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Cranberry Stressline

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March 8 - 31

Decas considers appeal
Potential mergers in the food industry
Tropicana introduces new orange blends with calcium
Quote without comment - Paul Olson, President, National Farmers Organization,
Handlers' panel addresses crisis in Middleboro meeting
Scenic Mass. cranberry bogs target of housing developer
Editorial - War without bodies
Editorial cartoon - Clobber the competition
Cranberry Marketing Committee to reconvene
Coke and Pepsi rated strong buys, Northland and Ocean Spray mentioned
OS vs. Northland a skirmish, look to Coke vs. Pepsi for a real juice war
Mass. Cranberry Institute to fund research on human health and medical benefits of cranberry
Innovative cranberry drying process launched in Canada
Canada to compete with U.S. sweetened dried
Ocean Spray Deploys Symbol's Wireless Mobile Computing, Scanning Appliances to Streamline Fulfillment, Delivery
Finally, Peace with Pepsi?
Northland closes previously announced sale of private label business to Cliffstar Corporation and recognizes after-tax gain of approximately $1.2 million
Middleboro-Lakeville growers speak out in Middleboro Gazette
The future of Northland
Northland shares down 16%
OpEd - Cooperation can return grower prosperity quickly, by Paul Jonjak
Northland Cranberries Retains Investment Bankers To Help Explore Strategic Alternatives

Decas considers appeal

3/28/00 In a letter to his growers, John Decas left open the possibility of an appeal of the decision of the Cranberry Marketing Committee. He is of the opinion that there is "a reasonable chance" that a volume regulation will be adopted. Decas, who is not in favor of a marketing order, explained his position in a Stressline article last month.

Tropicana Introduces New Orange Blends with Calcium

3/28/00 From the press release: "In addition to calcium, fruit consumption among adults is also inadequate. According to the government study,1 roughly half of all adults in the U.S. (53% of men and 49% of women) consumed less than one serving of fruit per day. The recommended daily intake is at least 2-4 servings of various fruits and fruit juices." Read entire release here.

Quote without comment

Paul Olson, President, National Farmers Organization, from an Associated Press article

"I don't have a lot of faith in anything coming out of Washington," Olson said.

"They've done a really good job of pitting one farmer against another, one state against another, one commodity against another."

"That's about all they've done for us," he said. "A lot of these younger farmers, they walk up to me and say, 'I've done everything I can.'

"They tell me, 'I've gotten bigger, I've gotten more efficient, I've sent the wife off to work off the farm, and all I end up doing is buying myself a few more months.'

"We've been thinking all along that if we could just outlast the neighbor and buy his farm, everything would be OK,' Olson said. "Well, that worked for a while, but it's catching up with us now."

Potential mergers in the food industry

However, some also say that while a prevalence of new CEOs has hindered consolidation from occurring in the past few years, it should no longer be a limiting factor. "The pressures are mounting," says analyst Jaine Mehring of Salomon Smith Barney, adding consolidation will become more and more tempting to food companies if their stock prices remain low, because it will be the fastest means to grow in the short term. "The honeymoon is over." Bridge News

3/28/00 Campbells, and several other household names in the food industry may be ripe for merger. Hershey was down 40% last year, Heinz was down 44% and even Quaker, which had expressed interest in acquiring Ocean Spray, was down 22%. General Mills, another company sometimes mentioned as a possible Ocean Spray suitor, was also down. Giant companies like Nestle, Unilever and Phillip Morris (which owns Kraft) are considered by experts to be in acquisition mode. Pepsi, with the great success of Tropicana, may also be considering expanding into cranberry juices, and many consider them a primary suitor of Northland Cranberries.

According to an article in Bridge News, several factors mitigate against poorly performing smaller companies being purchased by large corporations. One is that stockholders may balk at the devalued prices that are offered. Also, some majority stockholders may be unwilling to give up control of their companies. Another is that a number of small food companies have new CEO's who may be reluctant to relinquish their titles. (Ed. comment: CEO's also want to reinvigorate their companies so they can continue to stand alone or be more valuable as an acquisition.) Furthermore, there's no guarantee that a merger will automatically increase long-term market share. Read the entire Bridge News article here.

