Coke plans major expansion of Fla. orange groves
- Article by: TAMARA LUSH
- Associated Press
- May 7, 2013 - 2:31 PM
AUBURNDALE, Fla. - The Coca-Cola Co. said Tuesday that it is spending $2 billion to support the planting of 25,000 acres of new orange groves in Florida, a move officials are lauding as a major investment in the Sunshine State's citrus industry.
The announcement was made at a news conference at Coca-Cola's juice production plant in Auburndale.
Coca-Cola will buy fruit from two growers: Peace River Citrus Products in Vero Beach and Cutrale Citrus, one of Brazil's top growers and juice processors.
Cutrale Citrus' entrance to Florida as a grower is significant, said Florida Agriculture Commissioner Adam Putnam.
"The fact that one of the dominant Brazilian players will now have an ownership stake in actual production in Florida is a tremendous development," Putnam said.
Coca-Cola owns the Minute Maid and Simply juice brands and already buys juice from Cutrale in Brazil. Coca-Cola is also a significant juice processor in Florida — Tuesday's news conference was held at the largest juice bottling plant in the United States.
Some 5 million new trees will be planted in the new groves, believed to be the largest citrus addition in the state for at least 25 years. The groves will be located in Polk, DeSoto and Hendry counties in central Florida.
"It's an investment in a market that's very important to us," said Steve Cahillane, the president of Coca-Cola Americas.
Analysts say that the announcement intensifies the juice wars between Coca-Cola and PepsiCo, which owns the Tropicana brand.
"This shows Coke's commitment both to the Florida citrus business and the future of its own juice business," said John Sicher, editor and publisher of Beverage Digest.
Sicher said that consumers have a growing interest in juice beverages because they are seeking products with "health, wellness and natural attributes."
"Citrus juices hit those criteria and make juices a potential category for growth," he said.
Coca-Cola officials said that Simply juice counted $1.2 billion in annual sales.
Company officials say the new groves and resulting juice production are expected to add about 4,100 jobs to Florida's economy.
The move also is seen as a boost to historically declining acreage devoted to citrus production in Florida. During the state's past housing boom, many citrus farmers sold their land to developers. Since 1997, total citrus acreage has fallen by 25 percent, from 600,000 acres to 450,000 acres, because of the disease, pests and other pressures, according to Florida Citrus Mutual.
Coca-Cola officials said that the Florida Citrus Commission is working on an economic study centered on the company's investment, and that a preliminary draft shows that over the course of 25 years the expansion will add more than $10.5 billion — or $422 million per year — to Florida's economy. Company officials said Coca-Cola buys a third of all Florida oranges.
Coca-Cola reported its first-quarter results in mid-April; they topped Wall Street expectations as sales volume rose in emerging markets. Shares of Coca-Cola Co. rose nearly 6 percent to $42.37 and touched their highest point since the late 1990s.
Cahillane said the company also purchases juice from Brazil, Florida's biggest competitor in the juice industry. He said different harvest times in each location allow the company to give customers "consistent, great-tasting juice." About 90 percent of Florida's oranges are used for juice; by contrast, the majority of California's orange crop is sold as fresh fruit. Florida is second in the world for orange juice production, behind Brazil.
Jose Luis Cutrale, the chief executive officer of Cutrale Citrus Juices, spoke at Tuesday's announcement and is considered the patriarch of the Brazilian juice industry. He owns one of the biggest juice companies in the world.
"We are going to do more juice and sell more juice," he said. "People need it."
Under the program, Cutrale and Peace River Citrus will each plant 12,500 acres. Coca-Cola will buy the fruit.
Bill Becker, president of Peace River Citrus Products in Vero Beach, is one of the growers. He said the new trees will be planted on land that once held citrus groves or are currently idle.
"It's a big help to the entire industry and to the state, for that matter," said Becker, adding that the research being done in Florida about the deadly citrus greening disease has bolstered the company's confidence in the long-term health of the state's citrus industry.
Becker said he hopes that Coca-Cola's investment will reverse the trend of declining citrus acreage in Florida.
The state's citrus crop suffered huge losses this past season due to warm, dry weather, too much fruit on each tree and citrus greening disease.
According to the Florida Citrus Mutual, the citrus industry directly and indirectly contributes some 76,000 jobs in Florida and is a $10 billion industry.
Follow Tamara Lush on Twitter at http://twitter.com/tamaralush
© 2014 Star Tribune