On April 26, a May orange juice futures contract settled below $1 per lb. for the first time since October 2009.
When inflation is taken into account the price of orange juice futures are more historically discounted than they first appear. Orange juice contracts are down over 20% to start 2019.
The decline in the price of orange juice is not a recent development caused by a positive supply shock. U.S. orange production has actually fallen dramatically the past decade. The reason for orange juice's decline is demand related, as people just aren't drinking as much as they used to drink. Since 2000, Americans consume approximately three gallons less a year per capita. Orange juice used to be the centerpiece beverage of a healthy breakfast. So what happened? Why has the most consumed fruit juice in the world fallen out of favor?
The decline of orange juice can be attributed to changing eating habits, most noticeable being the rejection of the idea of eating three daily meals. Breakfast is the meal where the majority of orange juice consumption takes place. Perhaps caused by changing work patterns or attitudes, the idea of three square meals a day has become antiquated and too constraining for contemporary society's mobile life.
A 2018 study by commissioned by frozen food company Farm Rich, showed that of the 2,000 Americans surveyed only 27% follow a traditional meal structure. Breakfast has been hit especially hard by this trend, as nearly half of Americans skip breakfast at least once a week and roughly 10% never eat breakfast. Those who eat breakfast in today's day age, especially Milliennials, are more likely to eat on the go, where beverages like coffee and tea are preferred, while orange juice has done a poor job marketing itself as a mobile breakfast drink.
The sales losses were particularly hard for the orange juice industry; however, they are not the only fruit juice suffering. Per capita consumption of all juices have shrunk the past decade. The decline of orange juice and by proxy most fruit juices can be traced back to changing consumer perceptions on health. When concentrated orange juice first began to be marketed, it was advertised not only to be tasty but healthy as well. They heavily marketed the juice's fresh qualities as well as it being chockfull with vitamin-c and other minerals; it was seen as a great drink for those fighting off a cold or just seeking nutritional value in their morning beverage.
However orange juice's image as a health drink has been torn down. The added sugars which help to give orange juice it's refreshing taste have been scrutinizied by the health conscious. A single 12 ounce glass of O.J. contains an incredible 9 teaspoons of sugar, about the same as a 12 oz. can of Coke. This equates to 36 grams of carbs, about half of what you should consume in a day. For those drinkers who are aware of the nutritional content of their foods orange juice is now seen as laboratory concoction rather than freshly squeezed fruit. Increased awareness and health consciousness has led to the declining demand for fruit juices and orange juice.
In The Food Institute's recent webinar "Achieving a self-sustaining business model: Top 3 trends companies need to think about post-COVID-19," Greg Wank, CPA, CGMA, partner and leader of Anchin's food and beverage group, as well as David Eben founder and CEO of...read more
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