This analysis of the international citrus marketing chain is mainly focused in oranges and orange juice, given the outstanding weight of these products in the citrus fruits group. In the orange chain, harvested fruit may go to the fresh fruit market, in order to be consumed fresh, or squeezed freshly at home to be consumed as juice, or it may enter the processing industry, in order to obtain orange juice (mainly in the form of Frozen Concentrated Orange Juice, FCOJ, for ease of transport in international trade) and other by-products. There is increasing competition in this sector, with restructuration and changes in the marketing chain, in a context of globalization. The market is increasingly consumer driven.
International trade in the fresh citrus fruits sector is characterized by the reduced degree of concentration of supply, with a multitude of medium-sized firms providing the fruit, although there is a certain trend towards concentration of producer groups as a response to buyers consolidation. There is also an important presence of cooperatives in this sector, which favor the obtention of better prices and conditions, improve negotiating power and coordination of activities of growers. Some examples of cooperatives in the citrus fruits sector are Sunkist in the United States and Anecoop in Spain, which is a union of cooperatives. The position and functions of cooperatives in the U.S. citrus industry is described in Cooperatives in the U.S. Citrus Industry.
On the contrary, orange juice trade, is highly concentrated. A small number of companies that operate in Brazil and Florida dominate the market. Four major companies in the sector, Brazilian companies Citrosuco and Cutrale and multinationals Cargill and Louis Dreyfus, hold around 70/75% of the market share in Brazil and 30/35% of the market share in Florida. These companies are highly vertically integrated, since size and scale are an important competitive advantage, particularly in bulk transportation of the juice. During the recent past, the international orange juice marketing chain has been marked by different developments, such as the penetration of global beverages brands (e.g. Coca-Cola with Minute Maid and Pepsi-Cola with Tropicana) and the concentration in FCOJ supply. The Brazilian industrial sector has been buying plants in Florida to produce the juice there, in order to overcome tariff barriers, increase buying and selling power and be better positioned in the US market (e.g. reducing transport costs), particularly in the Not-from Concentrated orange juice segment, whose demand is continuously increasing (on this subject, see: Florida-Brazil Processing Linkages, Economic and Market Research Department Florida Department of Citrus Working Paper Series 97-1) ; the concentration and consolidation of food retail chains and the growing importance of foodservice in juice distribution.
The most representative orange juice marketing chains at the international level are that of Brazil, as the major supplier of orange juice to the world, and Europe, as the major market for orange juice exports.
Although the United States of America are a very important market for both fresh citrus fruits and orange juice, the marketing chain is mainly domestic, since most of the citrus fruits and the juice consumed are supplied by US national production. In Florida, “fruit sold for the fresh market is hauled to packinghouses where it is graded and packed, then shipped to terminal points for distribution to retailers such as grocery stores. Culled fruit not meeting grade for the fresh market is sold to processors. Citrus produced for the processed market is transported to processing plants for juice extraction. Bulk juice is moved to concentrate plants for evaporation and freezing into frozen concentrate or to canning plants for retail packaging. Bulk frozen concentrate juice is sold to plants outside Florida for reconstituting and packaging. Florida processors also import orange juice concentrate from Brazil, Mexico, Caribbean basin countries, and other citrus producing states in the United States. Retail packaged citrus juice products may be exported to distributors outside the state or sold to wholesalers in Florida and then to retailers for sale to consumers under a nationally advertised brand or private grocery chain label. As citrus products change form and move through market channels, value is added from labor, capital and management. The industry is linked to input supply businesses that provide fertilizers, chemicals, grove care services, packaging materials, transportation, etc, and labor for citrus production and processing is provided by Florida residents”. See Hodges, A. et al, Economic Impact of Florida´s Citrus Industry 1999-2000, University of Florida, Institute of Food and Agricultural Sciences, Food and Resource Economics Department, Economic Information Report 01-2. The export market is more important for fresh citrus fruits from USA than for juice, particularly in the case of grapefruit.
The structure of the international orange juice marketing chain is explored in detail in Professor Marcos Fava Neves´ publications, University of SaoPaulo. In addition, a study of the competitive situation of the Brazilian citrus chain is presented in Estudo da competitividade de cadeias integradas no Brasil: impactos das zonas de livre comercio. Cadeia: Citros (only in Portuguese).
