Juices & Soft Drinks - IEG Vu... IEG Vu | Juices & Soft Drinks 2019 / 5 The USDA says that the...
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Juices & Soft Drinks 2019 IEG Vu
Transcript of Juices & Soft Drinks - IEG Vu... IEG Vu | Juices & Soft Drinks 2019 / 5 The USDA says that the...
Juices & Soft Drinks 2019
IEG Vu
IEG Vu | Juices & Soft Drinks 2019 / 3www.ieg-vu.com
IEG Vu
Publishing Director IEG Vu & IEG Policy Adam Sharpe Tel: +44 20 7017 7587 Email: [email protected]
Senior Analyst: Dried Fruit & Nuts/Spices & Exotics Julian Gale Tel: +44 20 7017 7539 Email: [email protected]
Agribusiness Intelligence | Agra Informa UK Ltd. | The Blue Fin Building | 110 Southwark Street | London SE1 0TA | UK | Telephone: +44 20 7017 7500IEG Vu
Principal Analyst: Beverages Neil Murray Tel: +44 20 7017 7553 Email: [email protected]
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© Informa UK Ltd 2019
News Analyst: Canned Products Estela Cuesta Tel: +44 20 7017 4549 Email: [email protected]
Contents An unusual year for juicesThis year is proving to be an unusual one in terms of the general price pattern for juices.
By Neil Murray
05 Recovery in orange juice
10 Juices and drinks rethought
12 Problematic pineapple
15 Tariffs and taxes
20 Explosive plastic
24 Soft drinks as impulse buys
26 Sugar is not sweet
28 Russia’s juice production increases for the first time in six years
Sometimes juices are in short supply and prices are very firm. A good example of that is the situation after hurricanes took out Cuba’s grapefruit crop.
Sometimes there is a glut of raw material or an over-production of juice and prices slump. A good example of that is when China over-produced AJC, a dozen or so years ago.
This year is unusual as prices of all the major juices are either weak or likely to weaken in the near future. Orange juice prices are drifting down on the back of improved harvests in Florida and Brazil. Pineapple juice prices have been unfeasibly low for a few years and still are, but they are likely to rise. And the repercussions of Poland’s colossal 2018 apple harvest persist, so apple juice prices, though higher than they have been this season, remain weak.
One problem for the industry is that consumption of pure juice, in the main markets of the EU and the US, at any rate, is stagnating at best. General world trade in
juices and juice concentrates is still fairly healthy and what we are seeing is juice becoming more of an ingredient in many soft drinks.
Juice/water blends are gaining traction. This is nothing new: Tropicana’s Trop50 product has been around for years, but there is a surge in the development of adult drinks that blend juices with carbonated water.
Part of this trend towards higher quality CSDs can be laid at the door of companies such as Fevertree in the UK, which emphatically showed the industry that consumers were quite happy to pay large sums of money for top quality mixer drinks.
From here, it is but a short step to persuading them that very high quality soft drinks are worth the extra, and the rash of organic, low-calorie, functional, vegan and just exotic soft drinks seen at the organic show in London recently suggests that this is indeed the case.
Yes, prices are low and margins are tight, but the market will not stay this way forever.
News Analyst: Dairy/Tomato/Frozen Jana Sutenko Tel: +44 20 7017 4990 Email: [email protected]
News Analyst: Tomato Products/Frozen Foods Cristina Nanni Tel: +44 20 7017 5174 Email: [email protected]
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We sell only top quality raw materials to the European fruit juice industry, from friendly and reliable producers to friendly and reliable customers
We have audited and chosen the most reliable suppliers of fruit juices and purees
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ISRAEL, ITALY, KENYA, MEXICO, PAKISTAN, PHILIPPINES, SOUTH AFRICA, SPAIN, THAILAND, TURKEY...
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The USDA says that the Brazilian increase will be 194,000 tonnes for a total of 1.2 mln tonnes, due to an increase in availability of processing fruit. Consumption is forecast unchanged and exports are forecast 10% higher. Fundecitrus in Brazil has recently released its forecast for the 2018/19 harvest, predicting a one-third increase in production to 389 mln boxes. This is likely to result in higher orange juice production and lower prices.
US production is forecast up 140,000 tonnes to 327,000 tonnes, again on higher fruit supplies. Imports are expected to be lower due to the higher domestic supply. The Florida harvest has been downgraded slightly to 72.4 mln boxes (the original forecast was for 76.5 mln boxes), but this is still an improvement from the previous season
Mexico’s production is projected 8% up to 210,000 tonnes, again due to more oranges going for processing. Consumption is flat while exports should climb.
Production in the EU is predicted up 9% to 106,000 tonnes on an increased processing orange supply. Consumption is flat while imports will be slightly down.
Global orange production for 2018/19 is forecast to expand by 4.2 mln tonnes to 51.8 mln tonnes as favourable weather leads to larger crops in Brazil and the US. Therefore there will be more fruit for fresh and processing use.
Italy’s 2018/19 marketing year orange production is forecast to drop by 7.5% from the previous campaign, due to summer rains and major flooding that occurred in Sicily in October and November.
The USDA forecasts that 267,000 tonnes of fruit will go for processing in the new season, down from 288,538 tonnes in the previous season and 340,870 tonnes in the season before that. This will produce some 18,690 tonnes of FCOJ-equivalent orange juice, down from 20,200 tonnes and 23,860 tonnes in the two preceding seasons. Italy’s
World orange juice output for the 2018/19 season is forecast 23% higher than last season, at 2.0 million tonnes (65 brix FCOJ equivalent), according to a new forecast. Brazilian and US production are predicted to rise by 19% and 75%, respectively.
By Neil Murray
Recovery in orange juice
Fruit for both fresh and processing uses is expected to be greater
6 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
core product is its prized NFC juice, especially its blood orange juice, but the USDA does not have any figures for production of NFC juice and FCOJ.
Orange output is expected to increase in the 2018/19 marketing year (which started in November 2018) due to excellent weather conditions and higher yields.
Mexico will make 213,000 tonnes of FCOJ (including NFC juice, calculated by brix to equate to FCOJ). This is nearly 16,000 tonnes more than last season, but identical to production in the 2016/17 season.
Growers in the northern states of Mexico have said that due to the decrease in orange production in Florida, fresh fruit exports to the US for processing purposes have increased. Generally, Mexican fresh orange exports are relatively small (less than 10% of total production, and almost all to the US) as the domestic fresh market takes a large volume and Mexico’s own orange juice industry takes around 40%.
There is no official forecast for orange production, but the USDA harvest forecast is 4.6 mln tonnes. Although weather and rainfall could affect production, growers are expecting good quality and size of oranges.
The USDA reckons that 2.10 mln tonnes of fruit will go for orange juice production, up from 1.95 mln tonnes last season. Mexico is renowned for its very high ratio orange
juice, which is in strong demand for blending, especially as production in Florida (the other major region for sweet juice) has been severely reduced in recent years.
This demand is also helping to keep prices for high ratio juice quite high.
The USDA does not anticipate that Mexico’s area planted to orange will change significantly in 2018/19, with an initial forecast of 341,000 hectares under orange.
South Africa expects its fresh orange harvest in the new marketing year (which started in April) to be 1.62 mln tonnes, up from 1.55 mln tonnes in the previous season.
According to a recent USDA forecast, there will be an increase in the volume of fruit for processing of nearly 10% to 220,000 tonnes, and a 9% increase in FCOJ production to 35,000 tonnes.
Domestic consumption of orange juice is forecast to increase by 6% to 5,000 tonnes, but the USDA adds that the country’s “relatively high” food price inflation has resulted in restricted growth in demand for fruit juices, especially 100% juice.
The USDA also forecasts that the country’s orange juice exports will increase by 6% to 33,000 tonnes from 31,000 tonnes in the previous season, based on the available supply and increase in production. South African orange juice is generally considered to be slightly bitter, which limits its potential in premium markets, but its FCOJ finds customers who are happy to use it in soft drinks manufacture rather than as ‘drinking’ orange juice.
South African producers prefer to export fresh oranges rather than to sell to processors as export prices are eight times higher than prices achieved from processors. Netherlands, Botswana, Mozambique, Mauritius, Zambia and Zimbabwe are the biggest markets for South African orange juice exports.
Costa RicaCosta Rica exports the majority of its orange production as FCOJ, though it does produce and export NFC juice as well.
According to the Costa Rican Trade Promotion Board (PROCOMER), in 2017 juice exports to all destinations amounted to 29,152 tonnes worth USD61.9 mln, down from 35,942 tonnes and USD70.2 mln during 2016.
Data available for January-October 2018 show a rebound in volume and value to 34,505 tonnes and USD65.7 mln respectively. During the same period the year before, exports amounted to 26,888 tonnes, valued at USD57.1 mln.
Costa Rica’s orange production reached 7.7 mln boxes (315,000 tonnes) in the 2017/18 season and is expected to decline marginally to 310,000 tonnes during 2018/19, due to renovation of its citrus plantations.
Two companies, TicoFrut and Del Oro, control most of the production and processing of oranges in the country. TicoFrut’s production areas are located primarily in the province of Alajuela near the border with Nicaragua, and in Nicaragua; and Del Oro’s in the province of Guanacaste, also near the border with Nicaragua.
