SQUEEZING THE PROFITS

Long a part of the healthy diet and lifestyle associated with sunny West Coast cities, fresh juices have poured across the nation, squeezing nearly $1 billion out of health-starved consumers last year alone.The category has taken on many forms in retail outlets nationwide, from branded products like Odwalla, Half Moon Bay, Calif., and Fresh Samantha, Saco, Maine, to on-site juicers to in-house juice

Long a part of the healthy diet and lifestyle associated with sunny West Coast cities, fresh juices have poured across the nation, squeezing nearly $1 billion out of health-starved consumers last year alone.

The category has taken on many forms in retail outlets nationwide, from branded products like Odwalla, Half Moon Bay, Calif., and Fresh Samantha, Saco, Maine, to on-site juicers to in-house juice and smoothie bars. It has endured setbacks regarding safety and government inspection and regulation, only to rise to the top of the quick-serve segment, and industry officials believe the profits will continue to flow.

According to Dan Titus, founder of the Juice Gallery, a Chino Hills, Calif.-based consulting firm specializing in juice and smoothie bars, and president of the Juice and Smoothie Association, these beverages have been big on the West Coast for some time but really started to make their way east about four years ago.

"The trend really started as a meal replacement, typically geared toward those with a high discretionary income," said Titus. "But really, how you market it and at what price is what determines where it will be accepted."

Titus said last year's sales figures for the industry show the retail juice/smoothie bar sector, not including retailers making their own juices in-house, brought in $647 million; the dessert smoothie category won another $177 million and the smoothie mix category garnered another $200 million. Titus said the fastest growing of the three, with the highest growth potential, is the smoothie mixes, which are packaged in containers and can be readily prepared in and offered from a soft-serve machine.

Fresh juice is serious business at Woodland's Market in Kentfield, Calif., where juicing is done on site daily, with the fresh juices displayed in the produce department. Randy Salinas, produce manager and buyer, said the fresh juices are one of the most profitable and fastest growing areas within his department.

"We've been making our own orange juice for 20 years," he said. "And we've been doing the full line for at least 10 years. We take it quite seriously."

Salinas said their juices are developed through sheer trial and error, using the fresh fruits and vegetables found in their produce department. He also said that success doesn't always lie where you expect it.

"We've learned that people don't really like grape- or blueberry-based juices," he said. "It's all chance. Some of the really good ones have just bombed."

Woodland's full line now consists of about 25 juices including orange and grapefruit in regular, low-pulp and organic varieties and carrot, which Salinas said always sells well. They also make Totally Tangerine, made from honey tangerines from Florida; Vampire's Kiss made from blood oranges; MOR Juice made with mangos, oranges and raspberries and a variety of blends. According to Salinas, the mango-based juices are very popular, as are Upbeat, which includes beets, apples and asparagus in its recipe, and Tropical, a blend of orange, mango, mint and lime.

To make the juices, Woodland's uses a variety of machinery including a standard juice tree machine for the citrus fruit, a centrifuge machine for the blends and a bermixer that Salinas said is generally used for blending soups. Here, however, it is used to mix in bananas, a very popular component in fresh-juice recipes, but problematic due to their starchy nature. The retailer tried using other devices to juice bananas, but they incorporated too much air and as a result, didn't blend the juice well. The bermixer, and its ability to chop, stir and blend, has solved that problem.

The juices sell for $2.49 per pint, which Salinas said is low considering the amount of work that goes into each bottle.

Also on the shelves at Woodland's, but carried with the refrigerated beverages in the dairy department, are Odwalla juices and smoothies, but Salinas said their customers seem to gravitate toward the homemade line.

Odwalla, the West Coast captain of fresh-bottled juices and smoothies, overcame a tragic set-back in 1996 when investigators determined that a batch of their unpasteurized apple juice was contaminated with the pathogen E.coli 0157:H7 and the cause of death of an 18-month-old child.

This incident caused the industry and the Food and Drug Administration in Washington to take a closer look at the growing fresh-juice market.

Odwalla and other fresh-bottled juice companies, like East Coast leader Fresh Samantha, have since developed methods of pasteurization that they claim ensure safety while maintaining the integrity of the juice.

"People feel that our taste is still superior," said Betta Stothart, director of communications for Fresh Samantha. "They don't care that it's pasteurized."

Advocates of fresh juice, however, argue that any pasteurization -- a heating process designed to kill foreign pathogens -- eliminates beneficial components and detracts from the nutritional value of the juice. They question the companies' legal right to call their product "fresh."

"The bottom line is, it's just not as healthy," said Salinas. "You're taking the goodness out."

But the manufacturers disagree, claiming they have developed forms of flash pasteurization that do not subtract from the taste or nutritional profile of the juices.

"We call our system gentle pasteurization," said Stothart. "The process subjects the juices to high temperatures for low amounts of time and maintains the flavor and vitamins."