Handlers' panel addresses crisis in Middleboro meeting

"I'm not going to sugar coat this. We've been telling the growers for the past five years that we need more berries, while at the same time we're telling them there's a surplus coming. What's more stupid than that?" John Decas

3/23/00 (Click to enlarge picture)
The war of words was muted. There were friendly smiles all around. In a first of its kind meeting, all of the major cranberry handlers with the exception of Clement Pappas had representatives express their views on the current cranberry crisis. They fielded questions from a diverse audience of cranberry growers, town officials, the press, and members of the business community in a meeting organized by the Middleboro, Massachusetts Business and Industrial Commission.

It's no secret that there have been differences between Ocean Spray and the independents, and between many Ocean Spray growers and Ocean Spray management. Northland has come under fire from both Ocean Spray and Decas Cranberries for their negative advertising. Ocean Spray has also been criticized for their less than enthusiastic endorsement of generic advertising and for their emphasis on aggressively challenging other cranberry companies for their share of the cranberry market.

The discourse was civil. Differences in opinion between Decas, Northland and Ocean Spray were not debated. The emphasis was on educating those in the community not familiar with the cranberry crisis, and on offering solutions. With the exception of John Decas, panelists were circumspect in assessing blame and somewhat less than totally candid in accepting it. John Decas said what many growers have said in private, "Northland and Ocean Spray have the surplus." On being late to market 100% juice, Chris Phillips (picture) allowed that "Ocean Spray was behind the eight ball on that," going on to say that cranberry juice cocktail was just as healthy but "as for consumer perception, it fell flat." CONTINUED | East to print version

NEW - Link to 3/25/00 article in the New Bedford Standard Times: "Cranberry handler blames woes on industry leaders" by Mary Jo Curtis --- "A year from now, you won't recognize this industry," said Mr. Decas, predicting there'll be both growers and handlers who won't survive. "One way of getting supply and demand in line is by having people go out of business." Ocean Spray spokesperson Christopher Phillips said the cooperative has "a sense of great confidence that we'll turn this around." But, he conceded, there will be pain in that process at all levels of the industry.

Link to 3/24/00 article in The Patriot Ledger: "Cranberry growers admit role in Glut" by Lorraine Kennedy --- "We're in a classic supply-and-demand mess,'' said Ocean Spray spokesman Chris Phillips, who also acknowledged that the "stupid mistakes'' cranberry companies have made in the past have sent the industry into a "tailspin.'' "It is a crisis. I think we never saw the severity of what was happening or what could happen,'' said Robert Hiller, chief executive officer of Hiller Cranberry Sales in Rochester.

From the 3/24/00 Brockton Enterprise article "Cranberry growers call for cooperation," by Mary Julius --- The marketing order is coming three years too late, Decas said. "It was important to take steps at the beginning of the problem," Decas said, "Ocean Spray and Northland have got the surplus, and I'm not afraid to say it."

Decas said the industry has to come together in order to survive. "We need to have respect for each other and unite on issues that protect us," he said. "Too much time is spent on trying to hurt the competition. We have to get through that mentality."

(Chris) Phillips said Ocean Spray is confident that their new chief executive officer, Robert Hawthorne, will make changes. "There's not a question mark in his voice," Phillips said. "We will turn this around. But this is tempered by the reality that it takes time, patience, and some growers will not be able to endure it."

As a fourth generation cranberry grower, Robert Hiller (of Hiller Cranberries) knows his survival is dependent on finding a way to work together. "We need to lay down our arms. Everyone is suffering," he said.

Scenic Mass. cranberry bogs target of housing developer

3/18/00 Stressline has learned that at least one company, backed by out-of-state money, is eyeing cranberry bogs for housing developments. Allied Mortgage Capital Corp. has been sending representatives from their Pembroke office to talk to cranberry growers in southeastern Massachusetts. Allied Mortgage is based in Houston, Texas and has numerous offices around the country. They are prepared to offer million dollar plus payments for land with rolling hills around cranberry bogs. In some cases, sources report, they will buy upland cranberry bogs which are exempt from wetlands regulations and are relatively easy to convert to developable lots with surrounding fill.

The advent of rail service to Boston from Middleboro/Lakeville and from Plymouth has altered the predicted demographics for the entire South Coast. Towns like Middleboro where the typical new house used to cost under $150,000 are seeing new developments where houses start at $250,000 and go up from there.

For decades cranberry growers have preserved the wooded rolling hills around their bogs. This is changing.

Massachusetts growers realize that even if prices rebound, they will never be able to grow cranberries as efficiently as Wisconsin does. Growers who wouldn't have let a developer in the door a year or two ago are now reconsidering the old cranberry wisdom about having houses too close to their bogs that "the only good neighbor is no neighbor." The one-time profit of a land sale, the sacrifice of part of their producing acreage, and having homes near their bogs are all being seen as necessary for economic survival.

