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Sunday Editorial Some pros and cons of a sale of Nectars to Coke 9/2/01 A sale of Nantucket Nectars seems inevitable, and Coke seems to be the logical choice. Ocean Spray, by all back-room accounts, has exceeded their credit limit and is being pressured by their bank to decrease their debt load. Their only other choice to raise capital is unacceptable: lowering returns to growers. Coke has been interested in acquiring Ocean Spray for a couple of years, and now there is more reason than ever for doing so, what with Pepsi's Tropicana doing so well and soda sales being flat. From Coke's perspective, acquiring Nantucket Nectars could be triple-win proposition. They win if they can boost sales of Nectars with an infusion of advertising and distribution dollars and move it into national convenience outlets and supermarkets to compete aggressively with other single serve juices. They win again if they expand the Nectars' label onto the juice aisle to compete with Pepsi's Tropicana Twister (and Ocean Spray) with their own line of blended juices. Obviously, these wins for Coke represent potential losses for not only Pepsi but for Ocean Spray as well. The later would be a likely course of action for Coke and a major con (* see below) of a sale of Nectars to Coke. In fact, if Coke brought a Nectars cranberry line onto the juice aisle, the sale of Nectars could go down in in the history of food companies as the most suicidal sale of an asset ever! However, there is a third win that could represent an important win for Ocean Spray, or at least for their shareholders. If Coke's negotiations with Ocean Spray over the sale of Nectars has opened the doors to the white house in Lakeville, it is possible that they have been able to informally float the idea of acquiring the entire juice company. Look at it from Coke's point of view. They have a nationally known and highly respected juice label, Minute Maid. However, it is known for orange juice. Even Tropicana decided to come up with a new name when it went onto the juice aisle. As good as Nantucket Nectars is, it isn't a national icon. Minute Maid's Nantucket Nectars would sell! Tom and Tom would be terrific spokesmen and Coke could do great things with the Juice Guys cachet and motif. If Coke went national with a new juice line, they would probably have to come up with a new name to both associate the product with Minute Maid's quality and remove it a step or two from orange juice. Ocean Spray, while clearly known for cranberry juice, has already become well known for numerous blends and for grapefruit juice. Using the Ocean Spray to compete with Tropicana Twister on the juice aisle makes a lot of sense. Think how well they would do with the kind of money Coke would have for advertising and promotion. More importantly for the long term viability of the cranberry industry overall, think what Coke can do for the expansion of cranberries overseas. If they own Ocean Spray, we believe they are more likely to emphasize cranberry blends in their juices than if they develop their own label under Minute Maid. *(Another con, which most readers have considered, for selling Nantucket Nectars is that it makes it less attractive as an acquisition for another company, or for Coke itself.)
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