Pressured by rising costs for their raw materials, slumps in sales are weighing on the bottom line for two major Canadian processors in the fruit juice sector.
Quebec's Lassonde Industries, which in June 2011 bought its way further into the U.S. market with a takeover of New Jersey-based Clement Pappas and Co., on Friday booked profit of $10.49 million on $256.4 million in sales for its quarter ending June 30, up from $6.4 million on $146.9 million in the year-earlier period.
Meanwhile, Kelowna-based Sun-Rype Products on Aug. 9 booked slim Q2 net income of $16,000 on $38.1 million in sales, up from a $1.4 million net loss on $35.9 million in the year-earlier period.
Reporting on the integration of Pappas, Lassonde CEO Pierre-Paul Lassonde said in a release that the company is "making good progress in achieving synergies, despite the lower volumes being seen across the entire U.S. fruit juice and drink industry."
Lassonde described the problem in Q2 as "a continuation in the decline of the cumulative sales volumes of U.S. fruit juice and drink producers."
That trend, the company said, has been "particularly true for apple juice sales, which seem to have been affected by the higher prices made necessary by higher concentrate costs."
The Canadian market, Lassonde said, "appears to be faring better with these price fluctuations, with producers not experiencing as significant an impact on their cumulative volumes."
All that said, Lassonde, which is the second-biggest producer of store-brand ready-to-drink fruit juices in the U.S. and a major cranberry juice producer, "does not plan on making major changes to its business model in fiscal 2012."
Sun-Rype, meanwhile, said its rise in 2012 net sales has been "primarily due to a 2011 business acquisition" plus a one-week-longer reporting period in its 2012 Q1 and Q2 compared to the year-earlier periods.
"Market data indicates that sales in the shelf-stable juice category, in which (Sun-Rype) derives approximately 60 per cent of its net sales, are in decline," the company said.
It's "unclear whether these declines are permanent," the company added.
Compounding the problem, Sun-Rype said, prices of apples and "certain concentrates" which rose in 2011 to "record and near-record levels" are expected to stay at those elevated levels through 2012.
Sun-Rype said it will keep its focus on launching "innovative products" and broadening geographic distribution of its products.
However, the company said, "there is no certainty that the incremental sales from these new products will exceed associated product and launch costs in 2012."
Furthermore, Sun-Rype warned, the "strong competitive pressures experienced on branded products in 2011 are anticipated to continue in 2012."