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Global Juice Strategy
Where's the juice?
Florida's citrus farmers hope they have the answer to that question and are counting on a marketing campaign aimed at China's 250 million likely customers as if the growers' economic future depends on it - because, in fact, it might.
The Sino strategy is the work of the Florida Department of Citrus. Would-be beneficiaries include Citrus World Inc., a cooperative in Lake Wales that processes fruit and distributes and markets citrus juice products for more than 1,100 independent Florida growers.
The co-op has successfully competed against giants Tropicana and Minute Maid with a highly effective marketing campaign for its flagship not-from-concentrate brand, Florida's Natural; the grapefruit juice is now the No. 1 seller in that category and their orange juice is No. 2. But an oversupply of fruit and flattened demand for citrus juices have hurt farmers in recent years, a situation made worse by competition from Brazil and Mexico.
"We have about five million boxes of grapefruit too much," says Jim Griffiths, managing director of the Citrus Grower Associates Inc., a non-profit trade organization. "The fact is that growers are losing money on grapefruit." Orange growers can still squeeze out a profit if they run their businesses efficiently.
Not surprisingly, juice executives, like execs in just about every other American industry, have begun thinking wistfully of China's vast market. Industry insiders say that for citrus farmers to survive and prosper, the U.S. must beef up juice exports to China, Japan and Taiwan as well as Europe. But first, Florida needs to market the health benefits of drinking orange and grapefruit juices.
Oversupply has its roots in the late 1980s when Florida citrus farmers fell on hard times after freezes destroyed groves in the north and central parts of the state. So they replanted even more fruit trees, and now those trees are maturing.
"We're heading toward a larger crop size because we have more trees and more acres of citrus," says Mark Brown, a research economist with the Florida Department of Citrus in Gainesville. "In the years to come, these trees will produce even more citrus. As we have larger production levels, it's going to be a challenge to market it at good prices. Hopefully demand can be increased in the U.S. and around the world."
With supply far outpacing demand, the returns to growers have fallen dramatically. According to economic research conducted by the University of Florida Institute of Food and Agricultural Sciences, the net return to growers producing white seedless grapefruit plunged from $2,359.94 per acre in 1991-92 to $49.77 per acre in 1995-96. Producers of red seedless grapefruit did not fare much better: In 1995-96 their net return was $206.82 per acre, compared to $2,604.56 per acre in 1991-92.
For growers of Valencia juicing oranges, net returns dropped from $2,000.26 an acre in 1991-92 to $918.20 in 1994-95, before rebounding to $1,896.05 an acre in 1995-96. Annual returns over the past five years average $1,332.92 per acre. Producers of Hamlin juicing oranges saw their returns fall from $1,510.08 per acre in 1991-92 to $891.86 in 1995-96.
Although many growers are struggling, most hope international marketing and advertising efforts will help increase worldwide consumption. "There won't be any quick fixes," says Gordon Hunt, director of international marketing for the Florida Department of Citrus (FDOC). "The reality is that we are going to be exporting about 75% of our fruit."
Citrus World has capitalized on the growing preference for premium, not-from-concentrate juices. According to Walt Lincer, vice president, sales and marketing for Citrus World, not-from-concentrate represented 7% of chilled juice sales 10 years ago; today, it's 38%.
About two years ago, Citrus World's Florida's Natural brand moved ahead of Minute Maid into the No. 2 spot for not-from-concentrate orange juice sales, and earlier this year it received another boost when Minute Maid dropped out of the not-from-concentrate market to focus on its frozen concentrate business.
As a result, Lincer expects Citrus World's chilled juice to grow by "double digits" this year, and a lot of the profit will come back to the growers. "Our returns to our growers have been very good, compared to other returns in the industry," says Lincer, explaining that Citrus World processes the juice, sells it, subtracts the costs and then shares the profits with the growers.
He admits, however, that the industry is clearly in a down cycle now. And while Citrus World is looking to expand its overseas markets, which now account for 5% to 7% of total sales, company officials are trying to be realistic about how quickly they can accomplish their goals.
Some consumers think that "not-from-concentrate is too expensive here (in the U.S.), and we have a mature juice market," says Citrus World Chief Executive Officer Stephen M. Caruso. "It's going to be a hard sell in other parts of the world. People have to want it and be able to pay for it."
That may be where the Chinese fit in.
While China restricts the importing of citrus fruit, juice products from other countries have been popular for years. Until recently, however, "the market was not ready for a premium product," says Hunt of the FDOC. But an April shipment to Shanghai of 100% all-Florida juice to fill an order from a private Chinese company reflects a growing class of consumers, according to Hunt.
The U.S. government estimates that 250 million Chinese (the population of the U.S.) earn the equivalent in China of a middle-class wage. "All of a sudden, they have an enormous amount of discretionary income," Hunt says. "With the disposable income, they want to upgrade the quality of their food. Not-from-concentrate juice fits right in. They are moving from juice drinks to 100% juice for health reasons."
Indeed, demographics and economics seem to be working in favor of Florida citrus growers. "The world has a larger population and a rapidly aging population. Orange juice is seen as something you just have to have," Hunt explains. "A lot of the growers are suffering greatly now. But in five years we will have production topping off and international demand will have grown to soak up the supply."
Doug Bournique, general manager, Indian River Citrus League, says the grapefruit growers he represents also believe increased international marketing will help them. "It's not the doom and gloom some people have told you about," he says. "In 2010, China will have 10 of the largest cities in the world, and they want red grapefruit. We are not overproducing grapefruit; we are undermarketing," Bournique says.
