Orange-Juice Drinkers Vanish in Sign U.S. Rout Not OverLuzi Ann Javier and Marvin G. Perez
Orange juice remains the most popular fruit beverage in the U.S. The problem is many Americans just don’t drink it anymore.
Annual consumption for a juice that became a U.S. breakfast staple after World War II is now the lowest in at least 18 years. While smaller orange crops in Florida and Brazil have sent futures surging in the past month, sales of the top two brands, PepsiCo Inc.’s Tropicana and Coca Cola Co.’s Minute Maid, have plunged in the past decade.
Demand has suffered as beverage choices increased, from diet sodas to sports drinks, and high sugar content has become a turnoff for calorie-conscious consumers, data from market researcher Euromonitor Plc shows. Sales of bottled water topped all juices for the first time in 2007. The waning appeal of orange juice has limited the impact of a 55 percent production decline since 2004 in Florida, the biggest U.S. citrus grower.
“The trend is persistently downward,” said Lara Magnusen, a portfolio manager at La Jolla, California-based Altegris Investments Inc. which manages about $2.5 billion.
Americans still drink more orange juice than people in any other country. The industry was born in the late 1940s, after scientists figured out how to dehydrate the juice as “frozen concentrate,” clearing the way for mass production of a drink singer Bing Crosby promoted on the radio. Before then, juice was squeezed directly from the fruit.
Producers got another boost from pasteurization methods in the 1970s and 1980s that paved the way for ready-to-drink juices, and consumption peaked in 2000 at 1.6 billion gallons, according to the Florida Department of Citrus. Since then, the appeal has waned. Demand in the year that began Oct. 1 will drop 1.1 percent to 925 million gallons, the lowest since at least 1996 and the eighth decline in 10 years, state data show.
While orange juice accounted for about 60 percent of U.S. fruit-juice sales in the past decade, the market shrank 21 percent over that period, Euromonitor estimates. Since 2004, annual sales tumbled by a third at Tropicana to $1.4 billion last year, and Minute Maid dropped 27 percent to $927.5 million.
Even as consumption drops, output is falling faster. Demand exceeded production for 10 years in Florida, where the crop slid 22 percent last season to 104.6 million boxes, after drought and citrus greening disease hurt groves, U.S. Department of Agriculture data show. A decade earlier, the harvest was 242 million boxes. A box weighs 90 pounds, or 41 kilograms.
That’s helped revive futures in New York that are down 35 percent from a record in January 2012. Since dropping to a one-year low of $1.241 a pound on Nov. 11, prices are up 18 percent, trading today at $1.47. The commodity rose 7.2 percent in November to post the biggest monthly climb in a year.
The global harvest last season was 1.89 million metric tons, less than estimated demand of 1.96 million, USDA data show. Growers in Brazil, the biggest producer and top supplier of U.S. imports, saw damage in trees because of an extended drought and high temperatures in the season that began July 1, Cepea, a University of Sao Paulo research unit, said last month.
At the same time, producers are fighting to win customers. The Florida Department of Citrus will release 1 million comic books in U.S. schools featuring Captain Citrus explaining the health benefits of orange juice, along with Marvel characters Iron Man, Thor, Black Widow and Captain America.
Such efforts may not be enough. Juices accounted for 11 percent of global retail beverage volume in 2013, compared with 42 percent for bottled water and 31 percent for carbonated drinks including Coca-Cola, according to Ross Colbert, a New York-based global beverage strategist at Rabobank International.
Investors also are bailing out. Open interest in orange-juice futures tumbled 51 percent in the past two years. Infinity Trading Corp., an Indianapolis-based brokerage, stopped trading orange juice in September, after being in the market since 1996, said Fain Shaffer, the company’s president.
“I’m optimistic that eventually we’ll find something that will help us deal with greening” disease, said Mark Wheeler, who has managed his family’s 2,400 acres of Florida groves for two decades. “And then we’ll have to get demand going again. I worry about consumption more, going forward.”