Source: Reuters
03/03/2008

New York, March 3 - PepsiCo Inc's Tropicana unit is launching a new high-end line of juices on Monday with prices to match, even as U.S. consumers reign in spending on things like dining out and buying nonessential items.

The new orange juice, called Tropicana Pure Valencia, is made from the top 3 percent of Tropicana's orange harvest and will have a suggested retail price of $4.49 for 54 ounces.

The company's standard orange juice, Tropicana Pure Premium, sells for $3.79 for 64 ounces.

"Consumers are looking for super-premium products ... exotic flavors ... and to drink juice outside the breakfast occasion," said Tropicana's marketing director, Ellie Halevy.

Since orange juice is so tied to breakfast, the company is also selling Indian River grapefruit, pomegranate/blueberry, peach/papaya/mango and raspberry/acai juice as part of the new line. Acai is a purple berry native to the Amazon that is said to be high in anti-oxidants.

Halevy declined to give a specific sales target for the new line, except to say it would be a "key contributor of growth in 2008."

JUICING THE WEALTHY

PepsiCo's current juice portfolio, which includes Naked Juice and Dole juices in addition to Tropicana drinks, saw low-single-digit sales declines in the fourth quarter as price increases hurt sales volume.

PepsiCo, like most U.S. food and drink companies, has raised prices on many products in the last year in order to pass on some or all of the increased costs of raw materials such as wheat, energy, milk, and a host of other items.

Those increases led to a 0.7 percent gain in the food component of the Consumer Price Index in January, the greatest increase since an identical one in February 2007.

Consumers usually absorb price increases, but with the economy on the brink of recession, many consumers are feeling the pinch as they juggle higher food and fuel costs with lower home values and resetting mortgage payments.

Halevy said Tropicana is spending over $30 million to market the new juices, aimed at single men and women aged 22 to 45 who have "a lot of discretionary income."

Those wealthy consumers often have fewer financial worries than Tropicana's current core customer, which Halevy said is households with children, run by mothers aged 35 to 54.

Halevy said the company expects people will "trade up" to its more expensive juices, and perhaps "trade down" in other areas.