Oranges are also grown in other regions of the country including Acosta, near the Central Valley, and Nandayure in Guanacaste. However, oranges from those areas are mostly sold as fresh fruit in the local market. Besides the two companies
Brazilian monthly NFC orange juice exports (tonnes)
0
50K
100K
150K
200K
250K
300K
350K
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2012 2013 2014 2015 2016 2017 2018 2019
Source: GTT/National Customs
Brazilian monthly NFC orange juice exports (tonnes)
Mexico is renowned for its very high ratio orange juice, which is in strong demand for blending
IEG Vu | Juices & Soft Drinks 2019 / 7www.ieg-vu.com
mentioned, there are some small- and medium-sized independent producers, some of which have formed cooperatives and are trying to attract new farmers. The smaller independents tend to enter or quit the business in response to short term price
fluctuations not only of oranges but of other crops such as pineapples or coffee.
TicoFrut, one of the two processing companies, has orange plantations in Nicaragua, near the border. Oranges from
Nicaraguan plantations are trucked to Costa Rica for processing at TicoFrut’s plant in Muelle, San Carlos.
Growing conditions are favourable there, and land prices and labour costs are generally lower. The local industry has partnered with Nicaraguan businesses to plant orange groves in that country. The area planted is not expected to grow significantly in Nicaragua at this time, as the company prefers to improve its current operation through replanting and investments in irrigation.
According to government data, Costa Rica imported 70,398 tonnes of fresh oranges from Nicaragua in 2017, compared with 56,316 tonnes during 2016. For the January–September 2018 period, Nicaraguan imports have reached 67,314 tonnes.
ChinaChina should make around 45,400 tonnes of orange juice (FCOJ equivalent) this season. China’s orange juice season runs from November to October. Chinese production has hovered around 43,000-45,000 tonnes for the last few years.
The country’s orange production for the season is forecast at 7.2 mln tonnes, 100,000 tonnes less than in the previous season, but most goes to the fresh market and for export.
Chinese orange juice exports, never large to begin with, will fall slightly because of strong domestic demand and also the relatively
FLORIDA PROCESSING ORANGE PRODuCTION ANNuAL
FCOJ Chilled Others Total
1980/81 144,322 19,867 6,353 170,542
1981/82 105,150 16,518 4,473 126,141
1982/83 114,627 18,254 2,665 135,546
1983/84 94,547 16,981 2,909 114,437
1984/85 86,112 14,903 1,907 102,922
1985/86 96,061 17,267 1,361 114,689
1986/87 96,182 19,661 948 116,791
1987/88 110,206 23,325 904 134,435
1988/89 113,732 29,902 1,141 144,775
1989/90 73,640 33,836 659 108,135
1990/91 104,136 38,387 568 143,091
1991/92 93,932 37,324 456 131,712
1992/93 132,154 47,441 355 179,950
1993/94 116,248 52,912 225 169,385
1994/95 144,678 54,843 289 199,810
1995/96 132,907 64,543 224 197,674
1996/97 153,842 65,676 842 220,360
1997/98 160,865 74,767 989 236,621
1998/99 97,247 80,112 756 178,115
1999/2000 134,204 90,085 2,387 226,676
2000/01 124,072 89,564 2,246 215,882
2001/02 135,975 85,869 1,385 223,229
2002/03 102,073 92,506 1,445 196,024
2003/04 139,727 93,393 500 233,620
2004/05 54,322 88,514 1,059 143,895
2005/06 51,873 88,662 1,195 141,730
2006/07 47,996 74,523 907 123,426
2007/08 80,817 84,710 0 165,527
2008/09 72,543 82,561 1,115 156,219
2009/10 52,745 75,149 431 128,325
2010/11 51,739 82,674 835 135,248
2011/12 63,355 75,518 2,455 141,328
2012/13 47,968 79,247 411 127,626
2013/14 22,723 76,035 442 99,200
2014/15 19,224 71,891 865 91,980
2015/16 15,844 61,768 158 77,770
2016/17 12,648 53,237 162 66,047
2017/18 7,664 34,378 146 42,188
Source: USDA
8 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
high Chinese production cost, which IEG Vu understands is due, at least in part, to the low yield for juice, especially when compared with yields in Brazil and the US.
Middle-class Chinese consumers are increasingly focusing on freshness and health benefits of products, and this has raised demand for NFC juice.
The growth rates for ambient and chilled 100% orange juice are growing at around 15% and 30% respectively, says the report. Demand for NFC juice blends with a high percentage of orange juice in the blend, as well as juices with high pulp content is also growing.
In addition to traditional retail chains, branded NFC juices can be increasingly found in coolers in various locations such as subway stations, restaurants, gas stations, theatres as well as entertainment parks. In addition, there has been strong expansion in specialist fresh extraction juice shops and vending machines in shopping malls, airports, and train stations.
This corroborates presentations made at the China Juice conference in September 2018, including one from Jun Sun, founder of Jiajun Beverage, which is modelling its marketing on that of Innocent drinks in the UK and which is moving fast into HPP juices. Meanwhile, demand for traditional juice drinks with low juice content is apparently stagnant or declining.
China has also reduced its VAT rate on imported orange juice, which will have stimulated consumption.
Major juice processors in Jiangxi, Chongqing, and Sichuan provinces plan to expand their processing facilities to meet this increasing demand for high-end NFC orange juice, notes the USDA. In addition, farmers have planted more juice-variety orange trees in Jiangxi, Hubei, Hunan and Chongqing provinces.
GLOBAL ORANGE PRODuCTION
Production 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19E
Brazil 17,870 16,714 14,414 20,890 15,708 17,750
China 7,600 6,600 6,900 7,000 7,300 7,200
EU 6,550 5,954 6,038 6,739 6,269 6,512
US 6,140 5,763 5,523 4,616 3,555 5,022
Mexico 4,533 4,515 4,603 4,630 4,530 4,630
Egypt 2,570 2,635 2,930 3,000 3,120 3,420
Turkey 1,700 1,650 1,800 1,850 1,905 1,885
South Africa 1,723 1,645 1,275 1,363 1,550 1,620
Morocco 1,001 868 925 1,037 1,021 1,200
Vietnam 590 566 637 768 770 770
Argentina 800 800 800 700 600 500
Australia 430 430 455 480 515 500
Costa Rica 315 220 335 322 315 310
Guatemala 154 161 177 179 180 180
Israel 69 86 86 81 76 90
Others 209 166 179 183 182 183
Total 52,254 48,773 47,077 53,838 47,596 51,772Fresh domestic consumptionChina 6,865 6,043 6,446 6,717 7,058 6,950
EU 5,549 5,333 5,407 5,950 5,735 5,874
Brazil 6,036 5,196 4,940 4,761 4,933 4,976
Mexico 3,312 2,947 2,929 2,473 2,573 2,470
Egypt 1,385 1,350 1,380 1,380 1,480 1,690
Turkey 1,284 1,310 1,366 1,402 1,386 1,400
US 1,357 1,263 1,346 1,184 1,253 1,277
Morocco 820 688 811 822 826 950
Vietnam 661 602 695 811 832 835
Russia 467 438 470 425 458 475
Saudi Arabia 274 384 371 357 362 370
Iraq 305 247 262 258 335 345
Australia 206 175 235 250 245 245
Bangladesh 113 118 176 169 221 241
Argentina 524 450 469 350 280 230
Others 1,708 1,650 1,757 1,643 1,634 1,674
Total 30,866 28,194 29,060 28,952 29,611 30,002For processingBrazil 11,832 11,506 9,466 16,116 10,771 12,770
US 4,420 4,133 3,684 3,001 2,014 3,350
Mexico 1,200 1,550 1,650 2,100 1,900 2,100
EU 1,474 1,251 1,286 1,491 1,253 1,363
China 715 650 600 580 570 590
Costa Rica 208 125 230 238 232 227
Argentina 200 278 270 273 257 223
South Africa 471 403 142 123 201 220
Egypt 85 85 100 100 100 130
Turkey 100 80 100 100 98 95
Others 200 200 129 141 141 160
Total 20,905 20,261 17,657 24,263 17,537 21,228
Source: USDA. Figs 2018-19 estimated
Middle-class Chinese consumers are increasingly focusing on freshness and health benefits of products, and this has raised demand for NFC juice
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“As so much of JNSD builds up the quality of water blended in these beverages,” says the company, “we examined and explored how we could reconfigure the [processing of ingredients while maintaining product safety and shelf life – and achieve much lower processing costs as a result.”
Tetra Pak has done this by combining
existing technologies (filtration and ultra-violet treatment) to purify water before it is mixed with other ingredients.
Normally, the entire beverage (concentrate and added water) is pasteurised, and heat treatment is the most energy-intensive process step. Tetra Pak’s new system pasteurises the smallest possible volume
Tetra Pak has devoted some thought to improving the quality of juices, nectars and soft drinks (JNSDs), particularly those considered high acid (i.e. with a pH of up to 4.2).
