Already suffering from reduced consumer demand in key markets because of the health trend, many juice, nectar and still drinks producers now face dwindling water supplies and a changing climate. We look into the trends, challenges and opportunities around health, sustainability, the environment, and consumer demand facing the beverage industry today.
‘Fruit juice is as bad as soda’. ‘Cutting a glass of juice a day sharply reduces diabetes risk’. ‘Fruit juices linked to cancer’. Negative headlines have hit juice and nectar producers almost weekly over the past decade – and consumers have noticed.
While juice consumption is expected to continue growing in China by more than 4% in the short term1, figures released during summer 2019 by the US Department of Agriculture showed that the average American was drinking about half what they drank when the industry hit its US peak in the late 1990s2. Juice consumption in western Europe also is flatlining, up by only about 1% in 20193.
“It’s a big problem. Consumption has faced a ten-year decline in the US and Europe, probably due to the sugar issue. So how does the industry tackle it?” asks John Collins, Executive Director of the International Fruit & Vegetable Juice Association.
The soft and still drinks industry has faced the same problem for decades, according to Nicholas Hodac, Director General of UNESDA, which represents the industry in Europe. “It’s not something that started just a few years ago; one could argue that sugar reduction could be traced back to the 1970s,” he says.
At the same time, beverage producers are facing pressure as a result of climate change, which is affecting fruit growers and putting new demands on the industry to increase the sustainability of sourcing, energy and water use in production, packing and transport.
Gaurav Dutt, Global Business Insights and Analytics Manager at Tetra Pak, believes juice producers are already on the way to finding an answer to the growth problem. “In the coming three years, we forecast that we will see growth coming in from an overall perspective, with a compound annual growth rate of, let’s say, between 1% to 2% globally,” he predicts.
Markets in Asia and Southeast Asia, where consumption never declined, will continue to expand. Growth will meanwhile return to parts of Europe and the Americas, as the industry launches innovative products.
“Manufacturers have been quick to react,” Dutt explains. "They understood that they needed to develop solutions to take care of this trend, and what they are doing is moving towards what we call ‘value-added juices’.”
These include juices enhanced with so-called 'super fruits', juices mixed with cereal or proteins to cater to the meal replacement trend, ‘clean label’ products with as few ingredients as possible, and reduced-sugar fruit juice.
This follows the shift in the still drinks and soft drink industries towards low and no calorie products, with the category now making up an average of 24 percent of sales in Europe, and more than 40 percent in some markets.
Vegetable juice contains about a quarter of the sugar found in orange juice, so blending it with other juices can reduce overall sugar content. "We see vegetable juices becoming more popular, and moving away from single flavours towards mixtures is a growing trend,” says Collins.
Still drinks producers are also reformulating their recipes to reduce sugar content. They have at the same time moved to reduce portion sizes and launched a range of new health products such as iced teas and flavoured waters, Hodac says.
Climate change is increasingly affecting the juice and nectar industry, with hurricanes hitting orange-growing areas in Florida and the Caribbean, while growers in Central and South America, California and elsewhere, are affected by drought. Dutt says that the changing climate has also affected farmers in his home country of India.
“I come from the farming belt of India, and farmers there are not happy, because it’s raining when it’s not supposed to rain, and it’s a drought when it is supposed to rain.”
Collins says that large growers were also becoming increasingly conscious of their water footprint. “They will take steps to be more careful with their water usage, collecting from natural water sources, and using smart irrigation technology.”
Water is a key ingredient for the still drinks industry, with water representing some 90% of a beverage’s composition. Hodac says that water efficiency, reduction, conservation and protection have been a core focus for more than 20 years with high profile projects such as the cleaning up of the Danube. “Manufacturing operations aim to optimise water use and treat wastewater appropriately. Several of our member companies are replenishing a significant percentage of the water they use – some achieving up to 100% in 2018. Wastewater from production processes such as cooling and rinsing is also being reused internally to clean trucks and floors.”
With some countries now starting to take more decisive steps to combat climate change, pressure will grow on producers to reduce their use of energy and water, to use more sustainable packaging, and to reduce energy used in transport.
The first of these – reduction of energy and water – can be achieved by investing in new processing techniques.
Dutt predicts that juice, nectar and still drinks producers will face increasingly tough regulation forcing them to reduce energy use or pay heavy fines. And he expects consumer pressure, now mainly focused on packaging and the growing process, to begin to bear on energy and water use in production too.
“If, as a manufacturer, you're not doing something about it, you're not seen doing something about it, you are not in the good books of consumers. And that can have a significant impact on how you are able to operate in the markets tomorrow.”
With most fruit produced in the tropics, far from the biggest markets, the industry will struggle to reduce the amount of transport it uses. But the impact of so-called food miles on fruits’ total carbon footprint is less than most assume, with fruits and vegetables grown under glass in Europe and then consumed there often having a larger carbon footprint than those grown in the tropics and imported by sea.
Hodac says that his organization’s members are focused on driving energy efficiency, conservation and reduction wherever possible. “CO2 emissions have been halved in many manufacturing and bottling plants over the past ten years through the use of new energy-efficient technologies in plants, and also cooling and distribution systems.”
The preference for local produce is spreading from Europe and the US to other markets, and not only for environmental reasons. Indian consumers, for example, now want local ingredients such as turmeric and kokum fruit in their juice blends.
Juice producers are also under pressure to ensure that the fruit they use is ethically sourced. Thirteen of the world's biggest juice producers, blenders, and bottlers have committed to only use 100% sustainably sourced juice by 2030, under the Sustainable Juice Initiative developed by IDH, a sustainable trade NGO.
Hodac says he sees a similar trend among still drinks producers. “It’s not just local flavours but also whether your products reach certain sustainability requirements. There has been a huge trend towards organic, bio foods, and that’s something you also witness in the still drinks industry.”
Dutt says he expects this demand to intensify over the coming decade. “I think the two big trends driving this shift in the juices industry are health, related to sugar, and secondly and more importantly, the sustainability and traceability demanded by the consumers.”
If beverage producers continue to be as creative as it is today, those bad headlines should start to fade away.
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In 2017 Americans consumed just 20 litres of juice a year4. This is less than at any time in the last 50 years.
The still drinks segment is outperforming juice, with compound annual growth in revenues expected to reach 5% worldwide from 2020-20235. Annual growth of 8% in China is offsetting weaker growth of 1.7% and 2.6% in the US and Europe.
Juice production is extremely water intensive. According to the US Geological Survey, it takes 50 litres of water to grow a single orange, but 200 litres to make a single glass of orange juice6.
Editor’s note: These predictions were made ahead of the coronavirus crisis and do not take account of possible long-term economic effects of the pandemic.