Tropicana Launches Focus On Less Juice, Higher Margins

Feb 15, 2012, 12:51 PM

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PepsiCo's Tropicana brand is concentrating on developing products with less juice, more water and higher profit margins, reports Bloomberg Businessweek.

The piece reports PepsiCo Global Beverages chief Massimo D'Amore, who is to retire at the end of this month, as observing that some consumers prefer OJ that's less thick, and others want juice with the "goodness" of oranges but fewer calories. "They themselves add water before drinking OJ, so why not add the water ourselves and charge for it?," D'Amore told Businessweek.

Tropicana remains the U.S.'s best-selling orange juice (and is PepsiCo's fifth-largest, $1 billion-plus global brand), but last year lost share to Coca-Cola's Minute Maid and Simply Orange brands. C-C's "squeeze play," said a Wells Fargo analyst, is pricing Minute Maid at nearly $1 less than Tropicana, and pricing Simply Orange at about 40 cents more.

D'Amore dismissed that strategy. But according to the piece, "instead of trying to match Coca-Cola step-for-step in the 100% orange-juice category, D'Amore is focusing on products with less juice, more innovation and, therefore, higher profit margins."  

PepsiCo's Trop50, the 42% OJ, stevia-sweetened brand with a premium price, has seen its sales grow by up to 50% per year since its launch in 2009, and is on its way to generating $300 million per year in sales, D'Amore reported, and that success is leading Tropicana to extend the brand to other juices and teas. Tropicana will also target Hispanics with new juice drinks and blends.

"I prefer to flank my core business with Trop50 where I make 10 to 15 points of margin more than to flank it with a lower-price product," D'Amore observed. He also noted: "We have lost perspective here on the primary reason that we are in business, which is to make money."

D'Amore, according to the article, "greenlighted" the Tropicana package redesign and the subsequent reversal of that design, after it proved difficult for consumers to distinguish varieties (pulp or acid content, for instance), according to Businessweek.

The piece, which offers an in-depth look at the PepsiCo/Coca-Cola juice market rivalry, points out that Coca-Cola also has a stable of fruit blends, "including watered-down, lower-calorie juices." 

It also points out that the FDA has strict guidelines for the clear labeling of juice content in beverages, meaning that consumers have a clear way to "know what they're getting" when they buy juices and blends.

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