By Neil Murray
Juices and drinks rethought
The company has built a pilot line to validate its concept and run operational tests involving nearly 8,000 juice packages
IEG Vu | Juices & Soft Drinks 2019 / 11www.ieg-vu.com
of product, which is the concentrate, while the rest (water) is treated separately by the use of cheaper aseptic solutions such as filtration, UV light or a combination of both.
Another advantage of this system is that product changes on large systems mean product loss, plus a lot of water use and energy consumption for CIP and SIP as production is switched from one beverage or recipe to another. With Tetra Pak’s new technology, a lot of this time, water and energy is reduced.
Tetra Pak has tested the sterilisation capability of its new system on an organism with similar characteristics to Escherichia coli 0157:H7, because it could not use pathogens at its test facility in Lund, Sweden). The system uses filters to reduce the spoilage organisms and UV to attack pathogens.
The company has built a pilot line to validate its concept and run operational tests involving nearly 8,000 juice packages. “The engineering concepts we pilot-tested are relatively straightforward and easily be applied by upgrading existing JNSD lines,” says the company. It has produced an explanatory leaflet (from which this article was culled) for potential customers.
While maintaining product safety and quality, this new JNSD technology can greatly reduce energy-hungry heat treatments, reducing overall energy costs by some 67%, says Tetra Pak. It also halves water consumption in clean-in-place (CIP) and sterilisation in place (SIP) systems. Tetra Pak is now looking for beverage producers who would like to test the technology in their plants.
Interactive packagingElsewhere, Tetra Pak has announced the launch of its connected packaging platform, which will transform milk and juice cartons into interactive information channels, full-scale data carriers and digital tools.
Driven by the trends behind Industry 4.0, and with code generation, digital printing and data management at its core, Tetra Pak says the connected packaging platform “will bring new benefits to food producers, retailers and shoppers”.
For producers, the new packaging platform will offer end-to-end traceability to improve the production of the product, quality control and supply chain transparency. It will have the ability to track and trace the history or location of any product, making it possible to
monitor for market performance and any potential issues.
For retailers, it will offer greater supply chain visibility and real-time insights, enabling distributors to track stock movements, be alerted when issues occur, and monitor for delivery performance.
For shoppers, it will mean the ability to access vast amounts of information such as where the product was made, the farm that the ingredients came from and where the package can be recycled.
Ivan Nesterenko, vice president, Cross Portfolio at Tetra Pak said: “We are unlocking new opportunities for our customers to get more value from packaging than even before. No longer is it only about product protection and functionality, it is about connectivity. The future of packaging is undoubtedly digital: this launch is a step towards a truly intelligent package, and we are excited to collaborate with our customers.”
Tetra Pak has successfully completed pilots with its customers to test the new connected package and its performance in retail in Spain, Russia, China, the Dominican Republic and India, working with beverage, juice and milk producers. In Spain a customer increased its sales by 16% through the ‘scan and win’ campaign.
12 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
Pineapple juice used to be the most expensive of the ‘big three’ fruit juices. Now that position is held by orange juice and pineapple juice concentrate (PJC) is about the same price as apple juice concentrate (AJC), which has almost always been the cheapest.
Last year was difficult for the pineapple
juice industry. This year is proving just as problematic. Production in Thailand is still relatively small. Demand in Europe is weak. The summer harvest in Thailand looks like being small which should, in theory, drive prices up but while demand is as weak is it is (and it shows no sign of rising) trying to get a higher price for an unpopular juice will be difficult.
Problematic pineapplePineapple juice has been incredibly cheap for a couple of years at least, but consumers don’t seem interested in it. Now prices are rising, which may weaken demand still further.
By Neil Murray
Thai PJC price (60 brix, USD/tonne fob)
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Apr-1
9
Feb-
19
Sep-
18
May
-18
Mar
-18
Jan-
18
Nov
-17
Aug-
17
Jul-1
7
Apr-1
7
Feb-
17
Dec-
16
Oct
-16
Jul-1
6
May
-16
Mar
-16
Dec-
15
Oct
-15
Aug-
15
May
-15
Mar
-15
Source: IEG Vu
Thai PJC price (60 brix, USD/tonne fob)
IEG Vu | Juices & Soft Drinks 2019 / 13www.ieg-vu.com
Processors, both canned and juice (and many companies do both), are doing their best to keep raw material prices low but at the time of writing, they have only been receiving half the volume of fruit they would normally expect and some of the price increases are down to processors competing with each other for scarce fruit.
Canneries in the south of the country are
paying between THB7.0-7.3 per kilo, equivalent to about USD220-230 per tonne; the range for the five eastern canneries narrows to THB7.20-7.30 per kilo, equivalent to about USD230/tonne raw material price in central areas, where two canneries are currently operating, would be THB7.20/kg. Fruit for juicing would be slightly cheaper. Hot weather from mid-March until the end of April damaged a lot of fruit. Finally, operating
plants are well below their maximum capacity which is inherently uneconomic, pushing up production costs, which in turn mandate higher finished product prices.
Pineapple juice buyers, aware of the likelihood of higher prices for PJC which are the inevitable outcome of the more expensive raw material, are reportedly trying to sign long-term fixed-price contracts. A year, even six months, ago, this tactic might have worked but with prices likely to be around USD1,300/tonne fob by the time this supplement appears (people are already talking of USD1,400/tonne), few sellers are likely to be tempted.
The situation has been made worse by the existence of sizeable stocks in Rotterdam. Bottlers and blenders have been slow in their call-offs, so more juice has been staying in the storage tanks. Another critical component of the shortage of coldstore space was the long hot summer of 2018. The heat meant that there was a reduced production of animal fodder for the winter and so a lot of cows, pigs and other beasts were slaughtered earlier than they would otherwise have been. The meat went straight into coldstores.
Uncertainty over Brexit also meant that supermarket chains and food manufacturers wanted to ensure that their supply lines were not interrupted (such as by delays at the Channel ports) and so increased their inventories of frozen products. All this meant that it was even hard to find cold storage space for frozen drums. Indeed, IEG Vu even received a report of one coldstore hurriedly converting part of its space to accommodate juice drums.
There are also sizeable stocks still in Rotterdam, and some of these stocks must be approaching two years old.
Pineapple juice buyers, aware of the likelihood of higher prices for PJC which are the inevitable outcome of the more expensive raw material, are reportedly trying to sign long-term fixed-price contracts
Thai pineapple raw material price historical (2017 to date)
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
08/0
4-14
/04/
2019
04/0
3-10
/03/
2019
18/0
2-24
/02/
2019
04/0
2-10
/02/
2019
21/0
1-27
/01/
2019
07/0
1-13
/01/
2019
24/1
2-30
/12/
2018
10/1
2-16
/12/
2018
26/1
1-02
/12/
2018
12/1
1-18
/11/
2018
29/1
0-04
/11/
2018
15/1
0-21
/10/
2018
01/1
0-07
/10/
2018
17/0
9-23
/09/
2018
09/0
7-15
/07/
2018
11/0
6-17
/06/
2018
21/0
5-27
/05/
2018
19/0
6-25
/06/
2017
THB
per k
ilo
Source: IEG Vu's industry sources
Price uctuations comparative (USD per kilo)
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Janu
ary
Febr
uary
Mar
ch
April
May
June
July
Augu
st
Sept
embe
r
Oct
ober
Nov
embe
r
Dece
mbe
r
2014 2015 2016 2017 2018 2019
Thai pineapple raw material price historical (2017 to date)Thai pineapple raw material price historical (2017 to date)
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
08/0
4-14
/04/
2019
04/0
3-10
/03/
2019
18/0
2-24
/02/
2019
04/0
2-10
/02/
2019
21/0
1-27
/01/
2019
07/0
1-13
/01/
2019
24/1
2-30
/12/
2018
10/1
2-16
/12/
2018
26/1
1-02
/12/
2018
12/1
1-18
/11/
2018
29/1
0-04
/11/
2018
15/1
0-21
/10/
2018
01/1
0-07
/10/
2018
17/0
9-23
/09/
2018
09/0
7-15
/07/
2018
11/0
6-17
/06/
2018
21/0
5-27
/05/
2018
19/0
6-25
/06/
2017
THB
per k
ilo
Source: IEG Vu's industry sources
Price uctuations comparative (USD per kilo)
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Janu
ary
Febr
uary
Mar
ch
April
May
June
July
Augu
st
Sept
embe
r
Oct
ober
Nov
embe
r
Dece
mbe
r
2014 2015 2016 2017 2018 2019
Price fluctuations comparative (USD per kilo)
14 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
Thailand exported 8,825 tonnes of pineapple juice concentrate (PJC) in March this year, compared with 10,824 tonnes in March 2018. Sales to the US actually increased to 1,780 tonnes from 1,620 tonnes in 2018. Spain, one of the keenest consumers of pineapple juice, also bought more: 720 tonnes, compared with 440 tonnes in March 2018. However, sales to countries other than the US and the Netherlands, which took 21% and 20%, respectively, of Thailand’s total March exports are small
and counted in the hundreds of tonnes rather than the thousands.
