How is the South African fruit juice and dairy drinks market performing and what are the key trends for suppliers to capitalize on? Roxanne Rolando analyses the sector that has had a steady run through the economic recession and is now bouncing back with some interesting marketing and technological advancements.
How has the recession affected the fruit juice and dairy drinks segment?
According to Shawn Hennings an account executive at BMi, South African based market research company, ‘The recession overall lead to a five to ten per cent under-performance of these categories. The good thing about the products in these categories is that it does appeal to a wide spectrum of consumers. So, during the recession when consumer spending was under pressure and consumers tended to migrate between products they often remained within these categories preferring, for instance, to purchase a nectar as opposed to a pure fruit juice.’
Fruit juice specifically
In brief, Euromonitor suggests that, ‘As the South African economy begins to recover from recession, consumers have more disposable income and are returning to purchasing not from concentrate 100 per cent juice but from reconstituted 100 per cent juice, which is cheaper and was therefore more popular during the economic recession. Not from concentrate 100 per cent juice meets the demand for health and wellness by being preservative-free and rich in vitamins and antioxidants. Fresh juice also has more shelf space and better positioning in leading supermarket retail outlets.’
According to BMi, short-life juice benefitted from the recession as it has a lower rand per litre price. ‘Consumers tended to migrate from long-life to short-life juice during the recession when spending was suppressed,’ says Hennings.
Alli Pital, marketing manager for Sir Juice says that she did not notice a decline and Sir Juice has yet to feel the recession. In fact, the company has just recently undergone a revamp indicating growth in business particularly to do with natural and fresh juices. ‘We have redesigned our branding in line with a much more natural and fresher feel as consumers are turning towards these options,’ says Pital. Sir Juice is suppliers to News Cafe, Mugg & Bean and Sun International Hotels, with 85 per cent of its business in hospitality. This year it is branching out to supply retail outlets too. ‘We pride ourselves in supplying the highest quality juices and have worked hard to achieve a product that is 100 per cent real fruit juice with all natural flavours. It’s what the consumer wants as the health trend grows.’
Long-life juices on the other hand, declined during 2009 and the primary reason for this decline was the recession as consumers tended to migrate to more affordable short-life juices. ‘The long-life category has however seen a recovery recently as the economy has recovered and manufacturers have spent more money on the category. Brands such as Parmalat, have recently thrown money behind this category,’ Hennings points out.
A Business Monitor International analysis of this sector revealed, Clover Beverages led fruit juice sales during 2010, recording an off-trade volume share of 21 per cent. Clover was followed by Ceres Fruit Juice in second position with a value share of 14 per cent. Pick n Pay Retailers occupied third position in fruit juice in 2010 with a value share of 12 per cent and Liqui-Fruit was the fourth positioned fruit juice player in 2010 with an 11 per cent value share.
Germans are the world's leading juice drinkers, consuming almost 40 litres per year on average, from babies to the elderly. Germans prefer apple and orange juice to all other types of juice. While soft drinks have been stagnating for some time, the demand for spritzers and low-calorie lemonade has been growing significantly. A steady stream of new flavours has been very successful. Trendy fruits this year and next: pomegranate, açai and goji berries, containing high concentrations of vitamins and antioxidants.
Dairy/ fruit juice blends
Nielson statistics state, the dairy/fruit juice blend market in SA did not slow down during the recession and in the last two to three months the market has in fact grown. Hennings says, ‘This market has introduced various new flavours and packs over the last five to ten years but it has been negated by the recession and competition with other market categories. So, the quality of the product is still there but in a different guise of flavours and packs.’
Tropika is the leading player in this category and the introduction of the 500ml PET bottle with the sports cap, opened this market up to an out-of-home consumption bracket as well as the children’s market, where it was traditionally perceived as more of an in-home consumption product, says Hennings. The CAGR value growth of the dairy juice blend market has been set at 8,4 per cent over the last three years.
How are drinking yoghurts performing?
According to Katrien Grobler, brand marketing manager Danone Southern Africa , sales for fresh dairy products grew by 11,9 per cent in 2010 due to inroads into new markets, effective innovation and transforming market relationships with consumers. ‘The drinking yoghurt market has grown in the last two to three months,’ she says, ‘and we will be launching a new flavour Choc Chip, in October, in order to address the increasing demand.’
‘This is a category that has seen good growth over the last few years. Effective promotional activity, good flavours and the HDPE pack have all contributed to this growth,’ emphasises Hennings.
Danone would not disclose its flavour suppliers however Grobler did say, natural flavours are becoming increasingly popular, with vanilla doing particularly well.
Another consideration Danone has bought to the fore is that certain more traditional dairy drinks, such as Yogi Sip and Inkomasi Amasi, are seeing resurgence. ‘With an already loyal customer base that regard Yogi Sip as a status symbol, research has shown that Generation X will fill empty Yogi Sip bottles with water so they’re seen to be drinking this status brand,’ says Grobler.
