Editorial

A hitchhiker's guide to the beverage galaxy

by Hal Brown, Editor, Cranberry Stressline.com 

11/1/00 While Ocean Spray is ostensibly engaged in a vigorous turn-around plan engineered by new CEO Robert Hawthorne and a management team with far more talent than those they replaced, the battle lines are being drawn in the quest for fruit juice consumers by companies whose heft could easily crush Ocean Spray underfoot like so many cranberries. Take for example PepsiCo. The perennial number two rival to Coca-Cola has purchased SoBe, but this is merely a distraction to Coke. Coke and Pepsi both know that with carbonated beverage sales stable, the real world-wide growth potential is in mainstream fruit juices and juice blends.

Plain and simple, Pepsi's Tropicana and Coke's Minute Maid will be the major competitors to Ocean Spray within the next few years. In fact, within a year, Tropicana could be posting significant earnings on cranberry juices in countries that aren't even on the marketing maps at Ocean Spray. In the United States, this year look for more and more cranberry blends on the shelves under both the Tropicana and Minute Maid labels, as well as under Dole. (Seagram purchased the Dole global juice business in 1995. PepsiCo acquired Tropicana, including the Dole juice business, in August 1998.)

Ocean Spray will no doubt try to sell wholesale product to these companies at a price that the independents can't match. While it may lessen the surplus, this won't give anything back to the growers. Sources say that the bad blood between Ocean Spray and Pepsi still exists despite Robert Hawthorne's dropping the lawsuit.  Coca-Cola may have reservations about doing business with Ocean Spray, although they would certainly entertain bids from them. Even though Ocean Spray might offer them a price that seems too good to be true, they know it will last only as long as the surplus does, perhaps three or four years. Coke and Pepsi never enter a market for the short haul. They want business partners they can count on, and no matter what the new regime promises, these companies know that the history of Ocean Spray's dealing with other companies does not inspire confidence. 

If Tropicana and Minute Maid become major purveyors of cranberry juices, as I predict they will, they will use Ocean Spray's low bids to negotiate down the bids from the independents, thus devaluing the worth of cranberries for all growers. Already Tropicana has at least seven cranberry blends or juices under its various brands: Pure Premium Apple Cranberry Juice is available in Belgium, Luxembourg, The Netherlands, Finland, France, Germany, Ireland, Portugal, Sweden, Switzerland, United Kingdom, Canada, China, Japan, Argentina, Uruguay and the Caribbean. Dole has two blends, available in Germany, Switzerland, the United Kingdom, Japan, Argentina, Uruguay, the Caribbean and China. Seasons Best and Twisters each have two blends available only in the United States and the Caribbean. 

Industry sources say that we can expect a big promotional push this year for the various Tropicana cranberry products. While Minute Maid only has a cranberry lemonade, cranberry punch, a cranberry juice drink as well as a cranberry mixer under its Southern Sun label, sources within the company say that they are poised to enter the cranberry juice market in a big way.

In the United States, both Tropicana and Minute Maid are identified with orange juice, so both companies would benefit from ownership of Ocean Spray here, if only because it is virtually synonymous with cranberries. Overseas, where the real growth potential is, how a new product is marketed is far more important than what brand is on the label. Internationally, it is doubtful that there would be any problems associated with keeping the Tropicana and Minute Maid names for each companies entire juice line.

Ocean Spray is still an acquisition target only because the market for cranberry juices is so lucrative and the company is still the industry leader with, for now, the most growers and the most shelf space on the ever dynamic juice aisle. To Coke or Pepsi, Cadbury, Triarc, Quaker, or any number of potential suitors, it is fast becoming just bricks and mortar, and a few truly valuable employees, mostly food scientists, that they may decide to hire away whether they buy the company or not. To the suits in the corporate executive suites in Atlanta and Purchase, Ocean Spray isn't a phenomenon, like SoBe, or Snapple was in its heyday. It is merely an under-capitalized small one product juice company.

The classic corporate turn-around is basically like making a U-turn in a car, but Ocean Spray seems to be trying to do this while going the wrong way on a busy one-way street, where the heavier vehicles, operated by the Cokes' and Pepsicos', have no intention of yielding the right of way. Maybe it's time to abandoned the underpowered vehicle and hitch a ride into the future.

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