Private label juice boom sparks consolidation push

Agrana and Raiffeisen Ware Austria (RWA) announced late last month that they were considering a merger of the two fruit juice subsidiaries. The move would create a joint venture with annual revenues of €250m.

Changes at the top ​

Haider Hannes from Agrana explained that the deal with RWA is being driven by changes at a retail level.

More and more juice is being sold by supermarket own brands. “For example, two thirds of fruit juice in Germany is distributed in discount markets dominated by Aldi, Lidl, REWE and EDEKA,” ​said Hannes.

And that concentration at the top of the market is putting pressure on the whole chain to adapt. Hannes said: “Retailers are looking for reliable partners to secure competitive pricing, food safety and sustainability.”​

Rabobank analyst Francois Sonneville agreed that the power in the value chain is now with the retailers. A relatively small band of supermarkets has captured a big share of the juice market - Sonneville said this has occurred because consumers in Western Europe see juice as a commodity product and are quite happy to buy it private label.

He told BeverageDaily.com that the consequence of this for suppliers – bottlers, producers and processers alike – is that cost and size are all important.

Arguments for consolidation ​

To supply a big supermarket, a bottler or processor has to be able to supply significant volume and do so at a low price. The synergies and economies of scale achievable through mergers and acquisitions make consolidation an attractive strategy.

A major illustration of the trend came late last year with the announcement of a merger between the Brazilian orange juice processors Citrovita and Citrosuco. Competition authorities at the EU Commission are investigated the deal which would create a single juice processor with a joint annual revenue of $1.2bn.

Sonneville said there is limited scope for more similar mergers in orange juice processing as the market in Brazil and Florida is already quite consolidated – especially in Brazil.

But there is still plenty of scope for consolidation on the bottling side in Europe. Sonneville said there are a few big names like Refresco and Cott that manufacture, bottle and distribute juices for supermarkets but there is significant potential for M&A activity and resulting scale benefits.

And as the private label market evolves with different quality tiers and price points, he said big bottlers can offer the expertise to meet more complex demands.