According to customs data, Thailand’s export price dipped by about USD50 per tonne from March 2017’s level to almost exactly USD1,000/tonne fob. The benchmark price, that for sales to the Netherlands, was USD980/tonne.
Costa Rican PJC is hardly more expensive than Thai, and it is generally 65 brix rather
than 60 brix, which narrows the price gap still further. Costa Rican fresh pineapple was cheaper in 2018 than in 2017, which encouraged consumption in the large German market, but German consumers spent less. Although volumes in 2018 were 0.47 kg per household higher than in 2016, average expenditure of EUR1.29 per kg in 2018 was down from EUR1.56 per kg in 2016 and 11% lower than in 2017.
FAO data shows pineapple production grew by 2.2% per year between 2012 and 2017, with main producer Costa Rica accounting for 11% of 2017 production or 3.1 mln tonnes. Over 70% of Coast Rica’s production was exported.
The Philippines and Brazil produced 2.3 mln tonnes and 2.7 mln tonnes, with 19% of Filipino production exported and almost all of Brazil’s production remaining in the country.
Thailand’s export price dipped by about USD50 per tonne from March 2017’s level to almost exactly USD1,000/tonne fob. The benchmark price, that for sales to the Netherlands, was USD980/tonne
Thai PJC exports, monthly (tonnes)
2K
3K
4K
5K
6K
7K
8K
9K
10K
11K
12K
13K
14K
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2016 2017 2018 2019
Source: GTT
Thai PJC exports, monthly (tonnes)
Costa Rican PJC and NFC pineapple juice exports (tonnes)
0
2K
4K
6K
8K
10K
12K
14K
16K
18K
20K
Jan-
16Fe
b-16
Mar
-16
Apr-1
6M
ay-1
6Ju
n-16
Jul-1
6Au
g-16
Sep-
16O
ct-1
6N
ov-1
6De
c-16
Jan-
17Fe
b-17
Mar
-17
Apr-1
7M
ay-1
7Ju
n-17
Jul-1
7Au
g-17
Sep-
17O
ct-1
7N
ov-1
7De
c-17
Jan-
18Fe
b-18
Mar
-18
Apr-1
8M
ay-1
8Ju
n-18
Jul-1
8Au
g-18
Sep-
18
PJC NFC
Source: GTT
Costa Rican PJC and NFC pineapple juice exports (tonnes)
IEG Vu | Juices & Soft Drinks 2019 / 15www.ieg-vu.com
This has been a disastrous year for China and a triumphant one for Poland. There has been a perfect storm of circumstances which has combined to reduce China’s apple juice concentrate (AJC) production to below that of Poland’s, for the first time in decades, and has resulted in exports to the US collapsing altogether.
First, China’s apple production was slashed by a severe frost during the blooming period last spring. This pushed up the price of fresh fruit and dramatically reduced the quantity of raw material for juice processing. And whatever fruit was available was so expensive that it made Chinese apply juice ridiculously uncompetitive on price.
Secondly, Poland (indeed, all Europe) had a colossal apple harvest. Poland’s new EU-subsidised orchards are now in full bearing potential, and the old days of harvests of around 2-5-2.7 million tonnes,
and 3.0 mln tonnes being considered a bumper harvest, are long gone.
Poland produced about 5.0 mln tonnes of apples last season and unofficial sources reckon that it could have been as high as 6.0 mln tonnes. A definitive official figure – and not one from the Polish government statistics office, which is notoriously unreliable – is still awaited.
Thirdly, into the US, China has also been hobbled by the new 10% tariff on its AJC imports. This has recently been increased to 25%, which bodes badly for its prospects next season.
China exported just 19,430 tonnes of apple juice concentrate (AJC) in March this year (the most recent data available), compared with nearly 65,300 tonnes in March 2018. Sales to the US have shrunk from 27,300 tonnes last year to just 830 tonnes now.
Tariffs and taxesPresident Trump’s imposition of a 25% tax on Chinese apple juice has only made a dire situation worse for China.
By Neil Murray
There has been a perfect storm of circumstances which has combined to reduce China’s apple juice concentrate (AJC) production to below that of Poland’s, for the first time in decades, and has resulted in exports to the US collapsing altogether
16 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
For the season to date (the eight months to end March), Chinese exports have been just 225,840 tonnes: last year they stood at slightly over 0.5 mln tonnes. On a calendar basis, Q1 exports this year are 45,890 tonnes, down from 170,160 tonnes in Q1 2018.
Japan is still holding out as a market loyal to Chinese product and is now China’s largest export market, taking 5,370 tonnes in March (up from 4,390 tonnes last year). South Africa is in second place with 2,825 tonnes (5,050 tonnes) and Australia with 2,125 tonnes (1,470 tonnes). Shipping from China to Australia is obviously relatively cheap.
China’s average export price in March was USD1,265 per tonne fob, according to customs data, but this figure is skewed due to some unusually low prices for some Middle Eastern customers. For mainstream markets, China’s AJC has been priced between USD1,300-1,350/tonne. The average over the season to date is slightly lower, however, at USD1,200-1,300/tonne.
Polish export data is not as quick to arrive from the country’s customs authorities as China’s is from its customs. But Poland exported more than 30,000 tonnes of AJC in February this year, its highest-ever total for the month.
Poland has scooped up business from countries where, last year, it sold no juice whatsoever. Everywhere, the story is one of utter dominance in many markets, with a seasonal first-half total of over 190,000 tonnes exported, compared with just over 87,190 tonnes last season.
Exports to the US in February were 6,410 tonnes, compared with one, just one, tonne in February 2018 (and zero in January 2018). Similarly, Canada, which bought no Polish AJC last January, imported 1,150 tonnes. Other countries that bought nothing in January included Turkey (810 tonnes this year), Mexico (620 tonnes) and Greece (130 tonnes).
In dollar terms, Poland’s AJC export price has almost halved this season. From an average of USD1,750 per tonne fob between September 2017 and January 2018, according to customs statistics, the cost of Polish juice has dropped to USD1,080/tonne in the same six months this season. Moreover, Poland’s price has been falling in recent months (as has China’s, to be fair) as the country tries to clear stocks.
Poland’s problems have been largely felt by the apple farmers rather than the processors. With a massive harvest of 5.0 mln tonnes (and some sources have added 1.0 mln tonnes to that: a final definitive figure is still awaited), and the Russian embargo on imported Polish fresh apples biting deep (Russia used to be Poland’s biggest customer for fresh apples), it is clear that Poland’s chief issue is that it finds its biggest export market for fresh apples blocked at a time when its harvests are (by European standards) colossal.
IEG Vu reckons that Poland’s AJC production, this past season, was around USD350,000-380,000 tonnes. A well-placed source in the country agrees. Chinese production we put at about 310,000-315,000 tonnes. On a global basis, there is not a glut of apples, nor of AJC. Chinese production was cut by some 12-13 mln tonnes last season, and that is
Chinese seasonal AJC exports (tonnes)
10K
20K
30K
40K
50K
60K
70K
80K
90K
100K
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
2018/19
Chinese seasonal AJC exports (tonnes)
For mainstream markets, China’s AJC has been priced between USD1,300-1,350/tonne
IEG Vu | Juices & Soft Drinks 2019 / 17www.ieg-vu.com
a lot of fruit to take out of the markets, both fresh and processed. Initially, there were fears that there was no way that deficit could be made up by bigger harvests in other countries. Actually, as we come to the end of the current season, it looks like the market is fairly well balanced. Poland has produced as much as 100,000 to 200,000 tonnes more AJC than it would in an average year, and other AJC manufacturing countries (like Turkey) have also produced more than usual.
Turkey, like Poland, has had considerable success in the US market this season. A Turkish supplier told IEG Vu earlier this year: “We shipped almost everything to the US and sold out very quickly.”
Indeed, there appears to be a reasonable amount of carry-over AJC in Europe. Prices have risen slightly and are presently around EUR0.95 per kilo ex-works, equivalent to around USD1,120 per tonne. Poland has made more lower acid AJC than it has ever done before, basically
because all its new plantations are of dessert apples and so much of the surplus fruit has been turned into juice. Moreover, some of the fruit went into the coldstores slightly riper than it should be, which shortened its storage life, and this fruit has been suitable for processing only.
Latin AmericaArgentina and Chile have done reasonably well out of China’s difficulties these days. Both export to the US. In past years, when European prices have been high, Chile has had some success exporting to the EU whereas Argentine apple juice is subject to duty and so is uncompetitive. Argentina prefers to export to the US and (obviously) other Latin American countries.
Argentina’s apple industry has suffered both from weather events and neglect. Farmers have failed to invest in their orchards or switched to grapes and other more lucrative crops. The country’s government has also decided to support its more successful agro-industries such as lemons and wine, and ignored apples. Various Argentine export taxes haven’t helped. The result is that Argentine exports have plummeted from over 60,000 tonnes in 2011 to between 7,000 and 8,000 tonnes in the last couple of years. To all intents and purposes, Argentine AJC is now an irrelevance.
