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Editorial - Looking back:
July, 1999: "New Coke
shelf stable juice line
predicted in Sept. 1998,
and how things have changed"
and how things have changed, again.
Coca-Cola Co. has its
sights on yet another supermarket aisle. The $18.9 billion beverage
giant is developing a new line of shelf-stable blended juices to go up
against category leader Ocean Spray Cranberries, said an executive
familiar with the plans. "The goal is to compete with Ocean Spray,
like Coke vs. Pepsi." A senior product manager from the company's
Minute Maid division and executives from Coca-Cola's headquarters have
held several meetings in recent months to iron out details for the line
of large-size, multiple-serving bottles. The product, still under
development, has yet to be named. Article
in Ad Age, Sept. 1998.
1/22/01 Ocean Spray
is no longer "on the market." Pepsi has decided to rename the
old "juice aisle" the "power aisle," now that it
owns Tropicana which has Twister at one end, and Gatorade at the other.
News reports as early as
1998, when Ocean Spray was a force to be reckoned with, predicted that
Coca-Cola was working on a shelf stable juice line to compete with both
Tropicana and Ocean Spray.
Coke opted out of the
bidding war with Pepsi over acquiring Quaker Oats. Pepsi's acquisition
cost over $13 billion. No wonder industry analysts then
considered Ocean Spray a prime target for Coke, since it would have
given the beverage giant a powerful label to compete with Twister. There isn't an industry
analyst who believes that Coke is ready to concede the lucrative
shelf-stable juice market to
Pepsi.
Although Ocean Spray has
announced its full commitment to a turnaround plan and with much fanfare
at its Annual Meeting emphasized its intention to be "the best
juice company in the world," executives at Coke must know that the
real competition on the non-carbonated shelf-stable beverage aisle (N.S.B.)
will come from Pepsi, since Ocean Spray will be engaged in a feeble
effort to capitalize a comeback by paying next to nothing to its own
growers for fruit.
It is a reasonable
assumption that Coke had back-up plans if Ocean Spray couldn't be
purchased. One might be an acquisition of Northland Cranberries. This
would give them the option of using the Northland label, or retiring it
and using the brand name Minute Maid or an entirely new one for a line
of juices and blends including a full line of cranberry beverages. Since
Northland owns cranberry marshes and bogs, the acquisition would buy
them a guaranteed fruit supply. The other option is simply to implement
the plan discussed in the Stressline article from two summers ago,
below, and in an Ad Age article from the fall of 1998.
Pepsi has upped the ante in
this high stakes poker game for domination of the N.S.B. aisle. Coke,
which could have paid $13 billion for Quaker Oats,
certainly will join the game and stay the course.
Ocean Spray can buy some time
if it works out an alliance with Welch's
by saving some money on shared distribution and other costs. Although convincing the name in
grape juice, jam and jelly that a partnership is in its best
interest may be easier said than done. Welch's will continue to hold its own
against Pepsi and Coke on the N.S.B. aisle with their various kinds of
grape juices; but the nature of grapes and consumer taste is that
consumers perceive them as the secondary juice in blends. Welch's
has numerous blends, some with
cranberry juice. Welch's
blends will face severe competition in the coolers from Tropicana and
Minute Maid as the juice war heats up. Just as Ocean Spray blends will
become also-ran self-stable products, frozen and refrigerated Welch's
blends will barely hang onto a significant market share against these
formidable rivals.
No matter what happens in the
juice war between Pepsi and Coke, Welch's will probably have it's core
market share of varietal grape juices. Ocean Spray will continue to sell
its traditional Cranberry Juice Cocktail to those core consumers who like
how it tastes. Unfortunately for Welch's, Cranberry-Grape just sounds
better and more familiar than Grape-Cranberry. Cranberries spell profit
because they blend so well with so many other juices. That's why the
trademark "Cran" has been valuable to Ocean Spray. But now that
value has been diluted because so many other companies simply use the
entire word cranberry to precede the name of the juice it is blended with.
By exploiting the nature of
the cranberry as the berry that tastes great mixed with fruits from apples
to strawberries, Ocean Spray virtually invented the cranberry blend. Now,
it is difficult to believe
that within the year Ocean Spray won't be facing stiff competition on the
N.S.B. aisle from both Tropicana Twister and a Coca-Cola line of cranberry
blends. Despite the current crisis, Ocean Spray, by introducing cranberry
blends to millions of consumers, has assured that cranberry
growers will be in business for many more generations. This is good news for
"nonpartisan" cranberry growers who want to see more of
their fruit consumed by a thirsty public.
7/8/99 -- ( Some of the
material for this story came from an
article
in the Sept. 1998 edition of Ad Age.
) Industry insiders were predicting just ten months ago that Coca-Cola
was going to develop a shelf stable line of trendy beverages to go head
to head with Ocean Spray on the juice aisle, possibly under the Minute
Maid brand name. An executive knowledgeable about the plans said the
idea was for Coke to compete with Ocean Spray the way it does with
Pepsi.
How things have changed in the
beverage industry and Ocean Spray since last fall. Back then
Ocean Spray was characterized by the managing director of Reach
Marketing, Burt Flickinger, as a force to be reckoned with on the juice
aisle, even for the Big Two:
"Both Coca-Cola and
PepsiCo dwarf Ocean Spray in size and marketing dollars. But privately
held Ocean Spray, with sales of $1.4 billion last year, is an unusually
aggressive competitor. I haven't seen another company defend its
franchise as aggressively and as well as Ocean Spray has whenever there
is a major intrusion in one of its core categories."
An Ocean Spray spokesman said
the cooperative would "continue to defend (our) franchise and do
what we do, which is make top-quality healthful products that answer
consumer needs." He recognized the might and influence Coke would
have as a competitor on the juice aisle and added "I think the
whole juice arena is going to heat up because of Pepsi's purchase of
Tropicana."
An analyst for Salomon
Brothers, Jennifer Solomon, noted that was logical for Coke to develop a
competitive line on the juice aisle, and referring to the highly
competitive beverage business, said of Coca-Cola:
"You have got to get your growth where
you can, I think Coke's all about share-of-stomach."
If Coke is intent on expanding
in a big way onto the juice aisle (their Hi-C is only a minor player),
it remains to be seen whether they will develop a brand new product line
or acquire an established "name brand" like Ocean Spray. If
they don't, and Pepsi or Cadbury Schweppes, or a multi-product giant
like Nestle, Proctor and Gamble, or Unilever does, Coke will be at a
severe disadvantage competing against both Pepsico's Tropicana and a
newly capitalized Ocean Spray.
Article
in Ad Age
Welch's
2000 Annual Report in PDF Format
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