Tropicana is in big financial trouble

CNN

26-02-2025

Florida has been blasted with stronger hurricanes than ever before. A prolific disease carried by insects continues to devastate orange groves. And, on top of all that, consumers are watching their sugar intake. It's adding up to a disaster for Tropicana orange juice.
Tropicana, founded in 1947 by an immigrant from Sicily who developed a process for freezing concentrated orange juice, is in financial distress and could be headed for bankruptcy.
Tropicana Brands Group, which owns Tropicana, Naked, KeVita and other juice drinks, has seen sales and profit deteriorate in recent years. The company's revenue slipped 4% last quarter and its income dropped 10%, according to Debtwire, a financial services publication.
Actions from its owners paint a much more dire picture. PAI Partners, a European private equity firm that took a controlling ownership stake in the company four years ago from PepsiCo, recently provided a $30 million emergency loan to Tropicana, 'showing that they are a lender of last resort,' and are 'not confident any value remains from their initial investment,' said Tim Hynes, the head of credit research at Debtwire.
PepsiCo, which still owns a minority stake in the company, also said that it wrote down the value of its investment by $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 and PAI Partners did not respond to CNN's requests for comment.
Supply shortages in top orange-growing areas — worsened by climate change-influenced disasters like more severe hurricanes in Florida and intense droughts in Brazil — plus higher prices, competition and changes in Americans' diets have hammered Tropicana. The Department of Agriculture expects this year's orange production to be the lowest in 88 years.
Orange production has become so tough that Alico, a major supplier to Tropicana, ended its citrus-growing operations. The company said last month that 'growing citrus is no longer economically viable for us in Florida,' with disease and hurricanes reducing its production by 73% over the last decade.
Consumer trends have also hurt OJ. Customers are replacing orange juice with teas, sparkling water, sports drinks, energy drinks and other beverages that claim to be healthier or offer functional benefits like improved immune systems or energy levels, analysts say.
Within the orange juice market, Tropicana is getting squeezed on the lower end by Coca-Cola's cheaper Minute Maid brand and the higher end by Simply, which has similar prices to Tropicana's and is grabbing consumers willing to pay more for orange juice, said Duane Stanford, the publisher of Beverage Digest.
Tropicana is facing a 'cornucopia of challenges,' he said.
Hurricane Milton battered Florida last year with deadly tornadoes, historic rain and high winds — and the storm was supercharged by climate change, according to a scientific analysis.
It also devastated Florida's orange industry. Florida accounts for the majority of the oranges produced in the United States.
'Milton came across the center of the state and really impacted probably 70% of the most productive citrus acreage in Florida,' Matt Joyner, CEO of Florida Citrus Mutual, an advocacy group for growers, said last year.
And it's not just atmospheric disasters that have devastated the industry. Orange production in the United States has declined in recent years due to the spread of citrus greening disease, a bacterial infection that cuts off key nutrients to orange trees, which first hit Florida in 2005. Trees infected with the disease produce fewer, lower-quality oranges and eventually die.
Orange production in the United States was forecast to drop 10% in 2024 to 2.2 million tons due to weather and disease problems, especially citrus greening in Florida, according to the USDA. Production in Florida was forecast to drop 33%, while production in California was expected to drop 1%.
Even as people have stopped buying as much orange juice, supply issues have led OJ prices to soar regardless.
Orange juice prices have nearly doubled compared to 2020, reaching record highs in late 2024. The average price of a 12-ounce bottle of orange juice was $4.50 in January, up from $2.30 in January 2020, according to the Bureau of Labor Statistics.
And those high prices are turning off customers even more, said Stephanie Mattuci, an analyst at market research company Mintel. Only 19% of US consumers think orange juice is a good value, according to a Mintel survey of 2,000 consumers in April for a report on juice drinks.
Rising orange juice prices have come as prices on other foods, such as eggs, have surged.
Customers at dollar stores are abandoning orange juice more quickly than shoppers at grocery stores, warehouse club stores and big-box chains, said Chris Costagli, a vice president and the food insights lead at market research firm NIQ.
Dollar stores typically cater to lower-income customers, and the pullback there is a sign that the most price-sensitive shoppers are dropping orange juice, he said.
Recently, rather than raising prices, Tropicana tried to address rising costs by shrinking its bottle. But the move backfired.
Tropicana ditched its distinctive carafe, with its circular shape, thinning neck, and crown-like bottle cap. Over the summer, it rolled out a more traditional-looking plastic bottle and downsized the bottle from 52 ounces to 46 ounces. Tropicana also narrowed the label to fit the more compact bottle.
OJ fans were frustrated about the new look and protested that Tropicana was ripping them off by selling smaller bottles. Tropicana told CNN at the time that the company changed the bottle to address feedback from customers, including making it easier to pour and store while reducing plastic in the cap.
Consumers' changing ideas of health have also hurt orange juice and other fruit juice, which are relatively high in sugar and calories. Today, fresh-pressed green juices, enhanced water and protein-packed beverages are considered healthier than OJ.
Conscious of changing tastes, Tropicana has attempted to stay ahead.
In 2023, Tropicana launched a zero-sugar line. Tropicana also released limited-edition bottles without the letters 'A' and 'I' in its name ('Tropcn') to bring attention to its natural ingredients. The marketing stunt was aimed at highlighting the 'fact that there is nothing artificial, and never has been anything artificial' in the brand's orange juice.
Tropicana is also shifting into faster-growing drinks.
Last year, the company introduced Tropicana Refreshers, a line of non-orange juice drinks, and a line of sparkling drinks.
But Tropicana's brand is synonymous with orange juice. Shifting customers' association with Tropicana after nearly 80 years is difficult, said Stanford from Beverage Digest.
'When so much of your business is focused around 100% orange juice, it takes some time to diversify.'