Oranges and orange juice losing share to mandarins

16 November 2015 Consultancy.uk

Global production of oranges has dropped by 14% over the past five years, to a volume of 48.4 million metric tons in 2015. The drop in the industry’s capacity is mainly the result of demand shifting towards mandarins and tangerines, and other citrus fruits, as well as a sharp drop in the demand for orange juice, particularly in Western countries, amidst growing popularity of substitutes which contain less sugar.

In 2010 the globe produced nearly 56 million metric tons of fresh oranges, reveals an analysis by Consultancy.uk (based on data from the US Department of Agriculture and Bloomberg), of which more than half (51%) was used for fresh domestic consumption. Over the past five years the production of oranges dropped by 14%, with 2013 the exception to the trend, when production pickup up by 4%, caused by a massive drop in the price of oranges*.

Global production of fresh oranges

Brazil is by a distance the globe’s largest oranges breeder, this year producing 16.0 million tons, although the country’s footprint has been impacted, with production down from 22.6 million tons in 2010. China and the US are the second and third largest manufacturers of fresh oranges, with a production of 6.9 and 5.8 million tons respectively. In the case of the US, Florida accounts for about two thirds and California nearly one third of total production. There is however a key difference visible across the two superpowers: while China consumes 91% of its fresh production locally, meeting growing demand from the rising middle class, the US only freshly consumes 22%, and sends 70% to processing into juice, with the remainder exported abroad. Europe, Mexico and Egypt also take a significant share of global production, a position they have maintained since 2010.

Global production of fresh oranges

There are a number of apparent trends explaining the falling orange production. Firstly, the demand for processed orange juice has plummeted by 17% since 2010, mainly following changing consumption patterns in Western markets. Consumers are increasingly choosing for alternatives to orange juice as they are more aware of the high sugar concentration in pre-manufactured juice (can reach as high as soda), with freshly squeezed juices, smoothies and water the main substitutes, say experts. Five years ago, processed orange juice consumption stood at nearly 2.1 million metric tons, and since the demand has dropped every single year, to the current level of just under 1.7 million metric tons. Consequently, producers – led by market leaders Coca Cola (with Simply Orange) and Pepsi (with Tropicana) – have slashed their production by over 30%, partly to align with lower demand, partly due to the large overcapacity in the market between 2010 and 2012.

Global production of orange juice

Another reason explaining the drop in orange production is a shift in demand to the smaller, and typically sweeter version of oranges: mandarins and tangerines. In 2010 the globe’s inhabitants consumed 22 million metric tons of the smaller citrus fruits, and in the past five years the demand (and hence supply) has risen by 23% to nearly 27 million metric tons. Over the 12 months demand rose by 600,000 tons, with an increase in China – mainly due to higher yields and area expansion in provinces such as Guangxi, Fujian, Yunnan and Shaanxi – more than offsetting a drop in the European Union and Morocco. China now represents over two thirds of global production of mandarins and tangerines and one third of global exports. Across the board, only 6% of consumption was used for processing, opposed to 38% for oranges, down from 48% in 2010.

Global production of tangerines - mandarins

A similar trend is visible in the grapefruit segment, which has seen its consumption grow by 16%, with the consumption of fresh grapefruit largely outpacing the growth in processed juice, again reflecting the health awareness trend visible across the food & beverage industry. The production of lemons and limes has however remained flat, hovering at around 7 million metric tons. Other species of citrus fruits, such as the pomelo, papeda and commercial citrus varieties, represent approximately 7% of the total citrus fruits market, with demand and supply relatively stable.

Global production of grapefruit and lemons - limes

* In the first six months of 2012, the price of oranges more than halved.

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