Even growers with one or two house lots who vowed "I'll never sell the woods across the street from my own home," are thinking of putting up a "for sale" sign just to make ends meet. They are prepared to sacrifice the illusion that they still live "in the country," and face the incontrovertible fact that they are among the last suburban farmers in southeastern Massachusetts.

Related story: A.D. Makepeace, which is one of the largest landholders in the area, held a meeting in Plymouth where a noted expert on livable community development spoke to some 30 Plymouth residents on Friday. This is described in the Patriot Ledger HERE.

Editorial

War without bodies

3/21/00 The "veterans" at Ocean Spray seem to want to blow Northland to kingdom come. There's no Geneva Convention to dictate the rules of engagement. We have a Federal Trade Commission that insists on a smoking cannon powered by public outrage before it will glance sideways at the operations of an agriculture cooperative. There are no rules to guide competitive behavior, only ethics.

In an interview with Connie Hays on the new Cola Wars, in today's New York Times, John D. Sicher, editor of Beverage Digest says "as much as it is about taste, it also positions the brand (Pepsi) as confident, positive and aggressive...Americans love combat and competition, and that element of this will generate a lot of consumer attention." (emphasis added)

Sicher seems to forget one element in the consumer picture: women. Movie images aside, I don't see the majority of American women as aggressive and loving combat. I don't see Sally Spray sitting ringside chomping on a big cigar or dragging her husband to a Nascar race. She had no desire to see American children coming home in body bags from Bosnia either.

While boys will be boys, and high school coaches love to get that testosterone pumping, I don't see every American male as being enamored of competition or as loving combat. Besides, the notion that a man who enjoys a sporting event is some beer guzzling lout who relishes any aggressive spectacle is illogical. Even if it was true, who can prove that this will translate into sales?

Nobody will get killed in the cranberry wars; but people will be hurt. Some will succumb to stress related diseases, many will develop clinical depression, there will be more than a few divorces, and a few bereft growers tragically may take their own lives. Those who come out as winners in the cranberry war by sheer luck will have to cope with some measure of survivor guilt. Those who win by guile or deceit may someday feel the shame for what they've done. There is still time to avert this tragedy. The industry, individual growers, and particularly Ocean Spray under Robert Hawthorne's leadership, have to recalibrate their ethical compasses. Let's put this belligerent rhetoric aside and start to work together. A good first step would be for Mr. Hawthorne to participate in the Middleboro Business and Industrial Commission meeting being held on the cranberry crisis this Thursday (see above). Print version

Editorial Cartoon

Click above to enlarge

Cranberry Marketing Committee to reconvene

3/16/00 The Cranberry Marketing Committee will hold a special meeting on Thursday, March 30, 2000 starting at 9:00 A.M. in Minneapolis, Minnesota at the Airport Marriott Hotel. At this meeting the Committee will consider the following items:

1. Generic Domestic Promotion Program

2. Crop year 2000 marketing policy

3. Recommendation to the Secretary, USDA, that a volume regulation be established for the crop year 2000. Items to be discussed shall include, but are not limited to the following:

a. type of program
b. fresh fruit exemption
c. marketable quantity
d. allotment percentage
e. sales history
f. new acres producing for the first time
g. assessments
h. compliance
i. amendments to the volume regulation provisions to the Cranberry Marketing Order

4. Other business to come before the Committee.

OS vs. Northland a skirmish, look to Coke vs. Pepsi for a real juice war

3/15/00 If there ever was any doubt that Coke and Pepsi intend to compete aggressively in the juice marketplace, today's Associated Press article should dispel that notion. The soft drink giants are merely developing tactics as they position Tropicana and Minute Maid to go after orange juice market share. Can anyone doubt that Coke and Pepsi have an overall strategy to engage each other in worldwide battle for a hefty share of the overall juice market, including cranberry? Link to AP article HERE.

