Click to read the original article for details Source: 36Kr - Future Consumption (WeChat ID: lslb168) Following the bankruptcy of Huiyuan Juice, another juice brand has been “abandoned.” Food and beverage giant PepsiCo recently announced that it will sell its North American juice business, including Tropicana, Naked Juice, and other juice brands, as well as part of its European juice business, to French private equity firm PAI Partners for $3.3 billion (approximately RMB 21.3 billion). Among them, Tropicana is a well-known brand with a history of more than 70 years. It once entered the domestic market alongside Coca-Cola's Minute Maid, leading a wave of juice beverage consumption. Now, Tropicana's brand presence is weakening, unable to become a major revenue driver for Pepsi, and is gradually being forgotten. Although this sale does not affect the Chinese market, in China's juice beverage market, Pepsi, which owns brands such as Tropicana 100% and Guofen, has not yet entered the top five in market share, far behind Coca-Cola, which ranks first, and is also being chased by local brands such as Nongfu Spring. Especially in the past two years, Pepsi has been in a state of performance fluctuation. Despite having a global market layout and advantages across all categories, Pepsi has begun to selectively shrink. A “Hot Potato” Worth RMB 21.3 Billion As a food and beverage giant, PepsiCo has grown through acquisitions over the years, with business distributed across seven global markets, but now it is rushing to sell off its assets. One of the brands planned for sale, Tropicana, was born in 1947. It initially focused on Florida, the main citrus-producing state in the U.S., producing fresh orange juice for sale nationwide. In 1998, Pepsi acquired it, making it a major brand and differentiating it from Pepsi-Cola, which mainly focused on carbonated drinks. Tropicana was also the pioneer of NFC juice. NFC stands for Not From Concentrate, which involves washing fresh fruit, pressing out the juice, flash pasteurizing, and directly bottling without concentration or reconstitution, aiming to preserve the nutrition and flavor of the fruit. Compared with domestic NFC juice brands, including Zero Fruit Workshop, Wei Chuan, and Nongfu Spring, which became popular later, they only emerged in large numbers after 2017. However, products featuring the NFC concept have always been awkward. First, public awareness is low, and juices with NFC labels tend to be expensive. A 300ml bottle of Nongfu Spring NFC orange juice costs about RMB 8, while a 750ml bottle of Minute Maid Pulpy Orange costs RMB 5. In the juice category, compared with Coca-Cola, Pepsi's actions are always half a beat behind. Coca-Cola launched its sub-brand Minute Maid in the Chinese market in 2004, positioning it as concentrated juice, with real fruit pulp as its biggest selling point. Pepsi only launched its new brand Guofen in 2007, selling mixed juice, and the two are comparable in price-performance ratio. From sales on e-commerce platforms, Coca-Cola's Minute Maid performs better. In particular, Minute Maid's best-selling 1.25-liter drink sells over 3,000 units per month, meeting the needs of family and party consumption scenarios. Pepsi's Guofen, on the other hand, sells 2,000+ units per month. Another brand to be sold, Naked Juice, which focuses on fruit and vegetable drinks, also has sluggish sales. In terms of market share, Coca-Cola, with Minute Maid, has become the number one brand in the domestic ready-to-drink juice beverage market. Pepsi, on the other hand, turned to Tingyi in 2012, operating its juice products under the Tropicana brand through a joint brand operation. Poor performance is the reason Pepsi is divesting its juice brands. According to Interface News, in 2020, Pepsi's juice business achieved a net profit of $3 billion, but CFO Hugh Johnston revealed in an interview that the juice business's profit margin was below Pepsi's average. Third-party research data shows that consumption of juice and juice drinks fell from 3.4 billion gallons in 2011 to 2.8 billion gallons in 2020, a decrease of 19%. During the same period, Pepsi's juice product sales volume decreased by 36% to 436 million gallons. From Pepsi's financial reports in the past two years, although it covers many categories, increasing revenue without increasing profit has also brought obvious pressure. Pepsi's revenue in 2019 was $67.16 billion, growing to $70.37 billion in 2020, but profit fell from $10.29 billion to $10.08 billion. Among them, profits contributed by the North American market, Africa, the Middle East, and South Asia all decreased. After divesting these businesses, Pepsi can