A simplified representation of the citrus fruit marketing chain, identifying the major agents in the chain (although, given the vertical integration existing in the orange juice sector, a company may be present at different stages), is shown in the following chart:
Source: UNCTAD Secretariat
There are two kinds of orange juice processors: bulk processors, who produce most of the world´s orange juice, and marketing processors, who sell the packaged juice under their own brand name and often purchase additional juice from bulk processors. The beverage industry buys the FCOJ in order to add the water and transform, bottle and market it. These bottlers have undergone a process of mergers and acquisitions, where juice companies are becoming part of major multinational beverage companies. This is leading to increasing concentration in the sector. The market share of the top 10 juice companies in Europe was over 36% in 1997. In the United States of America the market share of the three biggest multinational companies was nearly 47%. See The Orange Juice Distribution Channels: Some Characteristics, Opportunities and Threats , M.F. Neves, E.M. Neves, Italian Food & Beverage Technology, Number 18, Zimella, Italy, November 1999, p.15-28.
The most significant distribution channel for orange juice, as well as for fruit juices and produce in general, are the global retail chains (supermarkets and hypermarkets), that account for more of 80% of total orange juice sold in Western Europe.
Global retail chains are playing an increasing role in the distribution of produce in developed countries, mainly in the EU and USA. This tendency is also developing in Latin America and Asia. Increasing concentration and consolidation in retail chains, as well as their global expansion, has improved their position and augmented their buying power in the market. It allows them to influence the marketing chain in order to better control it, imposing more stringent requirements when determining conditions of production and distribution. Supermarkets demand higher quantities, better qualities and lower prices. This downstream shift of power in the produce marketing chain is leading to increased vertical coordination, mainly through supply chain management practices used by the retail chains, such as category management. Supermarkets tend to build long-term relationships with preferred suppliers in order to guarantee continuous supply at the required levels of quality. The wholesale sector´s importance has declined dramatically as long-term relationships between retailers and growers/shippers have developed. Following suit, some citrus fruits growers and citrus processing companies are reacting, shifting from their production orientation to a more market oriented approach, improving supply chain management, in order to better meet consumers demands.
The new marketing and trade practices of retail chains also include slotting allowances and fees, in order to place the product on supermarket shelves, special packaging and other marketing and trade promotion services. An additional issue of importance in global retailing is the increasing presence of private labels (On this topic see: NEVES, M.F., CASTRO, L. T. & GOMES, C. C. M. P – Private Labels in Orange Juice: In What Should We Think – Journal for the Fruit Processing and Juice Producing European and Overseas Industry (Fruit Processing/Flussiges Obst), Volume 12, Number 10, ISSN 0939-4435, Schönborn, Germany, October 2002, p. 435-437).
The U.S. Fresh Fruit and Vegetables Value Chain is represented by Roberta Cook in U.S. Fresh Fruit and Vegetable Marketing System 2000. The dynamics of produce marketing are explored in different publications of this author, in Fresh Fruit and Vegetable Marketing and Trade Information (Roberta Cook), University of California, Davis and in the project Food market structures: ERS produce markets project, Economic Research Service, US Department of Agriculture
Consumer preferences are changing and they are demanding more healthy and natural products (they are becoming increasingly aware of the health and nutritive benefits of eating more fresh fruit and fruit juices). Consumers are also more interested in dietary issues, in consuming more food low in fat and sugar, and this favors fruit consumption. Food safety has also become a very significant issue, particularly after the food scares in Europe. Consumers demand higher quality of the food they consume and they are interested in the taste, appearance or shape of the fruit. They want to be informed about the food they are consuming through appropriate labeling and tracking and traceability schemes. They are also interested in innovation, showing an increasing taste for variety and demanding the continuing presence of new products. At the same time, new lifestyles have led to increased preferences for quick and easy to prepare food. Convenience has become an important factor in produce demand. This favors particularly the consumption of juice and easy to peel fruit, such as clementines. In addition, consumers are also ever more concerned about production conditions, both environmental and social, demanding more organic and fair-trade products. During the nineties there has been a move of consumer demand from frozen orange juice toward refrigerated and not from concentrate orange juice (NFC), in both North America and Europe. NFC juice is perceived as closely duplicating fresh-squeezed juice in flavour, while offering more convenience.
Consumption of FCOJ is high in mature markets of North America, Australia and some Western European countries. There is potential for consumption growth in Southern and Eastern European countries where there is still certain preference for fresh fruit consumption and freshly squeezed juices. Asian and Latin American emerging markets are also promising due to their low per capita consumption levels, their big populations and the fact that they are opening their markets. A case of particular interest is China, which, after its entry in the WTO, provides an immense market for citrus fruits products.