health benefits for consumers.  

 

Right balance between export-led growth and potential domestic subsegment

Noting that customers have already begun to change their perception toward fruit juice, this does not necessarily mean juice manufacturers will be running out of business. Amid of this challenge, there are some bright spots waiting to be captured. EIC has broken down three key strategies that fruit juice manufacturers could adopt to withstand the storm. These will not only help to keep their businesses afloat but also will eventually convert to a bigger win in a long run. These approaches include capturing new growth from the increasing demands in neighboring markets, focusing on specific segment in domestic market and lastly consistently investing in R&D for future product trends.

 

The export-led growth strategy for Thai fruit juice companies has already been validated by the move of Malee Group, one of the leading food-and-beverage firms, as it has undertaken its first foreign acquisition with Long Quan Safe Food Joint Stock Company (LQSF), a major beverage producer in Vietnam earlier this year. According to the news report, Malee is expecting to increase its oversea revenue share from 40% to 60% within the next 3 years. Import statistics of CLMV on fruit juice category in 2017 have shown a noteworthy growth of 170% from the previous year. Fruit juice manufacturers should take the advantage when the juice’s perception in these neighboring markets still be in an initial stage, which products from nature are considered healthy. 

 

Whereas in the domestic market, juice manufacturers should focus their attention not only on to reduce the added-sugar level on their juices but also to find new segments that savvy customers would embrace. The recent popularity of tomato juice and coconut water presents a good example of how fruit juice market has evolved. With the notable scientific proven record of nutrients that come with tomato juice namely lycopene, antioxidants and vitamin A, the product has become one of the rising stars among fruit juices. EIC has estimated the value of tomato juice market in Thailand in 2017 to be at around 880 million baht and predicted that it could reach over 1,000 million baht within the next 3 years. The story of coconut water is also worth-noting as we can see that many new brands of RTD coconut water are added onto the shelves. The benefit of this fruit juice to the body especially the low level of fat content and its advantages to skincare are the factors that make coconut water become a trendy beverage.

 

Keep researching for the future

With consumers continue to actively monitor their intake of sugar and nutritional label, juice manufacturers need to emphasize on research and development in order to understand the market trends. Rising number of middle class and the coming of ageing society are the two important factors that will create even more number of health-conscious consumers in the future. These group of customers are more sophisticated and have begun to favor premiumized products that could deliver what their bodies ask for. It is clear that consumer behaviors in fruit juice consumption have already started to change and those companies who can evolve quickly and respond to the change with the right mixture of balanced approaches will manage to stay. Juice companies are going to have to get creative.

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