Innovative cranberry drying process launched in Canada

3/13/00 ST. HYACINTHE, QC, March 13 /CNW/ via NewsEdge Corporation - What is red, round, sweet and good for your health? Dried cranberries, of course! Today Atoka Cranberries Inc. and Agriculture and Agri-Food Canada's (AAFC) Food Research and Development Centre (FRDC) were proud to launch a new cranberry-drying process. It is a natural process that not only dries the fruit, but also sweetens it and preserves its flavour and colour throughout its storage life. Cranberries dried in this manner have many uses, either as health snacks or high-quality ingredients, especially in the bakery sector. CONTINUED

Ocean Spray Deploys Symbol's Wireless Mobile Computing, Scanning Appliances to Streamline Fulfillment, Delivery

Symbol Teams With Business Partner ATS To Enhance Warehouse Productivity

HOLTSVILLE, N.Y.--(BUSINESS WIRE)--March 13, 2000-- Symbol Technologies (NYSE:SBL - news) announced today at the National Manufacturing Week trade show that it has teamed with business partner Applied Tactical Systems (ATS) and has installed a solution to enhance warehouse productivity and maximize fulfillment and delivery at leading juice manufacturer Ocean Spray. CONTINUED

Press release:

Northland closes previously announced sale of private label business to Cliffstar Corporation and recognizes after-tax gain of approximately $1.2 million

3/10/00 - Northland Cranberries, Inc. (Nasdaq: CBRYA), manufacturer and marketer of Northland brand 100% juice cranberry blends and Seneca brand fruit beverages, reported that it has successfully closed the previously announced sale of its private label juice business to Cliffstar Corporation of Dunkirk, New York. As a result of the sale, Northland expects to realize an after-tax gain of approximately $1.2 million, or approximately $0.06 per fully diluted share. CONTINUED

The future of Northland

3/9/00 The Wall Street Journal offers the opinion in an article today that Northland Cranberries is "on the auction block." This is not true, according to Northland President John Swendrowski. He emphasizes that "we have not made a decision to sell the company. Could that be an outcome? Yes it could. We're engaged in a process of looking at alternatives regarding a possible sale of Northland."

Swendrowski reiterates his position in an article in today's Milwaukee Journal Sentinel. In that article, Ocean Spray spokesman Chris Phillips says that Northland's financial difficulties are faced by all cranberry growers and processors.

"We certainly have felt their pain," Phillips is quoted, adding that Ocean Spray, will continue to compete "vigorously" with Northland.

Read Milwaukee Journal article here | Daily Tribune (Wisc. Rapids) article here

OpEd

Cooperation can return grower prosperity quickly
by Paul Jonjak

3/8/00 (Paul Jonjak is a former member of the Ocean Spray board. In his OpEd, outlined below, he presents timely and insightful proposals about redrawing the competitive landscape in the cranberry industry.)

Panic selling crashed cranberry prices
OPEC demonstrates cooperation stabilizes prices
Marketing order could help balance supply-demand
Capper-Volstead Act allows grower co-operative to stabilize prices
Increasing cooperative's share of supply decreases panic price cutting
Current surplus can be eliminated without further reducing grower returns
Why increase share of supply when co-op has enough fruit?
What will the cranberry industry do, what can you do?
Professional analysis confirms supply-demand dynamics determine price
Juice company doesn't change cranberry farm profitability
A new super co-op: If OPEC nations can cooperate, so can we

Read article HERE | Easy to print version

Coke and Pepsi rated strong buys, Northland and Ocean Spray mentioned

3/17/00 In a Wall Street Transcript press release which promotes a longer article, both Coke and Pepsi are rated strong buys by Scott Wilkins, Director and US Beverage Analyst with Deutsche Bank Securities. About Northland Cranberries (Nasdaq: CBRYA), Wilkins states, "It's a small company but one that does warrant mentioning because it has about a 47% share of what is one of the fastest growing segments within the juice area. Their primary focus is cranberry and variations on cranberries in blended juices. What they are doing well, I think, is creating a brand. They have formed this brand from scratch and they compete with Ocean Spray, which is a cooperative and nonlisted company, a company that is undergoing a great deal of change."

Activity on CBRYA Message Board picks up

3/17/00 Activity on the Yahoo Message Board (click here) for Northland stockholders has increased significantly in the last few days.

Mass. Cranberry Institute to fund research on human health and medical benefits of cranberry

3/16/00 The Cranberry Institute has appropriated $75,000 for human health and medical benefits research for 2000. Research grants will be awarded as unrestricted gifts. Grant proposal guidelines went out to a select list of researchers with the deadline for submission March 15, 2000. The Cranberry Institute is interested in funding research that demonstrates benefits of cranberry consumption in the treatment or prevention of human disease states. Primary disease states include cardiovascular disease and cancer. Secondary disease states include macular degeneration, diabetes, and inflammatory disease. The effect of cranberry on aging and immune response are also viable topics for proposals. Funding decisions will be made at the C.I. Board of Directors meeting, April 3-4, 2000. Applicants will be informed of their funding status the following week.

