China Beckons as Next Big OJ Market While Demand Elsewhere Drops

(Bloomberg) -- China could be the panacea for an orange-juice industry grappling with sliding sales in developed markets, at least for low-cost producers not caught up in trade wars.

Citrosuco fits that description. The Brazilian company produces twice as much as the entire Florida industry, at about a third of the cost. For decades, it has sold the commodity to well-known brands in Europe and the U.S. including PepsiCo Inc.’s Tropicana. But in China, local retailing and bottling startups have emerged as the best way to target a new generation of consumers.

Chinese demand for fresh juice first surfaced this year, and last week Citrosuco hosted a group of Chinese influencers from industries including food and beverage and fashion to tout its health and sustainability credentials.

“We’ve been trying to sell orange juice to China for a decade, without success,” Chief Executive Officer Mario Bavaresco Junior said in a interview from the company’s Matao plant, the world’s largest. “Now, we’re trying to do that in a different way -- not offering the commodity itself anymore but as a product with origin tracked.”

Given the vast majority of U.S. orange juice is consumed in North America, the commodity hasn’t been caught up in Washington’s tariff spat with Beijing to anywhere near the same extent as soybeans or cotton. But the trade war has accelerated the process of China opening up to new markets and products, which is of particular benefit to non-U.S. producers.

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For now, Citrosuco’s Chinese sales are only 10% of what it ships to top customer Europe. But Bavaresco said the company, owned by Brazil’s Fischer and Votorantim groups, is just scratching the surface. “It’s an unimaginable market in terms of size. We just need to figure out how to catch it.”

Orange-juice sales in markets such as the U.S. and Europe have been slowing as health-conscious consumers avoid sugary drinks and experiment with new beverage offerings. At the same time, Florida’s orange industry has battled greening disease, which has shrunk growing areas and pushed up costs.

Citrosuco, which grows half of the fruit it uses to make juice, says it produces oranges for about $4 a box, compared with Florida’s average cash cost of $14.

In addition, ICE Futures prices for orange juice have slumped more than 30% in the past year to the lowest levels in a decade. But producers that sell outside the U.S. are somewhat cushioned from the New York benchmark, with premiums of about $400 a metric ton in bilateral contracts this year, Bavaresco said.

While China is potentially the biggest prize for Citrosuco, the company is also looking elsewhere in Asia and the Middle East to boost sales, Bavaresco said.

It’s also seeking to adapt to increasing demand for low-calorie food. In partnership with Israeli startup Better Juice, the company aims to develop an enzyme technology capable of reducing as much as 80% of sugar in orange juice. In another venture, it’s looking to supply fiber that can replace part of the fat in hamburgers.

--With assistance from Marvin G. Perez.

To contact the reporter on this story: Fabiana Batista in Sao Paulo at fbatista6@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Reg Gale

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