Naval slang for the Kool-Aid-like drink served onboard ship. It consists of citric acid and artificial flavors and colors, it was mixed with sugar and water to serve. Bug juice actually had no particular flavor, despite the markings on the envelope. It was instead known by it's color. (Red (my favorite), Orange, Green, Yellow.)
Because of its high acid level the contents of an envelope made an excellent cleaner, and was frequently used in the toilets and bilges.