While Americans are trying to cut out sugar and are reaching for beverages like energy drinks in the morning instead of glasses of orange juice, longstanding American company Tropicana is struggling.
Bloomberg reported this week that Tropicana Brands Group is considering “competing offers for a cash injection from new lenders and holders of its existing debt, according to people with knowledge of the situation.”
It also said that a loan offer from global alternative investment manager TPG Angelo Gordon is on the table, per the sources. According to the outlet, they asked not to be named, citing private talks.
Tropicana was initially founded by Anthony T. Rossi – an Italian immigrant living in Florida – in 1947. Per the company, he was “the first to bring fresh juice to the masses.” Over the years, the brand became entwined with its distinctive bottle and its red-and-white straw logo.
In 2022, Tropicana Brands Group was established as a joint venture between PAI Partners and PepsiCo. It also includes the Naked, KeVita, Izze, Twister, Dole, Copella and Punica brands. CNN reported last Wednesday that PAI Partners, a European private equity firm, recently gave Tropicana a $30 million emergency loan.
This loan showed that “that they are a lender of last resort,” and are “not confident any value remains from their initial investment,” said Tim Hynes, the head of credit research at Debtwire, per CNN. PepsiCo still owns a minority stake in the company and it wrote down the value of its investment by $135 million last quarter, the outlet added.
According to Bloomberg, Tropicana’s debt includes a $1.8 billion first-lien loan due in 2029 and a $450 million second-lien loan due 2030. These stem from PAI purchasing majority control of Tropicana and the other juice brands, it added.
With this debt in the balance, Tropicana faces a variety of challenges. Even before its able to get bottles on store shelves, the company has to deal with the impact of environmental factors, such as hurricanes and a disease that has wasted orange groves, CNN explained.
Once on the shelves, there are different worries. Per its nutritional label, an 8-ounce serving of Tropicana 100% orange juice has 110 calories and 22 grams of sugar.
A survey of 3,000 adult Americans conducted last year by the International Food Information Council found that 66% of consumers were trying to limit their sugar intake, up from 61% the previous year. Additionally, three in 10 reported trying to limit or avoid both added sugars and sugars that are naturally present in foods, such as the sugar found in orange juice. At least one recent study indicated that 100% orange juice consumption could lead to weight gain, a concern for 42% of the people surveyed.
“Consumer trends have also hurt OJ. Customers are replacing orange juice with teas, sparkling water, sports drinks, energy drinks and other beverages that claim to be healthier or offer functional benefits like improved immune systems or energy levels, analysts say,” per CNN’s report. It added that Tropicana also faces competition within the orange juice market from Coca-Cola’s cheaper Minute Maid brand and from higher end brand Simply, citing Duane Stanford, publisher of Beverage Digest.
Under all this pressure, Tropicana Brands Group, “has seen sales and profit deteriorate in recent years,” CNN said. Last quarter, its revenue slipped 4% and its income dropped 10%, based on data from Debtwire.
In an attempt to avoid raising prices, the company even made changes to its bottle, making it smaller. However, that move backfired. Tropicana also launched a zero-sugar line in 2023, but CNN noted that consumers still associate the brand with its signature 100% orange juice.
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This January, the company announced changes to its leadership slate. Now, Bloomberg said that existing lenders to Tropicana are “in talks with the juice maker about a proposed debt fix that entails new financing and a restructuring of existing liabilities,” citing its anonymous sources.
“Those creditors are working under a pact to negotiate with the company as a coordinated unit,” the sources said. Bloomberg said that these types of cooperation agreements have become common as “creditors seek to claw back negotiating power they lost in recent years as debt demand grew and their protections eroded.”
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