The U.S. Refrigerated Orange Juice Market: A Competitive Profile

Abstract

Porter links high market share with cost leadership strategy which is based on the idea of competing on a price that is lower than that of the competition. But, customer-perceived quality—not low cost—should be the foundation of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition.

In most consumer markets a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher, to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run.

Quality, however, is an intricate concept consumers generally find difficult to understand. So, they often use relative price and a brand’s reputation as a symbol of quality.

Total U.S. Refrigerated Orange Juice retail sales for 2008 were $2.6 Billion. There were ten package sizes ranging all the way from 6 oz to 128 oz. Of these the 64- and 59-oz size captured about two-thirds of the market at 66%.

It is a very competitive market with 142 brands in 2008. However, we have focused analysis on 32 brands whose 64oz- or 59oz-pack sales were over $1Million.

We tested two hypotheses: (1) That a market leader is likely to compete in the mid-price segment, and (2) That the unit price of the market leader is likely to be somewhat higher than that of the nearest competition. Employing U.S. retail sales data for 2008 and 2007, we found that the results supported both hypotheses for 2008, as well as 2007.

We also found strong support for the idea, that relative price is a strategic variable.

We compared the results of this project with four similar studies: the U.S. Men’s Shaving Cream market, the U.S. Beer market, the U.S. Shampoo market, and the U.S. Shredded/Grated Cheese market. We found the results to be very similar, indicating a pattern emerging for consumer markets.

Finally, we discovered five strategic groups in the industry.