Stothart said the company went to pasteurization in July of 1998 following Odwalla's E. coli incident. "With the size of our company, we just couldn't take any chances," she said. "We proudly display on our labels that the juice has been pasteurized."

To further ensure the safety of their products, Fresh Samantha has also implemented a Hazard Analysis and Critical Control Point program and brought quality control managers on staff to monitor daily operations.

Stothart said plans are under way for East and West to merge as Odwalla and Fresh Samantha join forces positioning the new company, Odwalla, Inc., as a market leader in the super-premium juice category.

"We'll have a 60% market share after the merger," she said.

Fresh Samantha juices and smoothies are currently carried in units of Stop & Shop, Quincy, Mass.; Dean & Deluca, New York; Hannaford Bros., Scarborough, Maine and Publix, Lakeland, Fla., among others.

Another way of bringing the freshest juices to customers is to bring the juice stand right into the store. An increasing number of retailers have favored outsourcing the entire operation, as the bars typically operate as separate entities within the store.

One such concept, Minneapolis-based Sola Squeeze, will make its debut in a unit of Lunds Food Holdings, also based in Minneapolis, in March.

The in-store concept is designed to enhance Lunds and Byerly's innovative store-wide whole-health program, Living Wise [see "Lund Teams With Health Provider on Wellness," SN, Nov. 29, 1999]. This new program promotes the company's all-natural and organic products, and officials said that Sola Squeeze, with its fresh-juice menu, fits nicely into the chain's strategy.

"Juice bars are becoming increasingly popular in this area because people want products that fit their healthy lifestyles," said Tres Lund, president and chief executive officer of Lund Food Holdings. "Our new partnership with Sola Squeeze allows us to provide customers with an even greater selection of healthy choices."

The first Sola Squeeze will make its debut in Lunds Uptown unit in Minneapolis. The juice bar will occupy less than 1000 square feet in the second-floor Living Wise department. The company is leasing the space from Lunds and will remain financially independent. Sola will hire and maintain all of its own employees and be responsible for the upkeep of the juice bar itself.

Prices here will range from $1.50 for a wheatgrass shot to $3.95 for a Soyberry Squeeze nondairy smoothie. There are 18 different smoothie flavors to choose from, ranging from Wild Strawberry to Peanut Crunch, all at a cost of $3.50 or $3.75. Nutritional supplements such as Ginseng, bee pollen or protein powder can be added for an extra 50 cents. They also offer nine fresh-squeezed juices, including five blends, at $2.50 for a 12-ounce cup to $3.65 for 20 ounces.

In the light of recent government regulation, stations like these have sparked debate among retailers who are juicing and putting the product right on their shelves. The FDA now requires a warning statement be placed on all labeled fruit and vegetable juice products that have not been pasteurized or otherwise processed to prevent, reduce or eliminate pathogenic microorganisms that may be present. The agency argues that providing this information to consumers allows them to make informed decisions on whether to purchase and consume such juice products, thereby reducing the incidence of foodborne illness and deaths caused by their consumption.

Retailers, however, expressed reservations about the FDA regulations, arguing that if a 20-ounce glass of fresh juice purchased at a stand carries no label, and is assumed to be for immediate consumption, and therefore exempt from the labeling regulation, then a pint-sized bottle purchased at their stores should be exempt as well.

Salinas and others have argued that pint-sized bottles almost dictate that the product is for immediate consumption. But almost isn't good enough for the FDA.

"We don't make half-gallon portions because that typically means several days before it's finished and that's not good," Salinas said. "We make that decision for [the consumer]. They can make a special request, but we would never have that size just sitting out. And yet I have to put a label on my juice and a juice bar doesn't. That just doesn't seem right."

Still the FDA recognizes a difference.

"The regulations do not apply in all situations simply because our regulation was regarding labeled goods," said Geraldine June, consumer safety officer for the FDA's Center for Food Safety and Applied Nutrition division. "We require the label and regulate its language as well, but we can't regulate any products without labels."

The required statement reads, "WARNING: This product has not been pasteurized and, therefore, may contain harmful bacteria that can cause serious illness in children, the elderly, and persons with weakened immune systems."

Many in the industry believe supermarkets have really done their homework when it comes to safety issues and are confident they are taking all precautions when offering fresh products.

"I'm more worried about what the consumer does with [the juice] than the supermarket," said Ed Engoron, president, Perspectives Consulting Group, Los Angeles. "We don't tell them enough that they shouldn't go shopping and then leave their groceries in the trunk, or suggest they put ice chests or ice packs in their trunks. Supermarket executives today are very attuned to food safety and the liability involved. They have come a long way in the last 10 years as far as education, but we've done a lousy job at getting that message across to the consumer."

And while the FDA is hopeful their educational efforts have brought consumers' attention to the safety issues involved with fresh juices, those interviewed agreed when it comes to making the purchase, the consumer is putting their faith in the retailer and trusting they have taken every precaution to ensure their safety.