Editorial

Ocean Spray Cranberry growers must wake up

7/25/01 If you can't hold on at prices under $25 a barrel for at least three more years, depleting your resources to stay in the cranberry business is ill advised, and exhausting them is asking for bankruptcy.  We see no significant change in the supply and demand equation or the surplus, in 2001, 2002 or 2003. Only if Ocean Spray's white cranberry juice is wildly successful, and consumption of the traditional red drinks increases dramatically at the same time, do we see the supply-demand equation back in balance, unless there is a 50% volume reduction next year, until the year 2004.

If  white cranberry juice doesn't succeed, and we don't think it will, add a year or two for the price per barrel to reach $25. Can you hang on until 2006?

Ocean Spray is a company in trouble. It is worse than previously thought.  We learned today from a reliable industry source outside of Ocean Spray, and totally independent of the ExtraNet, that Ocean Spray will be paying their growers significantly less per barrel than previously announced.

Too many cranberry growers are sleep walking. It's as if they think this is all a bad dream. All the growers who supported the Ocean Spray position for the smaller volume regulation wanted to believe the company "wisdom." After all, there are bad dreams and good dreams. Maybe Ocean Spray could turn the nightmare into a good dream. But they couldn't. Single serve distribution turned out to be a disaster. The 48 ounce container likewise.

White cranberry juice can succeed only by beating the odds. We believe:

• Fueled by advertising and promotion, and because it's a novelty, it will get off to a modest start.

• Sales of red OS cranberry juice will drop both because of cannibalization and lack of advertising.

• Within 6 mos. sales will begin to drop significantly.

• Ocean Spray will begin deep discounting.

• Eventually, net profits, after all the costs (slotting fees, labels, advertising, etc.) are accounted for, will be minimal.

• Negative WILDCARD Possibility that there is a backlash about health claims related to implication that white and red cranberries have the same health benefits.

2001 is the year for Ocean Spray to prove themselves.  They fought for this chance in Washington and at CMC meetings around the country. They lobbied hard as is their right. They persuaded many of their growers to rally for their cause, again their right. But scrappy Ocean Spray CEO Robert Hawthorne, who I once pictured as a boxer, is on the ropes, although I doubt very much he sees himself as being there.

Since a posting on the Cranberry Stressline Forum of what supposedly is Hawthorne's Mercedes S430 has generated many responses, I'll use this as an illustration of my impression of his "executive personality type." Hawthorne is a man, who like many CEO's, drives what is arguably the one of the finest motorcars ever made,  a truly "world class" vehicle. Likewise, I am certain he considers himself to be a world class CEO, easily up to the task of rebuilding a company that had been helmed by two inept predecessors who brought the company to near ruin. For Hawthorne, the word failure isn't in his lexicon. Thus it is doubtful he has a contingency plan to implement should white cranberry juice fail, and a major volume regulation be necessary next year to save numerous farmers from bankruptcy. Hawthorne is probably uncomfortable recalling the fights he lost "on points," (Select Comfort for one), perhaps he even suffers from selective amnesia. White cranberry juice tanking would be a knock out and that would be unthinkable!

Under the best of circumstances, meaning that white cranberry juice is wildly successful, only the most efficient and debt free farms will be breaking even in 2004. There will be bankruptcies. People will be depressed. Marriages will break up. The toll on every farmer will be staggering. Don't let Ocean Spray executives sweet talk you into dreamland for another year. Be prepared to take action. Under optimistic circumstances, which is that white cranberry juice is a modest success but doesn't use many more cranberries than if it hadn't been introduced, Ocean Spray growers can look to the year 2005 or 2006 before before they see $25 per barrel per year in their pockets (i.e., in real cash money). And this is still barely break even, not even making a profit.

Watch Ocean Spray this year. Watch the roll out of white cranberry juice, watch their reentry into the single serve market and their attempt to regain the 48 oz. size. See how the red juice sales are faring. But don't be lulled into complacency.

If independent economic analysis doesn't show a utilization trend which will eliminate the surplus by 2002, cranberry growers, both independent and Ocean Spray, should be prepared to demand that the USDA and the Cranberry Marketing Committee enact a 50% volume reduction.  It should be obvious by now that the Cranberry Marketing Committee is, and will remain essentially an arm of Ocean Spray unless the handler representation is changed.

Ocean Spray is a powerful force not only on the CMC but in Congress. Rarely has a fairly small company gotten so much for a mere $500,000 of lobbying money than Ocean Spray. Ocean Spray was number 17 of the top 20 of all food companies in PAC donors (which includes corporate giants like Coke, Pepsi and ADM), so there's little doubt they got their monies worth by playing in the big leagues. Ocean Spray growers: Next year Ocean Spray must not be allowed to be your mouthpiece in Washington unless they really do speak for you.

Growers must wake up now. The cranberry crisis, your crisis, will not be over next year. It will not be over in 2003 unless we have a 50% volume regulation in 2002. Then growers can forget this nonsense about merely breaking even and we can start thinking about cranberry growing being profitable again.

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