A Market Analysis for New Opportunities in the Cranberry Industry

Presented by

University of Massachusetts, Dartmouth
Charlton College of Business
Slades Ferry Bank Center for Business Resources

Project Director

Dr. Nora Ganim Barnes
(about Dr. Barnes)

Research Team

Jocelyn Kagan
Eric Langone
Jennifer Novia
Ryan Pinto

Fall, 2000

EXECUTIVE SUMMARY

• Eighty-four percent of those who responded to the survey have tried eating or drinking a cranberry product. Sixteen percent have not tried cranberry products of any kind.

• Although 30% of those eating cranberry products eat them in the form of baked goods, there is still potential for growth in this product category. Twenty-nine percent of respondents indicated they would buy more cranberry baked goods if they were readily available to them at a reasonable price.

• While only 15% of those surveyed currently purchase fresh cranberries, 50% said they would buy them, if they were readily available at a reasonable price.

• The potential market for cranberry jams/jellies is also attractive. This study shows that although 21% of the respondents are now purchasing these products, 51% would, given availability at a reasonable price.

• This study indicates that there is significant market potential for organic berries and organic juice. While none of the consumers listed organic cranberry products as products they are currently buying, many would be likely to buy them given availability at a reasonable price.

• Seventy percent of respondents in this study expected no difference between a hypothetical brand named "Cape Cod" and any other brand of cranberries. They did not expect that a brand called "Cape Cod" would be different in color or taste. Respondents did indicate that for consumers in the Northeast, such a brand might be fresher given the proximity of the Cape.

• Thirty percent of those surveyed are not familiar with any of the health benefits of cranberries.

• The data in this study suggests that a full two-thirds of those who are not familiar with cranberry products are men from Generation X - 19-35 year olds. They account for approximately 60 million people, now age 19-35, and their spending power is estimated at close to $100 billion.

• The consumers surveyed in this study also provided many suggestions for products they would like to see; such as cranberry lemonade, sugar-free/low sugar juice and baked goods, cranberry popsicles, cranberry pop-tarts, cranberry waffles.

In the summer of 2000, the Project Director met with representatives of cranberry growers and manufacturers. It was decided that this study would focus on consumers in major metropolitan areas in the Northeast, to determine consumer preferences regarding cranberry consumption. To date, there have been no publicly available market studies detailing consumer attitudes regarding cranberries and cranberry related products.

Over three hundred consumers from the Boston, New York, and Greenwich/New London areas were randomly selected and interviewed by telephone between September 2000 and December 2000 (PhoneDisc™). All respondents were asked about their attitude towards, as well as use of, cranberry products. Current buying habits were assessed including what cranberry products were currently being purchased, channels most utilized to obtain products, and attitudes toward "branded" cranberry products. Those indicating a lack of exposure to cranberries were examined in an effort to determine their potential for entering the market. Additional questions were asked to assess the level of association between health-related issues and cranberry products. Cranberry consumers were asked to evaluate the market potential of new products including fresh organic berries and organic juice products. They were also queried regarding new cranberry products they might like to see on the market.

The response rate for this study was approximately 50%. The high response rate and statistically valid sample size make the findings of this study generalizable. The final sample of 329 respondents is statistically valid at the 95% confidence level. All findings presented in the report are valid within a range of ± 2.5%.

RECOMMENDATIONS AND CONCLUSION

Many industries today face increased competition, technological challenges, and dramatically changing market dynamics. Some have experienced greater success than others as they attempt to navigate these difficult times. The following list of marketing strategies is gleaned from some of those who succeeded in making the adjustments necessary and being savvy about the future. Some of these strategies may already be in place, others may not be. The intention is simply to begin a dialog of possibilities that may be helpful given the enormous change occurring in all levels of the cranberry industry.

• Increase presence in the areas of baked goods, fresh berries, and jellies and jams.

• Pursue the potential indicated in this study for organic berries and organic juice.

• Introduce beverages under private labels or alternative brand names.

• Expand presence in the single-serve market.

• Consider additional outlets for the sale of cranberry products. Discount stores, outlet stores, drug as well as liquor stores, may expand audiences.

• Investigate the potential of new products. This study suggests a wide range of new products including cranberry popsicles and energy bars.

• Pursue a relationship with the alcohol industry. Trends in that industry may afford significant opportunities for product innovation.

• Study the possibility of targeting men between the ages of 19-35. This market may provide a new audience and stimulate product development.

