The Brazilian Perspective of the

Global Orange Juice Market

ICBC Florida – September 2015

Larissa Popp Abrahão

Agenda • CitrusBR

• The sector in Brazil - The Crop Forecast Project (PES)

• The main challenges for the OJ sector in Brazil and abroad

• Main challenges of the Brazilian OJ sector

• OJ Consumption

• Sustainability and CSR

• The Brazilian Market

About CitrusBR

• CitrusBR was founded in June 2009 by the biggest Brazilian producers and exporters of citrus juices and by-products:

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Its main goals are:

to defend the collective aims of citrus exporters

to promote the sector’s image

to disclose clear and transparent information

to interact with other entities

Transparency and Information

- Monthly magazine and weekly videos

- printed/online material about the sector

- website with news, statistics, presentations and several other info

- Participation in events

- Press-Releases with crop forecasts and inventories

CitrusBR Magazine Containing: •International interviews •Economic studies •Business cases •Technical and agronomical information •Phytosanitary information •Data about crop forecasts in Brazil and in the US • Inventories • Information about events • Special reports about selected markets (US, Germany)

Magazines are printed and sent by mail directly to growers (around 5 thousand growers) and by e-mail. Also available at CitrusBR website (portuguese only)

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Website to disclose information about sustainability and CSR in Brazil

The OJ Business in Brazil

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Brazil is a global leader in orange juice production and exports, accounting for 50% of global production and more than 80% of global exports of the product.

The Brazilian Citrus Belt is located in São Paulo countryside, where the processing industries and the majoritity of the groves are located.

Brazil exports around 95% of the orange juice it produces.

Brazilian Exports of OJ

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Brazilian Exports by Destination

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Exports – FCOJ Equivalent 66 Brix Crop Season 2014/15

Total: 1.37 million tonnes / USD 2.04 bn

Source: Secex 2015

The Fundecitrus • The Fund for Citrus Plant Protection (Fundecitrus) is a not-for-profit private entity

based in Araraquara created in 1977 to benefit the citrus sector as a whole. It´s mantained by growers and processing industries (funds are collected by industries and transfered) and became worldly renowned as a good example in fighting citrus diseases and developing R&D aiming at keeping groves healthy.

• Its main role is to develop R&D that helps to control diseases and disseminate them amongst growers, so that they can apply them in their daily activities in order to keep their businesses sustainable. They have partnerships with the state of São Paulo government (i.e.: to control the citrus canker)

• They are also dedicated to educating growers and capacitating them. Since 2009 they offer a Masters Course with 24 months duration (approved by the Ministry of Education) in “Control of plagues and diseases”. The course if free for members of Fundecitrus or people related to them.

*pictures gently provided by Fundecitrus (Fund for Citrus Plant Protection)

The Fundecitrus

Latest Fundecitrus magazine about sustainability The institution was recognized by FAO for its contribution for regional greening management

The Crop Forecast Project (PES)

The project was carried out by Fundecitrus with the cooperation of Markestrat, the University of São Paulo and UNESP, involving 151 professionals in multidipliscinary teams. 481 municipalities were visited, using more than 151 square km of high-resolution satelite imagery.

The report is already available in English and contains: - The methodology used to collect and analyse, audit and refine the data -The 5 areas in which the citrus belt was divided and which municipalities were included in each - number of trees (bearing and non-bearing), considering their ages and varieties - number of properties and their average sizes/ average sizes of blocks, average density

PES Some highlights: Planted area with oranges: 444,583 hectares (1,098,588 ac) 7588 properties where oranges are grown