Chile has fared better. Its juice industry (and processing of other apple products such as dehydrated apple chips and powders, at which Chile excels) comes second to the fresh export market and so, when harvests are small and/or of excellent quality, less tends to go for processing. This happened in 2014 and 2015 when Chile exported 85,000 tonnes and 71,000 tonnes, respectively. Otherwise. Chilean AJC exports tend to fluctuate in a fairy narrow range between 55,000-60,000 tonnes.
What Chile is trying to do is move away from simple commoditisation and into more lucrative specialist export markets such as baby food purées and (especially) organic juices and other products. Chilean organic apple production has doubled in the last four years, partly due to the new generation of organic fertilisers, which have increased yields and (equally
Poland has produced as much as 100,000 to 200,000 tonnes more AJC than it would in an average year, and other AJC manufacturing countries (like Turkey) have also produced more than usual
Polish seasonal AJC exports (tonnes)
10K
15K
20K
25K
30K
35K
40K
45K
Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
Source: GTT
Polish seasonal AJC exports (tonnes)
18 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
There simply has not been enough high acid (4.0% and upwards) juice to blend with all this low acid juice. However, IEG Vu contacts assert that a volume of NFC juice is being made with 2.5% acid fruit for some markets. Quantities are unknown.
We are now approaching the new season production in the northern hemisphere, and it is almost time to start looking ahead to the second half of this year. This will be covered in our Half Year Outlook, to be published next month.
01 Jan 2018 01 Mar 2018 01 May 2018 01 Jul 2018 01 Sep 2018 01 Nov 2018 01 Jan 2019 01 Mar 2019 01 May 2019
0.8
1.0
1.2
1.4
1.6
1.8
Apple Juice: Polish apple juice Brix 70, EXW Poland (EUR/kg)Price from 1/1/2018 to 5/21/2019
© Informa Agribusiness Intelligence
Polish apple juice Brix 70, EXW Poland (EUR/kg)Price from 1/1/2018 to 5/21/2019
01 Jan 2018 01 Mar 2018 01 May 2018 01 Jul 2018 01 Sep 2018 01 Nov 2018 01 Jan 2019 01 Mar 2019 01 May 2019
6.5
7.0
7.5
8.0
Apple Juice: Chinese, AJC, Ex-dock US East Coast (USD/Gallon)Price from 1/1/2018 to 5/21/2019
© Informa Agribusiness Intelligence
Chinese, AJC, Ex-dock US East Coast (USD/Gallon)Price from 1/1/2018 to 5/21/2019
important) the consistency of the fruits and therefore their by-products.
NFC apple juicePolish NFC apple juice is often overlooked, but it benefits from close scrutiny. Poland exported nearly 76,000 tonnes of NFC apple juice in the 2013-14 season (September to August). In the following season, exports dropped by some 16,000 tonnes to between 59,000-60,000 tonnes. That season, though, was Poland’s annus mirabilis, when a bountiful harvest and Chinese production that was too expensive to compete gave Poland an entry into the US market, so NFC production was probably considered lower priority than AJC.
There simply has not been enough highacid (4.0% and upwards) juice to blend with all this low acid juiceSince then, however, Polish exports and production have grown very quickly and in the first half of this season Poland has exported something over 83,000 tonnes of NFC juice (hardly changed from the figure for last season).
The acidity of this juice is unknown. German federal law mandates an acidity of 3.5% for drinking apple juice, and the European taste is for a juice that is more acidic than (for example) what is preferred in the US.
Hiba, simply translated – frog, is the spiritual express of the indigenous people of Colombia from the Sesquilé region for the cycle of life and the ever-returning energy of nature. The more than 2,000-year-old cave paintings Sesquilés, replicated by children of the schools located there today, can be found in the background of our packaging.
Our Purafruta fruit bars are made of 100% fresh fruit, peeled by hand, slowly dried on slices in the drying oven, gently chopped and cut from the skin. The fresh fruits come from micro-farmers from the Valle del Cauca regions. They are paid fairly and above average. However, they are too small to be certified organic.
natural and handmade glutenfree free from additivespure, columbian fruitvegan
100 %Hiba, simply translated – frog, is the spiritual express of the indigenous people of Colombia from the Sesquilé region for the cycle of life and the ever-returning energy of nature. The more than 2,000-year-old cave paintings Sesquilés, replicated by children of the schools located there today, can be found in the background of our packaging.
Our Purafruta fruit bars are made of 100% fresh fruit, peeled by hand, slowly dried on slices in the drying oven, gently chopped and cut from the skin. The fresh fruits come from micro-farmers from the Valle del Cauca regions. They are paid fairly and above average. However, they are too small to be certified organic.
natural and handmade glutenfree free from additivespure, columbian fruitvegan
natural and handmade glutenfree free from additivespure, columbian fruitvegan
100 %
Hiba-FP-ad-remake.indd 1 26/02/2019 14:17:24
20 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
Nobody saw this one coming. Not in the beverage industry or anywhere else, really. However, once David Attenborough highlighted the issue of plastic packaging polluting the oceans and endangering wildlife, this shot to the top of every agenda imaginable, and it is already bringing changes to the way beverages are packed. Single-use plastic packaging is the new villain, and in an era where wine is now sold in single-serve throwaway plastic goblets, it is not entirely surprising.
The EU has reacted remarkably swiftly to introduce new environmental legislation governing such packaging. Member states will have to collect 90% of their plastic throw-away bottles from 2029, with recycling targets being phased in earlier. The European Parliament has approved a deal with the Council and Commission on a directive that will ban some single use plastics from 2021 and restrict use of others.
The most far-reaching impact of the future directive will be a 2021 ban on certain
single use plastic items where affordable alternatives are available. Items on the banned list include oxo-degradable plastic and expanded polystyrene take-away food and drink containers. For single-use items where there are no or few alternatives, other stringent requirements will apply in a bid to prompt development of new materials or to push industry and retailers towards different recyclable or reusable choices, such as glass.
Notably, the directive will apply a 25% target for recycled content in polyethylene terephthalate (PET) bottles by 2025. Then by 2030 all bottles must be made from at least 30% recycled materials.
Member states will have to achieve a 90% collection target for plastic bottles by 2029, with an interim target of 77% by 2025. In national legislation applying the directive, member states will have to make tethered caps and lids on bottles mandatory five years after entry into force, which will probably be from late spring 2024. They also
Explosive plasticThe environmental issues behind the use of plastic packaging are going to affect every single aspect of the beverage industry.
By Neil Murray
Member states will have to collect 90% of their plastic throw-away bottles from 2029, with recycling targets being phased in earlier
IEG Vu | Juices & Soft Drinks 2019 / 21www.ieg-vu.com
have to reduce the amount of drinking cups made of or containing plastics as from 2022.
Extended producer responsibilityThe directive further aims to strengthen application of the ‘polluter pays’ principle through the introduction of extended producer responsibility (EPR). Manufacturers and retailers of packaging and the products inside will have to pay for waste collection, beach clean-up and measures to raise awareness about littering.
Unsurprisingly, there is opposition to the new legislation. In a statement that “acknowledges” and “takes note of” the directive’s adoption, FoodDrinkEurope warned that without guidelines and implementing measures the new law risked causing trade problems within the EU.
“Additional measures implementing the directive are essential to allow the food and drink industry to meet its legal obligations and to avoid distortions on the internal market,” its director-general, Mella Frewen, stressed. “Improving the environmental performance of plastic packaging used in the food and drink sector should go hand-in-hand with ensuring a high level of food safety for consumers in Europe.”
The statement made clear that while FoodDrinkEurope backs the objectives to improve collection rates and increase the content of recycled plastics in beverage bottles, it is concerned that the targets can only be achieved if there are high-performing collection, sorting and recycling infrastructures resulting in a consistent supply of recycled materials which comply with food safety requirements. This is a valid point.
FoodDrinkEurope further argues that there is a need for “a clear and robust methodology” to calculate the recycled content in plastic bottles, which the organisation argues, “should be based on an evaluation of the amount of recycled plastics available that are considered suitable for food and drink products.”
The organisation calls on the Commission “to make these a part of their priorities” and to be developed through discussions in the Circular Plastics Alliance.
FoodDrinkEurope is also calling on the Commission “to swiftly adopt the necessary guidelines and implementing measures to
ensure the proper implementation of the directive and provide legal certainty to the food and drink sector.”
In particular, guidelines are needed to clarify which food and drink containers are considered ‘single use’ and to define clearly how producers are to fund litter clean-up on beaches and elsewhere.
Wholesale and retail organisation, EuroCommerce, also gave the directive a lukewarm reception. Ahead of the vote, EuroCommerce director-general Christian Verschueren warned that the directive needs to be implemented properly to avoid distorting the single market.
“We are, as a sector, already actively doing our bit in reducing plastic waste, but to do so effectively we need consistent implementation, and the engagement of the whole supply chain and public authorities to achieve real reductions in
single-use plastic and marine litter,” Verschueren made clear.
“But above all, the Commission needs to issue clear guidelines to ensure that the directive is implemented consistently and in a way which is workable,” EuroCommerce contends.
Beverage and packaging manufacturers are exploring all sorts of schemes to make beverage containers more environmentally acceptable. Most recently, the Scottish Parliament has declared that it intends to impose a 20 UK pence (about 23 euro cents or 25 US cents) deposit on all, repeat all, beverage containers, including alcoholic drinks. This would cover glass bottles, steel and aluminium cans, plastic bottles and even board containers.
