Accession to boost eastern European juice market
litres, well ahead of that in other emerging markets, but there is
still some way to go before consumption levels reach those in
western Europe. But with a number of factors continuing to drive
growth in the market - not least the accession of several countries
to the EU in May - producers are confident of further gains,
writes Chris Jones.
Fruit juice consumption is influenced by a number of factors, according to market analysts Euromonitor. Consumer purchasing power, health awareness and even the weather all have a major influence, and are likely to play important roles in driving growth in eastern Europe in the years to come.
A growing awareness of the healthiness of fruit juice - at least in comparison to carbonated soft drinks - has had a major impact on sales in eastern Europe over the last few years. According to Euromonitor, carbonate volumes increased by just 18 per cent between 1998 and 2003, compared to a massive 64 per cent gain for juice.
" Health conscious consumers have shown a strong interest in all products labelled as juice, pushing up sales across the whole spectrum, including 100 per cent juice, nectars and juice drinks," said Euromonitor's Hope Lee. "Nectars, with total volume sales of 1,384 million litres in 2003, showed the highest growth."
Although 100 per cent juice is perceived as the healthiest option - and indeed accounts for the highest volume sales across the region - nectars have grown at a faster rate because of a number of factors. Nectars are a mixture of juices, and as such have benefited from the possibilities of combining popular local flavours such as apple with more exotic and unknown varieties such as bananas.
Nectars are also less costly to produce than 100 per cent juices and so have a more competitive price point, making them more popular among to middle and lower income consumers - the vast majority of the population in this part of the world.
However, nectars have also benefited from labelling confusion - many consumers in Russia, for example, believe that nectars are simply 100 per cent reconstituted juice rather than a mixture of juices and water, as is more often the case. This is becoming an increasingly important issue, especially as manufacturers seek to highlight the quality of their products as consumers become more sophisticated. The widespread lack of understanding of the quality implications of juice content (i.e. the higher the content, the better the quality) needs to be tackled quickly.
The EU accession of Poland, Czech Republic, Hungary, Slovakia, Slovenia, Latvia, Lithuania and Estonia on 1 May should help in this regard, with tighter controls on labelling as EU regulations are enforced and regulated. In fact, accession is expected to have a beneficial effect on disposable incomes and living standards throughout the region, with consumers expected to be better able to trade up to higher quality juices in the medium term.
This explains why there has been an explosion of multinational juice groups onto the eastern European market over the last few years, as players such as Coca-Cola attempt to tap into the potential there. But finding the right niche is not easy, even for companies with as much marketing expertise as Coke, and so far the market remains dominated by local players. In Russia, for example, most foreign companies are positioned in the super premium segment, with limited demand restricted to higher income consumers in major cities.
The challenge for foreign groups is to provide affordable quality juice, and this is why most have focused on buying local players or setting up their own facilities there rather than increasing exports. In the Ukraine, for instance, Coca-Cola started local production of Minute Maid in 2002, while Finnish company Marli started to bottle its eponymous juice brand in St Petersburg in 2001.
For the moment, though, it is the local players which continue to dominate. Most are well-known to consumers, and with the major advances in product quality and aggressive advertising campaigns, they have been able to build on their brand equity to drive sales forward.
Although Russia will not join the EU, the juice market there will nonetheless be significantly impacted by accession. Russia is by far the biggest fruit juice producer in eastern Europe, and as well as being the largest consumer, it also the leading exporter - which means that juices will now have to meet EU quality standards if producers want to continue to target their traditional markets in the rest of eastern Europe.