obtain a return of up to RMB 21.3 billion, which will be used to develop other businesses such as healthy snacks and zero-calorie drinks. Why the Juice Business Is No Longer “Sweet” The juice industry has low entry barriers, competition is gradually saturating, and growth is slowing down, which is an obvious trend. Data shows that the domestic juice market grew from RMB 115.33 billion in 2016 to RMB 127.2 billion in 2020, with an average annual compound growth rate of only 2.5%. In addition to the sluggish market and low per capita demand, there are also few brands that truly achieve high-end positioning. Currently, the market is dominated by low-concentration juice, meaning juice content below 20%. Products labeled “100% juice” on the market actually have only 10% or even 5% juice content per bottle. To be precise, they are juice drinks, not real pure juice. However, the popularity of NFC juice has given brands a breakthrough. NFC juice emphasizes freshness, health, and no additives, and also has certain requirements for cold chain transportation, leaving more room for profit. NFC juice is filled either cold or hot, and has a relatively short shelf life. Compared with beverages with a shelf life of 9 to 12 months on the market, NFC juice mostly has a shelf life of less than 30 days and requires cold chain transportation. Nongfu Spring's room-temperature NFC has a shelf life of up to 120 days and a unit price of RMB 7, while the refrigerated type costs nearly RMB 10. It can be said that pure juice faces too many competitors, including sparkling water, juice tea, and new-style tea drinks. In addition to Zero Fruit Workshop, Chu Orange, and Nongfu Spring, which are focusing on NFC juice, tea beverage brands are also entering the market. For example, Heytea's juice tea beverage has a juice content of more than 50%, emphasizes low sugar, and has a unit price of around RMB 8, higher than its own zero-sugar sparkling water. Also entering the market with juice tea is Xiangpiaopiao's new brand Migu Juice Tea, with a unit price of RMB 6. For Xiangpiaopiao, this product line is also a new growth curve beyond instant milk tea. It cannot be ignored that the temptation of sugar-free beverages is also causing some consumers to abandon juice drinks. In the past, food and beverage companies often added more sugar and food additives to improve taste and sell more products. In recent years, under the trend of health consciousness, Pepsi, Coca-Cola, and others are all engaged in sugar reduction efforts. Now is the stage of concentrated outbreak of sugar-free beverages. In addition to Genki Forest, new-style tea brands such as Heytea and Naixue Tea, as well as traditional beverage brands like Wahaha, have successively launched sugar-free sparkling water. In the past, domestic consumers' awareness of juice drinks came not only from international brands like Coca-Cola and Pepsi, but also from old enterprises such as Huiyuan, Coconut Palm, and Wahaha. Now, brand rejuvenation has become a problem these brands face. Among new players, Genki Forest uses juice and sparkling water, and Heytea uses juice and zero sugar, telling different stories. There is still huge space for high-end positioning and category innovation in juice drinks. PS: From August 24 to 26, 2021, the 2021 (4th) China FMCG Conference hosted by New Distribution will be held in Shanghai. Focusing on industry trends + practical cases + growth through connections, 3,000 FMCG practitioners will gather for the event. 10 thematic forums cover new retail O2O, community group buying, short video and live streaming e-commerce, distributor transformation, rise of new consumer brands, new alcoholic beverage interpretation, distribution B2B supply chain, omni-channel marketing, B2B2C new technology applications, etc., with operators in each segment bringing the latest case studies. Some of the confirmed heavyweight guests include: **1. Tao Shiquan, founder of Jiangxiaobai; **2. Yao Xuhong, general manager of Meiyijia Holdings Co., Ltd.; **3. Lu Xiuqiong, global expert partner at Bain & Company and former vice president of marketing for Coca-Cola China; **4. Chen Xiaodong, senior vice president of Nestlé Greater China; **5. Zhang Fujun, president of Lee Kum Kee Sauce Group China; **6. Bi Chaojiao, general manager of China Resources Snow Breweries (China) Marketing Center; **7. Yang Hongbin, vice president of Junlebao Dairy Group; **8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, general manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, general manager of e-commerce at Gold Hong Ye Paper Group... A grand event for FMCG professionals, you must be there! Are you “watching” me?