Canada to compete with U.S. sweetened dried

3/15/00 The announcement (left) that Atoka Cranberries will be introducing a line of sweetened dried cranberries (SDC's) does not bode well for the cranberry market in the United States.

SDC's sold for around $2.60 a pound earlier in the year, and was driven as low as about $2.10 a pound by Ocean Spray as they tried to underprice the competition. Canadians can purchase sucrose on the international market for about half of the U.S. Support priced sugar. Since sugar is a main ingredient of Ocean Spray's Craisins, if the Canadian product is similar, they will have a significantly lower ingredient cost.

In addition to this cost savings, the current exchange rate is such that the Canadians could compete very aggressively against American SWC's, and even underprice Ocean Spray Craisins while still making a profit for Atoka. According to Marc Bieler, President and Chief Executive Officer of Atoka, "this market totals almost $75 (U.S.) million in the United States alone, demand is also rising in Europe and Asian countries where the nutraceutical benefits of cranberries are particularly appreciated.''

Finally, Peace with Pepsi?

3/13/00 When Pepsi purchased Tropicana from Seagrams for $3.3 billion, Ocean Spray initiated a lawsuit claiming that this created a conflict of interest which violated their single-serve distribution agreement. Since the purchase of Tropicana also included Dole, Pepsi had no need to include Ocean Spray products to round out its single serve juice line. According to an article in today's Wall Street Journal, Ocean Spray filed a "stipulation for dismissal" of the lawsuit with Pepsi with the U.S. District Court in Boston last month. Ocean Spray spokesman Chris Phillips is quoted as saying CEO Robert Hawthorne is dropping the lawsuit because "he wants to refocus our resources completely on building our brand." Pepsi has been considered a possible purchaser of Ocean Spray. Read a related Stressline editorial on the subject from June: HERE.

Middleboro-Lakeville growers speak out in Middleboro Gazette

3/10/00 Several growers who haven't been heard from in the media were interviewed for an article in yesterday's Middleboro Gazette. Former Ocean Spray board member, Larry Harju, who farms 250 acres with his brother, is in favor of a volume restriction. Regarding a marketing order, he is quoted as follows: "Ocean Spray's position was to do it anyway. We didn't prevail. We could have almost a whole crop extra in the freezer. It's not necessarily one handler's problem. It's everybody's problem until we get it straightened out." Read Middleboro Gazette article HERE.

Northland shares down 16%

3/9/00 Northland shares dropped 16.2% yesterday following the announcement, below, that the company would be writing down its inventory in the second quarter. In NASDAQ trading shares closed down 1 to 5 3/16. The CBRYA low for the prior 52 week period was 4 7/8. The Wall Street Journal describes the Northland announcement that they will be studying the possibility of a sale or merger as "a disclosure that the directors are putting it on the auction block."

Northland Cranberries Retains Investment Bankers To Help Explore Strategic Alternatives

Announces $18.0 Million One-Time, After-Tax Inventory and Receivable Charge: Expects Reduced Earnings From Operations For Fiscal Second Quarter

"Given the current oversupply condition in the cranberry marketplace and the prospect that Ocean Spray will continue its unusually heavy promotional activity in its ongoing efforts to recapture market share lost to Northland and others, our Board and management decided that there exists an opportunity to take some bold actions now to more effectively combat these circumstances...." John Swendrowski

3/8/00 - Northland Cranberries, Inc. (Nasdaq: CBRYA), manufacturer and marketer of Northland brand 100% juice cranberry blends and Seneca brand fruit beverages, announced that it has retained two prominent investment banking firms, Deutsche Banc Alex Brown and U.S. Bancorp Piper Jaffray, Inc., to assist it in exploring various potential strategic alternatives to facilitate the long-term growth of its branded juice business and increase shareholder value. It is expected that these potential alternatives will include, among other possibilities, a potential strategic alliance with, or the potential sale of all or a portion of Northland to, a major food or beverage industry company or other partner.

CONTINUED

Reaction on Yahoo CBRYA message board

3/10/00 Wisconsin reaction to possible sale of Northland in Wisc. Rapids Daily Tribune

3/6/00 Minute Maid health promotion

2/27/00 A.P. Story: Studies show ex-farmers bounce back

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