Response to Joe Darlington's ExtraNet letter

By John Swendrowski

Ed. Note: Joe Darlington is an Ocean Spray representative on the Cranberry Marketing Committee. The letter that prompted this response was posted on the Ocean Spray ExtraNet. Cranberry Stressline has not been granted permission by Mr. Darlington to republish it.

3/1/01 - Several growers have faxed me an Ocean Spray Extranet reply to my open letter to Ocean Spray growers. Within that response by Joe Darlington is the strong suggestion that the main reason that I am advocating a "large" reduction is because Northland holds inventory that will greatly increase in value.

That accusation is totally false and inaccurate. Northland will use over 50% more fruit in the Northland brand due to the change to 27% cranberry content. We have not increased the selling price of a case of juice; thus we will not enhance the value of that fruit from inventory. Based upon our current inventory, less our projected usage, less some portion of the government bid and less contracts for raw fruit to other handlers, we will need to purchase more fruit from growers in October of 2002 to meet our long-term needs.

The Ocean Spray response says, "you think that growers would be better off if you handlers did not sell all the fruit we can grow." My answer for 2001 is yes. We are talking about a one-year large cut to fix the inventory problem we currently have in place. (Long-term, we will not need to cut 50% of the crop.) Projections show that we will need small cuts for 2-3 years until we build demand. Therefore, while your statement that "$40 on half the crop doesn’t pay the bills as well as $30 on the whole crop" is mathematically accurate, it is an argument that is baseless and without merit in regard to a Marketing Order for 2001. I have not seen an Ocean Spray plan that will use the whole crop and pay $30 per barrel. I believe Ocean Spray’s projections for the 2001 crop under Ocean Spray’s business plan and a 4,800,000 barrel Marketable Quantity will return $28/barrel (over 20 months) for 65% of the crop.

Now, ask the real question. Is $28 for 65% of the crop better than $40 for 54% of the crop?

PLUS

1. Cost savings from not growing.
2. Cost savings from not handling, storing and freezing.

The grower is better off the quicker the price returns to break even at the farm level.

Within the response from Ocean Spray they state "If we don’t grow the market (by advertising and promotion, new product development etc.) how are we ever going to get away from Marketing Orders?" I am in total agreement that we need to grow the market and sell more fruit in the long-term.

Concentrate sales below grower costs, buy one get one free, coupons for free product, two 64 ounce bottles for $3, etc. is not about new markets, it is about market share and the money comes directly from the grower return. From a grower perspective, those are bad sales, not good sales.

Will 4,000,000 barrels raise the grower price quicker than 4,800,000? Yes. Will 4,000,000 barrels today reduce the need for a Marketing Order in 2002? Yes. Does 4,000,000 barrels plus the inventory give us all the fruit we need for good sales in 2002? Yes. Can we take in more fruit in 2002 if 2001 is 4,000,000 barrels instead of 4,800,000? Yes.

Finally, you claim Ocean Spray will be short fruit at 4,000,000 barrels. Based on data I have seen, you project to run out of fruit from current inventory (1999 and 2000 crop) in June or July of 2002 (expected close of 2000 pool). If you receive 70% of 4,000,000 barrels or 2,800,000 barrels plus 500,000 barrels from Canada that would be a total of 3,300,000 barrels from the 2001 crop. It would certainly appear that 3,300,000 barrels would be enough to carry Ocean Spray from June or July to December of 2002 when you can use the 2002 crop.

I can only conclude, based on data given to your growers, that you will have plenty of fruit to run your business and you will not be short as you suggest in your response. Once again I am perfectly willing to publicly debate anyone from Ocean Spray at a meeting open to all growers.

I am an advocate of 4,000,000 barrels because I believe it is in the best interest of growers. Like it or not, unlike management at Ocean Spray, Northland is a grower. Northland’s financial results are directly impacted by the value of cranberries just like every other grower. We do not have the luxury that Ocean Spray’s management has of transferring Juice Company Losses off of our books to the growers. If Ocean Spray had to pay the cost of growing as its cost of goods, like Northland, Ocean Spray would have lost approximately $150,000,000 last year. How long could management continue that business plan?

The growers want to see the handlers implement business plans that will at least cover the growing expenses now, not over the next three to four years as handlers fight over market share.

Ocean Spray, adjust your business plan. Accept 4,000,000 barrels and return more per barrel to your grower so all growers can pay the bills.