Q
& A "Curious OS grower" questions John Swendrowski 12/14/01 From time to time a question and answer, or a debate, on the Stressline Forum, which only holds 300 responses before they're deleted, is transferred to the less ephemeral front page because it is newsworthy. We believe this is the case with this Q&A between an anonymous poster and the CEO of Northland Cranberries.
John Swendrowski's answer: The following information you seek is all public and filed with the Securities and Exchange Commission (SEC). 1) Audited financials for every quarter since 1987 and 2) Ownership of Northland since 1987. We will continue to make our information public every quarter in compliance with SEC regulations. The IRI data indicates that the Northland brand was down significantly over the last 52, 12 and 4 weeks versus a year ago. It is no secret that we did not have cash available for the last 16 months to support the brand and thus lost market share to competitors that continue to give product away below grower break even values. Northland’s incentive payments will vary by region just like Ocean Spray’s and every other handler based on each regions unique characteristic. My friends either reached retirement age or decided to pursue other careers based on their individual family situations. Northland was restructured on November 6, 2001. The company intends to aggressively compete for market share in the cranberry juice business. Our forward plans include significant expenditures for media and trade promotions to rebuild the brand. You can expect that promotional media will be far greater than the small buy on the Food Network. Focus groups were amazed to discover the facts relative to the percent of cranberry juice in products that they have been buying. Northland’s new financial structure with $87,000,000 less in debt, all assets written down to market and a strong financial controlling owner positions us to profitability compete against the ridiculous discounting within our industry. I never claimed, nor believe, to be an industry leader. One person will control and “lead” this industry, the CEO of Ocean Spray. The decisions at Ocean Spray will reach out and touch every grower regardless of handler affiliation. If Ocean Spray decides to develop a business plan that is designed to increase grower profits, all grower profits will increase. If Ocean Spray decides to continue a market share at all costs, grower prices will stay in the tank. I am, and plan to be, the leader of Northland for a long time just like most growers plan to be the leader of their family farm. I believe that Northland’s restructure will allow us to remain viable even if the leadership at Ocean Spray decides to keep grower prices at the bottom. Just like every individual grower, Northland will cut its cost to the bone and do the best we can under the industry conditions created by Ocean Spray. As for our projected grower price for the future, the answer is quite simple, Ocean Spray plus $3.00. My opinion on a future marketing order is quite meaningless since, once again, the only opinion that matters is Ocean Spray. Northland will monitor Ocean Spray’s position and respond accordingly. After last years fiasco I have come to the realization that factual data has little to do with the marketing order and any order will simply be whatever Ocean Spray’s management decides. Finally, with regards to new products, Northland is always working on new products. We have two major criteria for any new products. 1) It must use cranberry and 2) it must generate a profit that is above the growing cost of production. For example, one of our research and development people recommended a new product called Clear Cranberry. It would be produced with an unknown new variety of invisible, less tart cranberries that would not stain and taste like sugar water. We decided not to introduce the product because it would not use cranberries and it could significantly cannibalize our current products that do use cranberries. I hope I answered all your curious concerns and hope that at the next Ocean Spray meeting you will ask Ocean Spray management all the tough questions like:
Curious Ocean Spray Grower, you should spend your time on analyzing the actions of the company you own since they will determine the industry results. Wasting your time worrying about Northland is fruitless. Probably much to your disappointment, we will not just go away. The value of every grower’s crop and their property values have been destroyed. Northland’s banks and shareholders, including me, have lost significant value. The Northland brand has suffered, but the Northland brand did not, and will not just go away. Curious Ocean Spray Grower, as soon as you adjust to the fact that Ocean Spray will have competition forever, you may just decide to develop a business plan that restores grower profits to yourself and the industry. Coke and Pepsi hate each other but somehow they have figured out how to compete and make money. It really is not all that hard to develop a plan that focuses on profits instead of market share when you control 70% of a commodity. One final comment: Unless you are willing to come out of the closet and identify yourself, I will not continue this debate. If you want to disclose your identity, I will gladly debate the issues at anytime or anyplace. Merry Christmas and the Best of Everything for 2002!
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