PepsiCo bets on the decline of juice

Juice is having an identity crisis

Over the last decade, the juice, juice drink, and smoothie category has suffered from an ongoing identity crisis of sorts, as factors like sugar and artificial ingredient content came to overshadow the nutritional value of these products. According to Mintel US research on juice, of consumers who report drinking juice less often, half say they are drinking less juice because they are reducing their sugar intake. The total US juice market declined 3.6% 2015-19. The ready-to-drink (RTD) smoothie market, a market dominated by Naked, has experienced significant YOY sales losses with the total market falling under $1 bn since 2016. RTD smoothies, once viewed as a better-for-you alternative to sodas, has largely become eschewed by health-conscious consumers due to smoothies’ high sugar content.

The juice market experienced unprecedented growth in 2020 as consumers purchased any and all products with immune-support benefits during the initial stage of the pandemic; other factors such as general increased time at home and remote schooling schedules also contributed to a banner year for juice. Total juice sales surged 10.6% in 2020, strong growth for a market that has experienced consistent YOY declines. The juice market as a whole faces a narrow window of opportunity to remind consumers that juice is a tasty way to ensure vitamin needs are being met and to refresh category offerings and perception with options that meet contemporary functionality to encourage consumers to keep products in their routine moving forward; three in five consumers agree that the addition of functional benefits would encourage them to purchase more juice.

What we think

Some brands may be able to contemporize juice for today’s consumers, but the market at large will return to its pre-pandemic decline. PepsiCo’s decision to sell Tropicana and Naked reflects a belief that the juice market won’t stage a dramatic comeback and that consumers will continue to abandon the juice market in favor of lower-sugar beverages. Mintel research reveals consumers who are drinking less juice are most likely to report they are replacing juice with water.

PepsiCo’s sale of its juice portfolio reflects the wider industry trend of beverage companies selling off or discontinuing underperforming brands/SKUs in order to divert more resources to high-growth categories. PepsiCo, for example, will be able to focus on expanding its successful sparkling water platform (eg Bubly and SodaStream), as well as build up its relatively nascent energy drink brands (Rockstar and MTD DEW RISE). Other companies have made similar moves such as Coca-Cola’s decision to sell off Odwalla Juice and Zico coconut water. Just this past week Molson Coors announced it would discontinue 11 economy-tier brands in order to focus on building its hard seltzer portfolio.