Apple Juice

1. Apple Juice Justin Morgan

2. Overview • Apple Juice had total sales of $616,309,900.00 in 2007 • Private label excels in Apple Juice. • Wal-Mart and Kroger brands had the most SKU’s and were also the Private Label brand retailers.

3. Audited Stores The Retailers are in control • (2) Wal-Mart Supercenters • (1) Wal-Mart Neighborhood Market • (1) Kroger • (1) Walgreens • (1) Harp’s

4. Demographics • Households with an income between $30,000 and $70,000 with kids less than 6 years old consumed the most apple juice. • Lucky leaf really excelled with incomesunder $20,000 in 2003.

6. Category Role • Apple Juice had a penetration percentage of 41% in 2007 with sales volume over 600 million dollars a year as a category. • Apple Juice maintains margins anywhere from 20% up to 50%. • Welch’s has the highest estimated gross margins. • According to Blattberg’s Category role I think Apple Juice falls in between a Cash Machine and Maintain.

7. Category assessment • I audited 6 stores. • (2) Wal-Mart Supercenters • (1) Wal-Mart Neighborhood Market • (1) Kroger • (1) Walgreens • (1) Harp’s • Great Value dominatedthe facings in Wal-Mart • Nestlé's Juicy Juice was found in the most stores • Was found in 4 of the 7 stores audited

8. Category Assessment • Gross margins for the retailers • Kroger – 34% • Wal-Mart Neighborhood Market – 35% • Wal-Mart Supercenter (Hwy 107) – 40% • Wal-Mart Supercenter (McCain) – 31% • Walgreens – 41% • Harps – 30%

9. Share of Display Space and SKU’s

10. Display Space • Wal-Mart definitely had the greatest displace space and used their private label to flood the category. • Wal-Mart used up to 60% of their displace space for Great Value • Harp’s also had a great deal of displace space but nothing compared to Wal-Mart. • Harp’s actually carried a larger % of Knouse Manufactured Apple Juice because of Wal-Mart’s pride in Great Value. Harp’s displayed 43% Knouse manufactured Apple Juice.

11. Gross Margins • The top 5 gross margin for suppliers are • Welch’s- 56% • American Brands – 47% • Wal-Mart – 47% • Walgreens – 46% • Knouse – 37% • These are not bad gross margins for any food category.

12. Gross Margins

13. Category Strategy • The retailer’s are in control of the Apple Juice category. • With Great Value controlling the largest retailers sales in the category private label has become very strong. Even Kroger has a strong private label push. • Harp’s pushes the national brands in the Apple Juice category and is maintaining fair margins, up to 40%, doing so. • Treetop and Musselman’s are their two stronger manufacturer brands with close to 40% gross margins. • It seems as if Apple Juice has a large entrance of private label because even Walgreens has created a private label brand. • This private label has upwards of plus 40% gross margins.

14. Private Label Capabilities • With Wal-Mart already having over 40 facings of Great Value in some stores I don’t see their being much room for private label expansion within the largest retailer in the world. • It appears, looking at the gross margins, that any retailer could come into private labeling Apple Juice and be profitable doing so. So I definitely think there is opportunity in doing so. • The Ad Hoc Demographic trial came back with little increase and decrease between 2003 and 2007 across the board with private label.

16. Recommendations • I don’t think you have to enter private label right away to make a reasonable profit in this category. Harp’s for example is pushing manufacturer brands is has profit margins over 35%, even though these are not quite as high as some private labels. This is still a reasonable profit margin. • There is definitely profit and revenue to be gained by going to private label.