This harks back to the era when beer bottles and most large glass soft drinks bottles carried a deposit, payable on their return to the pub retailer, from which they would be collected for cleaning and re-use. The advent of giant bottling plants, which replaced the myriad of small plants and breweries, meant that it was simply cheaper to make new bottles rather than re-use old ones, although glass milk bottles continued to be re-used for some years afterwards and, indeed, are making a comeback in the UK.
Manufacturers and retailers of packaging and the products inside will have to pay for waste collection, beach clean-up and measures to raise awareness about littering
FreshSafe PET bottling machine
22 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
This scheme has attractions. The deposit makes it worth doing – a dozen bottles returned generates enough deposit money to buy more beverages – but it is also open to abuse. If you artificially increase or subsidise the value of anything, someone will see an opportunity for financial gain and it isn’t hard to imagine truckloads of used packs being driven from England into Scotland to have their deposits reclaimed. It is unclear how the redemption scheme will work, nor whether glass bottles will be re-used or recycled.
Also in the UK, Princes, whose products include fruit juices, canned tuna, bottled water and more is introducing shrink-wrap packaging made from 50% post-consumer recycled waste (PCRW). By the end of the year, all its UK-made brands and products it makes under private label will come packed in the sustainable wrapping.
Polyethylene waste will be collected from supermarkets, washed, shredded and formed into pellets for extrusion into new wrapping. Princes says this will reduce the amount of plastic sent to landfill across the country by up to 1,000 tonnes.
Princes is also increasing its use of recycled PET in its plastic bottles for ambient soft drinks and oils, and its high-density polyethylene PET bottles that it uses for its chilled fruit juices are being made with 30% recycled plastic.
Coca-Cola has already committed itself to offer packaging containing at least 50%
recycled content by 2030. As part of this strategy, via its Cross Enterprise Procurement Group (CEPG), it will buy Loop PET at a new plant that Loop, a Canadian PET recycler, is setting up in the US and which will be operational in 2020.
Coke has also signed a new loan agreement with Ioniqa, a Dutch start-up from the Eindhoven University of Technology specialising in plastic recycling. This funding, the amount of which is undisclosed, is intended to accelerate the development of the Ioniqa process, based on ionic liquids, to produce high quality rPET from PET waste that difficult to recycle.
PepsiCo is already trialling the use of reusable beverage containers in France. In Paris, consumers can order Tropicana orange juice online. Operated by global recycling organisation Terracycle, the Loop (by unhappy coincidence the same name that Coca-Cola uses for its recycled PET) scheme has the containers collected for cleaning and re-use. The packs are claimed to be robust enough for multiple use and cleaning cycles, and Mondelez, Nestlé, Unilever and Danone have also subscribed to the initiative, although PepsiCo is the first to put it into practice.
Bruno Thevenin, general manager of PepsiCo France, said: “The Loop system really is about testing a possible model for reinventing packaging, which is a key area of focus for PepsiCo as we look to reduce, reuse and rethink our plastic packaging.
“During the trial we hope to gain valuable insights into how consumers adopt Loop and to understand what is needed to make this a long-term and mainstream solution that could help reduce packaging waste and make a meaningful change in how people interact with our products.”
The Loop system is also being rolled out in the US, in a deal with the Kroger supermarket chain.
Improvements in recyclable PETThe use of more recyclable PET bottles is gathering momentum. There has always been a problem with using recycled bottles to make new ones, because the clarity of the plastic is not as good, but a company called KHS has launched FreshSafe bottles that combine PET with a wafer-thin protective layer of chemically pure glass (Plasmax) on the inside wall of the PET container. This assures product protection with full bottle-to-bottle recycling. The glass coating applied to the inside wall of the bottle is washed off during the recycling process, producing pure PET.
KHS says that “sensitive” products such as juice, wine, sauce and liquid food are protected from oxidation and carbonated beverages from CO2 loss. Furthermore, compared with standard composite materials the coating process is claimed to provide a much better barrier quality and ensures much longer product shelf life.
“People want more sustainable solutions from the industry,” said Jon Elward, head of plastic packaging at KHS USA, Inc. “The demand for clean recycling systems in particular is steadily gaining in significance.”
“This technology considerably facilitates recycling and at the same time improves the barrier properties of PET bottles,” confirmed Steve Alexander, executive director of the APR.
FreshSafe’s new bottle has been officially acknowledged by North America’s Association of Plastic Recyclers (APR): this recognises PET bottles coated using
It is unclear how the redemption scheme will work, nor whether glass bottles will be re-used or recycled
IEG Vu | Juices & Soft Drinks 2019 / 23www.ieg-vu.com
Plasmax barrier technology as meeting or exceeding APR’s most stringent Critical Guidance criteria for recyclability.
KHS acknowledges that bottles will incur additional overheads when they invest in the system but claims yet these quickly pay off as operating costs are reduced because bottlers can switch to less expensive standard PET preforms, so they do not have to source preforms from a specific manufacturer. “Measured against the huge benefit of additional product protection and longer product shelf lives in particular, the costs per bottle are actually lower than when conventional composite materials are used,” added Elward.
In France, Carbios is claiming a world first: it has managed to manufacture a bottle entirely from the refining and reprocessing of used plastics. The bottle meets all the technical and sanitary requirements of beverage packaging.
The company plans to license the technology for biorecycling PET plastics and fibres. This success “brings us closer to the marketing of our technology,” commented chief executive Jean-Claude Lumaret.
Its objective was to find an alternative to the mechanical recycling used today, and in particular to the degradation of the material involved, as this prevents much reuse of the recycled material. Another problem has been that recycling PET can also prove more expensive than sourcing virgin plastic.
Founded in 2011, the company has developed two industrial processes using enzymes to break down various types of polymers into monomers. Carbios says it has managed to convert 97% of PET plastic waste of all kinds (clear, coloured, opaque, complex) into their basic constituents in 16 hours.
It has also demonstrated how to reproduce PET from the monomers resulting from enzymatic decomposition.
Production of PET is expected to grow by 4.8% annually by 2025, according to Carbios’s figures. This year, the company intends to start building an industrial demonstrator, which should be ready in 2021. This is being achieved with the help of funding worth EUR7.5 million (USD8.5 mln) obtained with its partner Toulouse
White Biotechnology (TWB), via the future investment programme operated by ADEME (French Environment and Energy Management Agency).
uS is less dynamicUnfortunately, the US seems to be lagging behind the packaging initiatives being demonstrated in Europe. In 2017, its total plastic bottle recycling collection rate was 29.3%, a decrease of 0.4 percentage points compared with 2016, the country’s Association of Plastic Recyclers reported in its 2017 United States National Postconsumer Plastic Bottle Recycling Report.
The weight of plastic bottles collected decreased by 106 mln lbs for 2017 compared with 2016, with decreases for PET and HDPE and PP bottle resins. The annualised change in lbs of plastic bottles collected for recycling fell by 3.6%. To a great extent, this is due to beverage manufacturers and bottlers making their bottles lighter, but still, the collection rate is basically static.
PET bottles collected decreased by 27 mln lbs for a total of 1.726 bln lbs in 2017. The recycling collection rate rose from 28.4% in 2016 to 29.2% in 2017. The numerator, which refers to the total amount collected, dropped by 1.6% while the denominator, which refers to the total amount sold, dropped by 4.2%.
Compared with 2016, HDPE bottles collected fell by 70.3 mln lbs to 1,041.8 mln lbs. The HDPE bottle recycling collection rate dropped to 31.1% in 2017 compared with the 2016 rate of 33.4%. The numerator dropped while the denominator rose as both did in 2016.
The total weight of HDPE processed by US reclaimers was 953 mln lbs, down 31 mln lbs from 2016.
PP bottle recycling collection totalled 31.1 mln lbs, a decrease of 15.2% over the 2016 total of 36.6 mln lbs. The collection rate dropped to 17.2% in 2017 compared to 20.2% in 2016 with the numerator dropping and the denominator constant in 2017 compared to 2016. The total weight of PP processed by USA reclaimers was 28.9 mln lbs, down 0.8 mln lbs from 2016.
Exports of US-collected HDPE bottle material fell from 193 mln lbs in 2016 to 140 mln lbs in 2017. The 140 mln lbs represented 13.4% of the domestically collected material with approximately 54% of the exports leaving North America. US exports of recyclable plastic bottles have fallen dramatically, mainly because of China’s decision not to import what it sees as other countries’ waste products.
Another issue facing the industry is that collection is generally ‘single stream’ (ie: unsorted) which, while it results in greater household participation rates, delivers bales whose yields are described as “dismal”. Sleeve labels on PET bottles present another recycling problem.
The contradictions in implementing a joined-up environmental policy when it comes to beverage packs is shown by the situation Coca-Cola finds itself in Ottowa, Canada, where it signed a contract with the municipality to put vending machines for bottled water and other soft drinks in its buildings. Ottowa collects a royalty on every bottle sold.