Despite AHoy Branding and Dairypack working together to modernise the bottle shape and design, making it fresher and cleaner, Yogi Sip is still a trusted brand. ‘Consumers wanted the packaging to be more convenient,’ Grobler reiterates, ‘so we tweaked it here and there. This has also asserted the healthiness of the product as consumers have an increased perception of the health and wellbeing trend.’
Dairy drinks are also a snack and so play very heavily into the convenience trend. Containing much higher recommended daily allowance (RDA) than most fruit juices or even soft drinks, these are often consumed as an afternoon snack or as a meal replacement, such as breakfast on-the-go. ‘Despite this, South Africans continue to stick to tradition,’ maintains Grobler, ‘and will never take to substituting a meal, such as lunch or supper, on a regular basis with a dairy drink, keeping it firmly in the snacks segment.’
‘The brand positioning of drinking yoghurt is across the board and despite the fact that functional beverages are gaining momentum, drinking yoghurts with functional benefits, will succeed if they are perceived as being good value for money,’ she adds. Drinks such as Actimel have not taken off in SA as the packaging is small and the pricing off-putting to the general public.
‘This is a category that has seen consistent growth over the last few years. Some good flavour introductions (such as cappuccino) have also contributed to its growth,’ says Hennings.
The market leaders in this category are Sterri Stumpi, says Jannet Andrews Woodlands Dairy marketing manager. ‘But we are offering something completely different and new in the First Choice range,’ she says. ‘Sterri Stumpi contains preservatives but because we package our new range of falvoured milks in Tetra Pak, the product is preservative-free.’
In terms of the segment’s performance during recession, Andrews says that she has not noticed a slump. ‘We would not have launched this new range if that was the case. It’s been a steady run for these types of products,’ she says. ‘Our new dessert range offers a lot of cost-saving options too. If you just add milk it becomes a milkshake, if you freeze it, it becomes ice-cream and you can whip it up to almost three times the volume so a little really goes a long way.’ Flavoured milk products continue to be one of the most popular liquid dairy products in the world with over 12 billion litres consumed in 2007.
In terms of flavours, natural such as vanilla, have seen a surge in sales. Packaging has not changed remarkably, however for convenience purposes, the screw cap is increasingly popular in this segment and Tetra Pak’s benefits allow for preservative-free options. ‘We have launched some unusual flavours,’ continues Andrews, ‘such as ginger ale. People do not respond to it positively immediately but once tried and tasted, it is much loved because of it being similar to old favourites such as Stoney. It definitely targets consumers with a much more traditional palate.’
And the trends affecting the various categories mentioned such as, health and wellbeing, indulgence, convenience – how have these affected research and development (R&D) and the overall financial performance of this drinks segment throughout the economic recession? ‘Consumers did unfortunately migrate away from value added premium offerings during the recession. Fortunately manufacturers maintained their efforts and R&D spend,’ says Hennings.
The major trends to watch out for in the dairy drinks sector are health and wellbeing and functional. ‘Consumers are looking for extra and need products with more function!’ says Grobler.
Health and wellness trends will continue to impact fruit juice in SA, benefiting products which are free from preservatives and colourings as well as products which offer additional health benefits. Not only will the addition of functional juices drive growth, but manufacturers will also look to increase their focus on communicating the benefits of fresh fruit juices to consumers.
The Sunday Times Top Brands survey 2011 revealed, Minute Maid had been included as one of the top 10 brands in the ‘favourite juice’ category. Minute Maid lacked substantive support over the last couple of years in SA, but The Coca-Cola Company is now recognising the importance of the brand’s role in the health and wellness trend. It has made changes accordingly, such as designing a fresher look and feel. Formulations have also undergone a revamp to cater to this trend, delivering fuller flavours that are natural and nutritious. The product is preservative-free and packaged in 330ml cans and 1l Tetra Pak, allowing for a six-month shelf life.
In terms of packaging trends, Euromonitor has noticed an increased focus on effective storage and reusability after opening, resulting in positive retail unit volume growth in 2010. The trend of improving product dispensing qualities and product storage is expected to continue, and innovation in dairy packaging is expected to focus on this particular trend.
While delivering the freshly-squeezed texture popular with consumers, fruit pulp is highly expensive and vulnerable to price fluctuations. A low cost-in-use texturiser, Precisa Pulp 02, can replace this costly ingredient whilst conferring all-important pulpiness and stability for a longer shelf-life.
Global ingredients supplier, National Starch Food Innovation is highlighting how its innovative starch-based solution, Precisa Pulp 02, can be used in a variety of fruit-juice bases, including peach, apricot guava, pear, and mango.
Mona Rademacher, National Starch Food Innovation, comments: ‘Exotic fruit juice flavours, such as guava, apricot and mango are very popular amongst consumers in the Middle East and pear flavoured beverages hit the mark with European consumers as they have a local, home-grown appeal. We are delighted to be able to offer manufacturers the chance to meet these demands, helping them create cost-effective beverages with the consistent quality, texture and flavour desired by consumers.’