America’s favorite orange juice maker is in big financial trouble – hit by a triple whammy of problems.
Hurricanes destroying fruit trees, insects ravaging orange groves and consumers cutting back on sugar have all affected Tropicana.
Best known for its much-loved orange juice, Tropicana has battled falling sales and shrinking profits in recent years at the same time the price of oranges has skyrocketed.
The company, which also owns Naked smoothies and Kevita juices, saw its income drop 10 percent and its revenue by four percent last quarter.
Despite Tropicana’s sales dipping lately, it is still the biggest chilled juice brand in the US, with about a third of the market share – just ahead of Simply.
Tropicana’s financial woes were laid bare when it was recently forced to take a $30 million lifeline from private equity firm PAI Partners.
PAI took a controlling interest in Tropicana, founded in 1947 by a Sicilian immigrant, from PepsiCo four years ago.
However, recent events show ‘that they are a lender of last resort,’ and are ‘not confident any value remains from their initial investment,’ Tim Hynes, the head of credit research at Debtwire, told CNN.
Tropicana, best known for its much-loved orange juice, has battled falling sales and profits
PepsiCo still owns a stake in the company but wrote down its value by a staggering $135 million last quarter.
‘Tropicana’s financial difficulties have raised concerns about how the company will manage its balance sheet,’ Hynes said.
‘Tropicana faces an uphill battle.’
Tropicana’s problems have been compounded by increased hurricanes in Florida and droughts in Brazil where much of its fruit is grown.
This year’s global orange production is expected to be the lowest in 88 years, according to the Department of Agriculture.
Further to this a disease carried by insects recently devastated huge swathes of orange groves that supply the company.
The drop in supply has sent the cost of orange juice products soaring. The average price for a 12-ounce bottle of orange juice was $4.50 in January, almost doubling since 2020.
High prices have put off inflation-weary customers, with only 19 percent of US consumers thinking orange juice is a good value, according to a recent Mintel survey.
Orange juice production in Florida has been hit by hurricanes and disease
This year’s global orange production is expected to be the lowest in 88 years
Tropicana also recently reduced the size of its orange juice bottles from 52 ounces to 46 ounces rather than raise prices further.
However, the move backfired as customers accused the brand of stealthy shrinkflation.
Changing diets have also hit Tropicana as consumers try to cut back on sugar.
Americans are now swapping out orange juice for tea, sparkling water or other drinks that claim to offer healthier alternatives.
Tropicana is facing pressure from the lower end of the market by Coca-Cola’s cheaper Minute Maid brand.
At the same time rival brand Simply is squeezing them on the more premium end.