• Advertise on the Internet by establishing Web sites. Like all other media formats, Internet users have distinct demographic and psychographic characteristics. Targeting them with appropriate messages continues to be challenging as that profile changes with the number of Internet users increasing almost exponentially. A well-designed Web site can offer product information, innovative recipes, and related pieces ranging from cooking tips to entertainment ideas. The interactive nature of the Internet allows a unique opportunity for communication between suppliers and consumers.

Beyond these suggestions, other industries have had some success with the following:

• Increase international expansion/export opportunities.

• Faster product innovation and repositioning of portfolios toward premium products.

• Form strategic alliances with potential opinion leaders in the music, entertainment & food industries.

• Promote positive image through use of scholarship, research grants, endowed chairs and sponsorship of outreach programs at colleges and universities.

• Strengthen brands through targeted promotion, product placement, etc., thereby increasing demand and decreasing brand vulnerability.

• Maximize demographic trends favorable to the industry through use of relationship marketing strategies.

• Invest in ongoing and integrated marketing efforts to reach consumers at the retail level. This effort should include primary research, direct communication to support public relations, media penetration, and a mechanism for consumer feedback in an innovative way.

One of the most widely used and successful marketing strategies of the 1990s is "cause-related" or joint venture marketing. It is particularly useful in promoting a positive image while making a personal connection with consumers.

In 1981, American Express entered into an agreement with the not for profit Statue of Liberty/Ellis Island Foundation. For every new American Express card issued, money would be donated to the restoration project. This marked the first national joint venture marketing campaign of this type in the United States. The designation of this relationship as "cause-related marketing" was registered by American Express with the United States Patent Office as a service mark.. The campaign resulted in $1.7 million donated to the foundation and an increase in American Express card usage of 28%.

Since then, there have been literally hundreds of these relationships including Proctor & Gamble and Special Olympics; Burger King and the March of Dimes; and Campbell Soup and the Literacy Foundation. Just recently, Coca-Cola announced that their beverage division is adopting a cause-related marketing (CRM) drive for its vending operation on a trial basis in England. The Royal National Institute for the Blind will receive money for every can sold from specially labeled machines. This marked the first venture of CRM campaigns into the self-service arena.

Articles about these campaigns have covered the pages of most leading newspapers and trade publications. Marketing and business journals have been detailing the advantages, disadvantages, and possibilities for these relationships. A definitive article on the subject offered the following definition: "Cause-related marketing occurs when a company promises to make a charitable contribution contingent on a customer purchasing something from the firm" (Varadarajan). The authors make it clear that cause-related marketing is a partnership that is mutually beneficial to both parties.

There are three components of a typical CRM campaign. The for-profit business partner lends its promotional expertise and one or more of its products as a focal point of the campaign. The not for profit partner contributes it's name, image, and audience. If consumers purchase the product, both partners reap rewards. The consumer also realizes those emotional rewards of facilitating a donation to a worthy cause.

Cause-related marketing has proliferated in the past decade. To date, there is scant evidence of the strategy being risky or unproductive. On the contrary, CRM is said to be one of the most successful promotional strategies in recent memory.

CONCLUSION

All indications are that the cranberry industry will face difficult challenges in the years ahead. These challenges include all the market dynamics discussed in this study as well as constant concern with production issues.

It would be prudent to monitor both the issues relating to cranberry production and those relating to market dynamics. Original research that focuses on different aspects of the industry would help to illuminate potential problems and opportunities. Marketing research involving consumers - especially those under 35 - in conjunction with data on successful strategies from other industries with this group would be invaluable.

All the findings in this study support the reality that the market potential includes two segments. These segments are made up of current cranberry consumers and those who make up the "Missing Market," Generation X males. Eighty-four percent of those surveyed are currently using cranberry products. These consumers however, indicated they could increase their consumption. In addition, the current literature on beverage trends suggests product variations, single-serving size bottles, trendy packaging, educational health information, availability in new channels, and Community Supported Agriculture will all be part of the effort to reach these consumers.

The Generation X segment is the key to addressing the non-consumers. Data in this study demonstrates that the 16% of consumers not currently using cranberry products are fairly homogeneous. Most are young men between the ages of 19-35. The liquor and sports/health industries will be key factors in marketing towards these consumers. Generation X's spending power is estimated at close to $100 billion. Note that Generation X men are also major consumers of health and exercise equipment, including power drinks and sports bars.

The industry needs to continue investigating and studying its options. While no one can predict the future, one must attempt to develop strategies for doing business in a variety of potential environments. This report is offered as a tool to help better understand the present and thrive in the widest range of possible futures.

Industry change is inevitable. Managing that change will be a challenge for all those involved in the cranberry industry.

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