Area with oranges in the

propertyProperties Percentage Trees Properties Percentage

hectares number % number number %

0,1-10 3651 48,12 below 10000 5149 67,86

10-50 2631 34,67 10-19000 977 12,88

51-100 605 7,97 20-29000 421 5,55

101-500 558 7,35 30-49000 383 5,05

501-1000 79 1,04 50-99000 301 3,97

above 1000 64 0,84 100-199000 176 2,32

total 7588 100 200-399000 100 1,32

above 400000 81 1,07

Total 7588 100

Orange Properties - planted area Orange Properties - number of trees

Factors used for stratification of the citrus belt

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12 regions 5 groups of

varieties 3 age

groups 1- Triângulo Mineiro

(TMG)

2- Bebedouro (BEB)

3- Altinópolis (ALT)

4- Votuporanga (VOT)

5- São José do Rio Preto

(SJO)

6- Matão (MAT)

7- Duartina (DUA)

8- Brotas (BRO)

9- Porto Ferreira (PFE)

10- Limeira (LIM)

11- Avaré (AVA)

12- Itapetininga (ITG)

1 - Hamlin, Westin,

Rubi

2- Valencia

Americana, Valencia

Argentina, Seleta e

Pineapple

3 - Pera Rio

4 - Valencia e

Valencia Folha

Murcha

5 - Natal

Age 1: 3 to 5 years

(Planting years:

2012, 2011, 2010)

Age 2: 6 to 10

years

(Planting years:

2009, 2008, 2007,

2006, 2005)

Age 3: Above 10

years

(Before 2005)

Slide gently provided by Professor Marcos Fava Neves

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1 The calculation considers the total number of trees of the block, that is, bearing and non-bearing trees (2013 or 2014 resets). 2 Weighted average per stratum area.

Orange production forecast 2015-2016 season

Slide gently provided by Professor Marcos Fava Neves

PES All reports available at Fundecitrus website Citrus tree inventory and first forecast http://www.fundecitrus.com.br/pdf/pes_relatorios/Citrus_Tree_Inventory_and_Orange_Production_Forecast_Expanded_Version_July_01.pdf Crop forecast update http://www.fundecitrus.com.br/pdf/pes_relatorios/0915_Orange%20Forecast%20Updat1.pdf Next update (2nd update): December 10, 2015 3 rd forecast update: February 11, 2016 Final estimate: April 11, 2016

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Consumption

Between 2003 and 2014, the four main markets faced a decline of 28% in the OJ consumption - 439 thousand tons less. In the group BRICs + Mexico, consumption increased by 67%, however this additional volume in terms of FCOJ equivalent means only 118 thousand additional tons. The “deficit” is 321 thousand tons.

Included Orange Juice used in fruit mix juices and frozen orange juice, not ready-to-drink. Source: Elaborated by Markestrat from Tetra Pak Compass and Euromonitor International

Consumption

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Global Research to further investigate reasons

• There´s competition for stomach share with other beverages • People´s habits have changed – breakfast, sedentarism, less time = this won´t change • People DONT KNOW why they should drink orange juice • Older people know about the benefits, but newer gererations don´t. • In countries where per capita consumption remains high (Canada and Norway) consumers know more about the benefits of drinking OJ

MAIN CONCLUSIONS

What can we do?

PR Campaign in Europe Two workshops in 2014 with marketing representatives from main bottling companies and technical people

European Fruit Juice Association and main bottlers on board

Main targets: scientific community, nutritionists and health professionals Central coordination (AIJN), local execution

HOW WOULD IT BE?

First countries: Germany, France, the UK, Poland and Spain Tool box: message map with proactive and reactive messaging, stakeholder map, events calendar, panel of experts, scientific Database and others

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The Brazilian Market

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Differences comparing with the US: - Nectars

- Freshly squeezed X Industrialized

- To incentivate consumption, taxes need to be lowered or eliminated

From CitrusBR magazine #6 – comparing US and Brazil in millions of litters

Thank you!

Larissa Popp Abrahão

lp@citrusbr.com / +55 11 2769-1205 +55 11 99117 8423

Brazilian Association of Citrus Exporters

www.citrusbr.com/en | citrusbr@citrusbr.com