This contract will expire only when a minimum sales threshold is reached and that could take another three years, according to a report presented at a meeting of Ottowa’s Standing Committee on Environmental Protection, Water and Waste Management. Cancelling the contract early could cost the city CAD740,000 (USD552,000) in penalties.
Ironically, one reason for the failure to meet the sales target could be that the city, to reduce its consumption of single-use plastic bottles, installed water refill points for bottles owned by its staff, reducing the need for them to buy pre-packed beverages.
24 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
Health and wellness remained one of the top concerns for the UK soft drinks market last year.
The need to cut the sugar content in beverages also weighed heavily on manufacturers’ minds, according to the Britvic report on juices and soft drinks sold through the convenience sector. Many bottlers chose to reformulate their recipes, with the result that only 8.4% of soft drinks sold were exposed to the soft drinks levy when it was introduced.
The result was a 36% increase in value growth, partly attributable to price hikes imposed by the levy. Manufacturers reacted in other ways besides reformulation. They shifted their marketing and promotional focus to low and no sugar variants: Pepsi Max, already a low-sugar product, was particularly successful here and added 22% in value.
Manufacturers also reduced pack sizes to allow them to offer the same price for sugared and sugar-free products. Coca-Cola
Regular is a good example of a product that followed this path.
The UK convenience/impulse market for drinks and snack products was worth GBP40.1 billion (USD52 bln) last year and is forecast to be worth GBP47.2 bln by 2023. “Convenience penetration continues to increase,” noted Britvic, describing consumers as “more promiscuous” these days.
Soft drinks showed the fastest growth of any of the impulse categories, at 7.7%, compared with 3.9% for crisps and snacks and 1.5% for biscuits. Confectionery sales actually fell by 1.6%. Soft drinks purchases have consistently increased over the last 10 years and now comprise 18% of total convenience market sales, the highest of all categories. This shows the importance of the sector for manufacturers of carbonated soft drinks (CSDs), fruit drinks and fruit juices.
The bulk of the value growth has been delivered by the biggest soft drink
Soft drinks as impulse buysSales through the UK convenience store sector are actually growing faster than they are through the traditional High Street/supermarket channel.
By Neil Murray
Many bottlers chose to reformulate their recipes
IEG Vu | Juices & Soft Drinks 2019 / 25www.ieg-vu.com
segments, although some were exposed to higher risk from the sugar levy. These include cola (11.3% growth), energy drinks (8.5%) and water (5.1%). Strong growth was also observed for cold ‘hot drinks’ (33%, driven by Lipton’s), natural energy drinks (32%, due to Purdey’s) and water plus (4.5%).
Often, instant refreshment drinks to stimulate and provide an energy boost are the key reasons for impulse purchases.
“Health food is big business,” says Britvic, pointing out that the average impulse spend on a single snack is GBP1.44, but a ‘healthy snacking’ shopper spends GBP1.84.
There has been a marked move towards ‘premiumisation’, after several years of private label products eroding the sales of well-known branded products. Britvic’s own Robinsons brand has added sales after launching more upmarket products such as Robinsons Creations and Robinsons Cordials.
Another factor driving the soft drinks market is the avoidance of alcohol, particularly by Millennials and Generation Z (consumers born between the mid-1990s and the mid-2000s). “There is a clear opportunity for soft drinks to play an increasingly important role in adult socialising occasions,” observes Britvic, adding that adult soft drinks are currently worth GBP28 million in the impulse/convenience sector, and have grown by 12% in the last 12 months.
The average of a convenience shopper is surprisingly high (46) indicating that the next generation to play a big part in the sector is Generation X (born in the 20 years from the mid-1960s). Retailers will need to be aware of the blurring of channels and be prepared to stock a wider variety of soft drinks. Moreover, the internet will play an even bigger role as browsing without a screen becomes more commonplace and, by 2021, there will be 1.8 bln consumers worldwide shopping by using voice-activated devices.
“This brings new ways of how soft drinks, and brands in particular, will make their way into shopping baskets and the key challenge that everyone faces is how they get themselves to the top of search lists,” concludes Britvic.
uK BEVERAGE IMPuLSE SALES THROuGH HIGH STREET CHANNEL
Beverage types Value (GBP) Value growth %
Volume (litres)
Volume growth %
Cola 83,501,703 14.3 56,344,611 3.2
Stimulants 48,400,329 10 17,918,603 6.5
Carbonated fruit drinks 28,100,009 13.2 18,706,610 5.5
Plain water 26,094,959 3.6 26,610,915 5.2
Juice drinks 23,710,419 7.1 10,906,562 -10.6
Water plus 22,370,170 n/a 15,333,963 17.2
Glucose 18,514,318 -7.9 9,231,118 -9.4
Pure juice 11,285,592 0.7 4,957,692 -1.7
Smoothies 9,124,598 -9.2 2,314,868 -10.8
Sports 8,187,932 9.6 3,890,353 4.2
Carbonated non fruit 6,307,815 11.9 4,785,539 16
Squash/dilutables 5,190,084 5.9 3,994,307 11
Lemonades 3,568,851 16.7 5,826,715 10.5
Mixers 1,784,788 17.1 1,856,766 37.3
Cold hot drinks 1,452,006 10.1 582,384 -1.3
Others 0 n/a 0 n/a
Total 297,593,572 8 183,261,004 4
Source: Britvic
uK IMPuLSE BEVERAGE PuRCHASES CONVENIENCE CHANNEL
Beverage types Value (GBP) Value growth %
Volume (litres)
Volume growth %
Cola 577,119,197 11.8 366,830,945 0.1
Stimulants 461,534,658 14.1 169,293,570 9.2
Carbonated fruit drinks 242,847,459 11.2 159,759,326 4.8
Plain water 231,603,121 6.1 215,695,278 4.7
Juice drinks 163,209,193 -5.3 78,681,255 -5.2
Glucose 136,153,215 -7.8 61,226,608 -10.4
Water plus 125,965,752 6.7 84,970,729 8.4
Sports drinks 85,421,275 17.1 55,724,153 22.8
Pure juice 68,905,566 -1.4 37,726,721 -6.5
Carbonated non fruit 60,962,552 10.5 56,480,177 14.9
Squash/dilutables 41,067,941 7.1 30,501,966 6.6
Lemonades 35,124,573 20.6 53,201,527 16.6
Smoothies 25,113,946 -1.5 5,404,734 -3.5
Mixers 20,075,114 17.8 16,874,316 10.8
Cold hot drinks 12,888,258 30.8 5,172,146 25.8
Others 205 n/a 30 n/a
Total 2,287,992,036 6.7 1,392,543,490 4.1
Source: Britvic
26 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu 26
Some see the sugar tax, sin tax, health tax, call it what you will as an unnecessary imposition. Some (mainly governments) see it as a useful way of raising cash while pandering to the health lobby. Some, like the more imaginative beverage manufacturers, see it as an opportunity. And some complain that it is creating unemployment in other industries.
When the issue of sugar in soft drinks (and natural sugar in pure fruit juices) raised its ugly head a few years ago, Foodnews stated at the time that this was one issue that was not going to go away, and we were correct.
It is an easily understood proposition. Too much sugar is harmful to teeth, it causes obesity and it contributes to the incidence of diabetes. The problem is that once you like sweet things, you tend to like them the more you consume them. It’s not an addiction, but it is definitely an acquired taste.
Replacement of sugar is not as simple as it sounds. There is almost as much antipathy towards artificial ingredients, which means artificial sweeteners, as there is to sugar itself. Great things were expected of stevia as a natural lower-calorie sweetener, but
manufacturers of a sweetener whose after-taste is masked when it is used in coffee have found it difficult to conceal the aftertaste when it is employed in more delicately-flavoured products like soft drinks. So stevia is often used in reduced quantities as a means of cutting calories without totally replacing sugar itself.
Simply slapping a tax that is directly payable by the consumer onto a bottle of carbonated soft drink or a juice drink is a problem in some parts of the world where consumers are acutely sensitive to even the smallest price changes in the products they buy – India’s juice drinks market is a good example. This is noticeable even in Spain. In the region of Catalonia, where a sugar tax was imposed in May 2018, it has been determined that the subsequent fall in consumption of sugar-sweetened drinks was highest among the lower- paid consumers.
The soft drinks internationals have also
Sugar is not sweetThe world is full of differing approaches to the issue of sugar-sweetened soft drinks.
By Neil Murray
There is almost as much antipathy towards artificial sweeteners, as there is to sugar itself
IEG Vu | Juices & Soft Drinks 2019 / 27www.ieg-vu.com
woken up to the need not to raise prices at point of sale: they are doing this by reducing pack sizes.
Nor is it necessarily effective when sources of ‘full sugar’ drinks, and foods, are easily available elsewhere. Norway (where food and beverages were highly taxed even before the sugar scare) has discovered this: its tax is on confectionery as well as beverages and has prompted an increase in cross-border traffic as consumers pop over to neighbouring Sweden to buy drinks and confectionery, to the anger of retailers in Norway itself. The country is now considering replacing its complicated system with a simple ‘health tax’.
