• by Karlene Lukovitz  @KLmarketdaily, March 2, 2007

Orange juice marketers could hardly be blamed for feeling under siege these days.

Anyone who's priced OJ recently can attest to the impacts of the citrus crop crisis resulting from two seasons of hurricane-shortened growing seasons (plus crop disease) in Florida and the recent freakish cold snaps in California. And if there's a marketing truth that can always be counted on, it's that "Nothing changes consumer behavior faster than a change in prices, up or down," points out Harry Balzer, executive vice president of research group NPD.

The very real supply issues--current estimates are that Florida orange growers will produce just 140 million boxes for the 2006-07 season, or about 60 to 80 million fewer than normal--have pushed prices up by at least 18% currently as compared with this time last year, reports Andrew Meadows, public affairs manager for the Florida Department of Citrus (FDOC).

Specifically, according to ongoing four-week snapshots of citrus data supplied by AC Nielsen, the average price for a gallon of OJ across all retail outlets was $5.51 as of Jan. 20, compared to $4.58 at the same time last year. "That's a major price increase for any product," says Meadows, adding that OJ prices have been quite stable for about a decade.

The not-surprising bad news: OJ consumption for the four-week period ending Jan. 20 was about 57 million gallons, versus 63 million for that period in '06.

The so-far good news: Demand has remained high enough that dollar sales are still on the rise. The Nielsen data for the same period shows total dollar sales at $313 million, compared to $289 million last year.

But, while price hikes are keeping them afloat, growers are concerned that the hikes could backfire long term--as was the case for grapefruit juice, which saw double-digit sales declines after the past two hurricane seasons wiped out those crops.

Marketers' options are obviously limited in the face of such acts of God. "With any produce product, you're going to see periodic price volatility created by agricultural anomalies and, basically, you just have to ride it out," says Balzer.

Minute Maid has done its best to get the word out to consumers through releases and other press efforts about why it had to increase prices four times last year (after about five years of price stability), says Ray Crockett, director of communications for Coca-Cola North America.

"We're also working with retailers. And we're working on some initiatives now that will be rolled out in the near future, which we think will appeal to both retailers and consumers," he says, declining to elaborate. Advertising and other basic brand marketing messages and programs have not been adjusted, he confirms.

At the FDOC, "Even before the natural disasters, we had shifted from an implied health and wellness core message to more overt health and wellness messages stressing orange juice's vitamin C, folic acid and potassium benefits," reports Meadows. "But in light of the price increase, we are putting even more emphasis on communicating to consumers the value of drinking an eight-ounce glass each day."

The biggest concern is that prolonged pricing issues could feed into an existing downward trend in OJ consumption.

"Orange juice has been the third most popular breakfast item [after coffee and cereal] forever," notes Balzer. "But the low-carb diet craze had a negative impact and, although the decline hasn't been continuing as fast since that craze subsided, it's not a rising category. It's probably dropped by 2 to 3 percentage points in terms of importance to the breakfast meal in the past few years."