Consumers confronted by high orange-juice prices in the coming year will be paying for more than a bad growing season. They'll be paying for more marketing as Minute Maid and Tropicana boost budgets to convince consumers to keep drinking higher-priced juice.
With the poor harvest in Florida this year, PepsiCo's leading Tropicana brand and Coca-Cola's Minute Maid both have begun taking price increases that by early next year will mean register rings as much as 20% higher than they have been over the past five years. With the nearly $3 billion refrigerated-orange-juice category already down almost 2%, both of the biggest brands are gearing up to use marketing spending and innovation to keep consumers in the category.
UBS Securities analyst Kaumil Gajrawala said that as the top players take up pricing, "marketing is going to be really important as they make sure there is consumer pull."
"Mother Nature's not been kind to us," said Jim McGinnis, VP-marketing for Tropicana, which commands a 42% share with sales hovering beyond $1 billion. But the new premium prices (half-gallons go for $3.00 instead of $2.00 on promotion) give Tropicana a good reason to reinforce its premium positioning. To do that, Mr. McGinnis said, it will increase ad spending next year well beyond this year's levels, particularly on print. Print, TV and outdoor ads will put Tropicana's iconic straw-in-orange image front and center as "it instantly communicates our straight-from-the-orange, fresh-taste message," Mr. McGinnis said.
Though Tropicana spent $50 million on a mix of TV and print in 2005 for its orange-juice varieties, TNS Media Intelligence shows it spent only $17 million over the first 10 months of this year, almost entirely in print, a more "impactful" medium for the brand, according to Mr. McGinnis. Element 79, Chicago, handles.
Tropicana also is rolling out new package graphics, the first for the brand in a decade. Innovation will be key as well, Mr. McGinnis said, and will focus on products such as Tropicana Healthy Heart with omega-3's to keep consumers interested.
One Midwest retail buyer predicted orange-juice marketers will "try to hang their hat on the health benefits-after all, they have to find some way to doll up their products a bit as they charge higher prices."
Without giving specifics, a Minute Maid spokesman said 2007 will bring "category-leading innovation ... with new products and packaging" there as well, and marketing investment will rise over 2006. TNS data show Minute Maid spent $13 million on media during the first 10 months of this year, focusing on its Kids Plus and Heart Wise varieties, and $25 million in 2005.
Minute Maid has been losing share to Tropicana for its base brand, which fell 9.6% to $364 million for the 52 weeks ended Nov. 5 in food, drug and mass outlets excluding Wal-Mart, according to Information Resources data, but has seen sales skyrocket for its Simply Orange brand, which grew 25% to $208 million for the same period in those outlets.