Fruit-flavored drinks decline, future dull, says Mintel

By Lorraine Heller

- Last updated on GMT

Related tags: Kraft foods

Obesity concerns and a lack of innovation have driven down sales of
fruit-flavored juice drinks in the US over the past five years, and
prospects to boost the market remain dismal according to a new
report by Mintel.

The market for these products has dropped 9 percent to $4.4bn from 2001, which corresponds to a decline of 20 percent in constant terms.

Published this month, the new report reveals that the major factors blamed for this decline include the nation's obesity epidemic, which has led many consumers to seek less calorie-dense alternatives; the 'boredom factor', which has resulted in many people - especially teenagers - keen to try new beverage types such as energy and sports drinks; a need for convenience, which has especially impacted sales of powdered products that need to be mixed with water; and a growing interest in natural and organic products, which has led to people turning away from products containing artificial colors and flavorings.

Another possible contribution to the drop in sales has been the declining population of children aged 6-12 - one of the market's primary consumer segments - which has fallen by around 5 percent between 2001 and 2006.

And parents worried about the rising rates of childhood obesity are also avoiding the purchase of high calorie drinks, despite the fact that many companies attempt to entice children with exciting flavors and wild colors, together with logos and licensed characters.

In contrast, firms that have attempted to appear responsible may have chosen the route with most potential, indicates Mintel.

For example, Kraft Foods in January 2005 said it would stop advertising products like Kool-Aid and Oreo cookies to children, a move that won the good will of parents. "But the company will have to reformulate its products for kids (less sugar and fewer artificial ingredients) if they want to win the purchasing power of the parents as well,"​ said the report.

Sugar content has also proved a barrier to sales of products targeting adults, with the general drive towards healthier eating and drinking being to the detriment of fruit-flavored juice drinks.

Healthier alternatives, such as fruit-flavored water products, as well as competition from other areas such as fruit-flavored carbonated beverages, have also contributed to the segment's decline.

Indeed, when it comes to the overall market for non-alcoholic beverages, fruit-flavored juice drinks account for only 10 percent of total sales, and are "not doing well"​ compared to other products in the category.

For its report, Mintel divided fruit-flavored juice drinks into five categories: shelf-stable, refrigerated, aseptic, drink mixes and frozen. And out of the five segments, refrigerated juice drinks are the only ones that have seen an increase in sales, with the market for these shooting up 34 percent in the period, driven primarily by refrigerated lemonade.

According to the report, just over 70 percent of the market is dominated by seven major players, these being Kraft Foods, Coca Cola, Ocean Spray, PepsiCo, Cadbury Schweppes, Sunny Delight and Welch Foods.

And although this illustrates the popularity of well-established brands, many of these are losing ground because of the "dietary negatives"​ that the products connote, again circling back to the core issue damaging the market - obesity.

On the slightly positive side, Mintel identifies that changes in demographics may help the industry. Hispanics, it said, are more likely than other consumers to use fruit-flavored juice drinks, and their above average consumption of these beverages has helped keep sales from dipping more than they already have.

But in general, the future of this segment of beverages does not appear too bright, according to the report.

"There does not seem to be a way for fruit-flavored juice drinks to gain share unless the products can find their way into part of a 'hybrid combination' drink. It may be possible, for example, for a fruit-flavored juice drink to also take on characteristics of an energy drink or to be paired with RTD tea in a new type of fusion product,"​ said Mintel.

"Innovation is probably the only way that this segment can see any type of significant growth."

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