Peeling Back The Orange Juice Supply Chain!

Orange Juice Supply Chain

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Orange juice is the most popular fruit juice in the world, and one of the most popular of all drinks globally.  Depending on the country you live in you may consume on average several gallons of Orange juice annually.

When you go into a grocery store or supermarket you are likely to see a large pile of oranges.  And when you walk down the aisle to where the juices are you will see a large variety of brands and types of juice … with lots of pulp, some pulp, no pulp, low acid, with calcium and vitamin D, and on and on.

While Oranges and juice are common and usually easily found it is still curious as to what the Supply Chain is.  What exactly is the Orange juice Supply Chain and how does it work?

The Orange Juice Industry

It all obviously starts with the Oranges.  In North America we certainly hear a lot about Florida oranges and as such I myself have certainly assumed that Florida was the Orange capital of the world.

But actually the Top Orange growing country in the world is Brazil.  With approximately 16 million tonnes of oranges produced annually Brazil accounts for over 30% of global orange production.  China now produces over 7 million tonnes annually (about 15% of global production) putting them second behind Brazil.  And then there is the U.S., India and Mexico.

Orange Juice

Within the U.S. 70% of production comes from Florida, followed by California.  Most of Florida’s orange supply is used for making juice whereas California’s production is used for the fresh fruit market.

Orange juice production is also dominated by Brazil at almost 1 million tonnes annually, as compared to the U.S. which produces around 200 thousand tonnes annually.  Brazil exports 99% of its Orange juice production for global consumption where 90% of Florida’s Orange juice production is consumed in the U.S.  Most of this production is shipped in the form of Frozen Concentrated Orange juice (FCOJ).

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The Orange Juice Supply Chain

It all starts with the Oranges.  Orange growers, working either independently or as part of cooperatives or marketing associations, harvest the fruit.  If the Oranges are to be used for juice they are transported by truck to Fruit processing facilities.

Fruit processors will first clean and grade the fruit.  This is followed by an automated process designed for juice extraction.  The objective of the Fruit processor will then determine what happens next.

If the Fruit processor sells product under it’s own brand then the juice will be pasteurized and then put into retail packaging ready for consumer use.

If however the Fruit processor is a “Bulk processor” then after juice extraction they will first concentrate the juice.  This involves the removal of water from the juice via evaporation, which makes the concentrated juice more efficient for economical shipping.  This concentrate is then stored in refrigerated tanks and then transported to refrigerated trucks and refrigerated tankers for shipping around the world.

There are actually dedicated, specially equipped ocean going tankers for the transportation of juices, made economical because of the process of concentration of the juice.

When Frozen Concentrated Orange juice (FCOJ) arrives at its destination it enters another processing facility where it is reconstituted.  Reconstitution involves the addition of water, flavours, and whatever other additives are required.  This juice is then pasteurized and it is now ready to be put into retail packaging.  The reconstitution and blending process may be completed by different companies from those that do the final packaging.

When the product is in the retail package it is then transported to your local store.  It may go through Distributors or other Packaging entities before it makes its way onto store shelves.

Orange Juice

Supply and Demand

There are many factors which effect both the supply and demand of Orange juice.  For instance in 2017 Hurricane Irma destroyed 30-90% of Florida’s crop.  The reduced supply had the impact of increasing prices.  And higher prices have the added impact of driving down demand.

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The Orange juice supply and demand equation is highly elastic.  A 10% increase in OJ price will result in 7.6% reduction in demand.  (https://econlife.com/2017/09/florida-orange-industry-problems/)

There are many factors which affect the supply, demand and price of Orange juice.  The Top 10 Orange juice price drivers are Hurricanes, Frost, Disease, Drought, The Brazilian Real exchange rate, Planting, Inventory levels, Consumer tastes and Health concerns, Substitutes, and Shipping/Production/Logistics costs.  (Source: http://materials-risk.com/orange-juice-prices-top-10-important-drivers)

Certainly as people become more health conscious, more sensitive to sugar intake, and are presented with many other choices the stress on juice demand is real.

Conclusion

Most of us take the Orange juice Supply Chain for granted.  We see a plethora of oranges and a wide variety of juice choices in our local stores and we assume it’s a very simple process to bring that product to us for consumption.

The reality is that a lot of hard work is done by great people which takes place in a highly dynamic environment in order to execute the Supply Chain which results in a glass of Orange juice being available to you as you desire it.

So let’s raise a glass, of Orange juice, and toast those who work the Supply Chain in this very interesting industry!

Originally published on August 21, 2018.

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