Interestingly, Norwegian consumers are also taking the opportunity to buy alcohol in Sweden, and sales at Sweden’s Systembolaget border alcohol stores have risen by nearly 9%. It also appears as if a number of Norwegians are bringing back more alcohol from over the Swedish border than allowed. Confiscations at the border have shown a steady increase over the last few years. The Norwegian Customs Service’s figures show that confiscations of spirits increased by around 20% from 2016 to 2017, while wine confiscations almost doubled and beer confiscations have also increased steadily. As Sweden’s alcoholic drinks industry and market is state-controlled, this is embarrassing for the country’s government which is pleased to receive the extra revenue from itinerant Norwegians.
On a smaller scale, the US city of Philadelphia, which recently introduced a soft drinks sugar tax, found that consumers were simply driving to buy them outside the city limits. And, as might be expected from a country that started its war of independence by throwing highly taxed tea into Boston harbour, there is a huge antipathy to such taxes anywhere in the US.
No consistencySome countries are re-thinking their sometimes hastily introduced levies. Morocco started with a simple increase in value added tax (VAT) on sweet beverages and introduced a graduated increase of the domestic consumption tax on these drinks according to their sugar content. In return, beverage manufacturers concerned will return the entire subsidy on the sugar they use in their businesses.
Sri Lanka has cut the sugar tax by 40%. The Finance Ministry had been asked to exempt only soft drinks that contain less than six grams of sugar and sweetened fruit drinks by up to nine grams from the tax. The government says this could cut the retail price of soft drinks by around 30%.
Jordan, meanwhile, has cut its special tax on soft drinks to 15% from the original 20%. In contrast, Saudi Arabia has extended its original tax on CSDs and energy drinks to all sugar-sweetened soft drinks. Here, the move is partly driven by the need to replace government revenues lost as a result of lower oil prices, though the incidence of diabetes in the oil-rich Middle East states makes some form of action to curb sugar consumption an imperative. The UAE may copy Saudi Arabia’s move soon.
In Russia, the industry is trying to block the sugar levy that was due to come into force in January 2019, and has been delayed. The government is suggesting that the tax will be at least an additional 20% over the existing retail price, and the country’s soft drinks industry, which has been suffering anyway from the economic slowdown, is worried that sales will be badly affected. Already, Russian consumers are buying more mineral water and fewer CSDs and this consumption switch is as much to do with price as it is to do with health reasons.
In the Far East, Malaysia introduced its sugar tax in April this year. Singapore is considering a three-tier levy, depending on the amount of sugar in the drinks considered, plus a total ban on the sale of higher sugar packaged beverages, a tax on
manufacturers and importers, and restrictions on advertising sweetened beverages. The proposals are being considered. Germany, despite being Europe’s biggest consumer of soft drinks, plans no tax whatsoever.
Meanwhile, the UK’s nuanced approach (applying the tax on the manufacturer rather than at the point of sale and exempting zero- or low-sugar drinks from the levy), has proved spectacularly successful; so much so that the government had to downgrade its forecasts of the revenue it would receive as the UK’s soft drinks bottlers rapidly launched a slew of ‘unsugared’ drinks to be sold alongside the ‘standard’ items. In Malaysia, Fraser & Neave (F&N) is pursuing a similar policy of rapid reformulation. F&N’s chief executive Lim Yew Hoe has revealed that almost 90% of the group’s products are taxable under Malaysia’s new sugar levy, and it will be reformulating about 70% of them. Malaysia’s postponement of the sugar tax implementation to July 1 has given the company more time to execute this mitigation plan.
More sugar taxes will be imposed in the near future: this is a certainty. While some beverage companies have seen sales fall (as an example, the Dubai Refreshment Company, PepsiCo’s exclusive bottler and distributor in the UAE, claims that the implementation of VAT and the excise tax resulted in a 54% net profit drop and 26% revenue drop in 2018), others such as A G Barr in the UK and F&N in Malaysia have shown that reformulation can be good for business.
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28 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
The rise in production is also evident from import data, whose growth slowed in 2018. Imports of fruit juices under HS Code 2009 increased 2.9% to 192,200 tonnes, compared with a 4% rise in 2017 and 8% growth in 2016.
The increase in 2018 was led by the main category of apple juice, of which Russia imported 89,400 tonnes. Over 72% (63,704 tonnes, USD63.9 million) of apple juice came from China, with other countries like Moldova and Iran also increasing their share in the Russian import market, to 9% and 8% of the total, respectively. Interestingly, Polish deliveries
in the period plunged by 81% from 9,200 tonnes in 2017 to only 1,000 tonnes in 2018. A similar trend was also witnessed in Uzbekistani and Belarusian shipments, which fell by 53% and 52% respectively.
In fact, all other major juice categories showed declines last year, including orange juice. Total imports fell 7.6% to 19,600 tonnes, while their value suffered a 5.5% drop to USD43.4 mln. The decline mainly concerns largest supplier Brazil, whose supplies dropped by 5% to 16,000 tonnes from 16,900 tonnes reported last year. More marginal importers like Italy, Spain and Israel also saw volumes decline.
Russia’s juice production increases for the first time in six yearsRussia managed to lift its juice production in 2018, producing 2.41 billion litres of juice products in 2018, an increase of 1.6% compared with 2017. The Russian Union of Juice Producers (RSPS) said this was mostly driven by exports, adding that it was the first increase in the last six years for Russia’s dynamic beverages market.
By Jana Sutenko
Imports of fruit juices under HS Code 2009 increased 2.9% to 192,200 tonnes, compared with a 4% rise in 2017 and 8% growth in 2016
Photo: Tramp57 / Shutterstock.com
30 www.ieg-vu.com/ Juices & Soft Drinks 2019 | IEG Vu
Exports last year reached a peak of 60,600 tonnes worth USD40.6 mln. In volume terms, this is the largest amount Russia exported in the last 10 years, while value was just USD2.1 mln behind the record seen in 2013.
Apple juice still dominates Russian exports, reaching 17,300 tonnes (up 13.5%), while the mixed juices category saw an 18.3% rise to 15,300 tonnes.
Policy There are a number of policy changes in the pipeline, that have the potential to disrupt the industry.
In early April, deputy minister of finance Ilya Trunin proposed slashing the preferential VAT rate of 10% on non-alcoholic beverages with a high sugar content, which include such drinks as fruit juices with added sugar for baby food production.
This was followed by another suggestion that raised the industry’s eyebrows. The Federal Customs Service of Russia has proposed an increase in import duties on a range of food raw materials under the guise of customs codes of products with similar characteristics to avoid additional duties. Orange juice was included in the list of products.
The president of the Russian Union of Juice Producers (RSPS), which includes PepsiCo, Coca-Cola and Gardens of the Pridonya, Maxim Novikov, explained that industrial processing of oranges on Russian territory is unprofitable, so all producers use concentrated or frozen juice as raw materials. Last year, Russia imported a total of 33,500 tonnes of FCOJ and NFC juice.
More recently, prime minister Dmitryi Medvedev ordered a doubling of the list of products subject to labelling, which also caused an industry outcry. Products such as baby food, juices and soft drinks are to be added to the list of items under the product labelling system that was launched in 2017. In an open letter to Medvedev, Alexey Popovichev, head of the Russbrand group of companies, as well as Maxim Novikov, president of the Union of Producers of Soft Drinks and Mineral Waters (SPBN) and the RSPS, said the development will inflict serious damage on baby food and drinks producers in Russia.
The cost for baby food manufacturers will be at the level of RUB13.5 billion (USD206.8 mln), mostly affecting importers and consumers with children aged under 18 months. At the same time, juice producer damages are estimated at RUB30-40 bln, with additional costs spent on traceability in retail.
Where is the Russian juice industry headed?The RSPS told IEG Vu that the industry in Russia is now at a high technological level. The overall level of the quality of juice products is also at a high level.
“In Russia, we make high-quality and safe juices. This fact was even confirmed by the head of Roskachestvo, Russia’s state agency for product quality. But the development of companies’ own brands is determined by companies themselves. So, we prefer not to comment on whether manufacturers will be able to maintain the industry’s momentum.”
Russian juice exports: HS Code 2009 (tonnes)
10K
15K
20K
25K
30K
35K
40K
45K
50K
55K
60K
65K
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
23,39819,917
17,00714,456
45,595
41,538 41,938
53,55650,214
52,345
60,615
Source: GTT/IEG Vu
Russian juice exports: HS Code 2009 (tonnes)
Russian juice imports, by type (tonnes)
0
10K
20K
30K
40K
50K
60K
70K
80K
90K
0
22K
44K
67K
89K
111K
133K
156K
178K
200K
2016 2017 2018
88,7
62
83,1
41
89,4
07
13,3
68
22,2
16
22,4
13
21,9
06
21,2
95
19,7
05
16,7
36
18,3
06
16,4
00
12,3
37
14,3
00
14,0
24
3,28
6
4,75
6
6,39
8
2,61
0
3,01
1
4,46
6
total apple juice other juice orange juice mixed juices grape juice
pineapple juice tomato juice
Source: GTT/IEG Vu
Russian juice imports, by type (tonnes)
Industrial processing of oranges on Russian territory is unprofitable, so all producers use concentrated or frozen juice as raw materials
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