Juices, Teas Stir Margins

In the juice and tea segments, it’s the products with healthier ingredient profiles, low sugar and on-trend flavors that are at the forefront in convenience stores.

Total juice revenue last year totaled $12 billion and although annual growth declined 2% between 2012 and 2017, it’s expected to grow slightly at .2% between 2017 and 2022, according to New York-based market research firm IBISWorld. Orange juice comprises the bulk of the juice segment at more than 52%, followed by non-citrus fruit juice and smoothies at nearly 34%.

By comparison, ready-to-drink tea revenue totaled $6 billion in 2017, experienced annual growth of 3.3 % between 2012 and 2017 and is estimated to grow annually about 2% between 2017 and 2022, according to IBISWorld. Almost 60% of the category is black tea, while 25% is green or white tea.

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NEW BREWS
“There are many new items coming out this year in teas and juices,” said Steve Magestro, president of Saukville, Wis.-based Mad Max Convenience Stores, which has 10 Wisconsin locations. “We are seeing more space be given to the alternative beverages in our store set again this year, and space that was once for sodas is shrinking.”

Magestro is seeing a bigger push for teas and new items, with its biggest sellers including Minute Maid and Ocean Spray for juices and Arizona, Peace Tea and Lipton teas.
Tropical flavors like mango and pineapple have been on the rise, as consumers look for exotic and creative healthy alternatives, reports IBISWorld. For example, POM Wonderful is expanding into POM Blends that mix tropical flavors with its staple pomegranate juice.

Additionally, Ocean Spray Mocktails, nonalcoholic juice blends launched last year, are also being marketed to Millennials. PepsiCo’s Tropicana brand rolled out Tropicana Essentials Probiotics in 2017.

Coca-Cola promotes the level of antioxidants in its Honest Tea beverages on its product labels. In 2017, Lipton added mango as a new flavor in its iced tea line while Nestlé revamped its Nestea line using only natural ingredients and simplifying packaging.
Through recent mergers, the beverage segment is experiencing consolidation. Keurig Green Mountain recently struck a deal worth more than $21 billion to combine with Dr Pepper Snapple Group Inc. This will put well-known coffee, soft drink, ready-to-drink tea and juice brands, including Dr Pepper, Green Mountain Coffee, 7UP, Snapple and Sunkist, under one umbrella.

“This deal is all about distribution,” said Daniel Levine, director of the Avant-Guide Institute in New York. “The future of retail is multi-channel and this deal is greater than the sum of its parts because it gives all the company’s brands access to each other’s markets.”