The big soft drink makers would practically kill for a brand such as Ocean
Spray - for years the dominant U.S. name in bottled and canned juices.
But as the 70-year-old company's latest internal war played
out in a proxy fight yesterday, you had to wonder if some force is actually
bent on simply killing it.
The cooperative of some 800 Ocean Spray growers,
based in Lakeville, acts much like a closely held stock company.
Yet it's been bitterly divided over how best to
attack the future ever since nine board members were ousted last
year in a proxy driven shakeup. All that was old became new again yesterday, as
a minority group of growers descended upon Florida to once again demand new
leadership at the Ocean Spray annual meeting.
The current regime - led by chairman Robert Rosbe Jr. - was predicting
victory last night in staving off another upheaval, though votes won't be
certified for another week. The Rosbe-led board of 12 would expand to 15
members under a compromise plan approved by owner growers, with additional
members of the minority group joining the board.
Still, any notion that a status quo approach is the answer to competing
with Coca-Cola and Pepsi would be a huge mistake.
The soft drink giants have aggressively moved into the single-serve juice
market - an area of considerable growth potential in which Ocean Spray is
weak.
Yet the realities of staying relevant have caused fits within the
cooperative. An $800 million bid for Ocean Spray, from rival Northland
Cranberries of Wisconsin, was rejected last year.
And growers from Wisconsin and New Jersey launched the most recent proxy
battle to block even a minority stake sale or strategic partnership.
The turmoil is taking a toll.
Last month, Standard & Poor's downgraded its long-term
credit rating on Ocean Spray.
The rating house said on Feb. 17 that the upheaval is "a
major distraction... at a time when the firm needs to focus on its brands
and product innovation."
The message couldn't be clearer: Get your act together.
"I think it's finally dawning on the (minority) group how
divisive this looks to Wall Street and the business community in general,"
says Hal Brown, whose family grows cranberries in Middleboro for Ocean
Spray.
Says Tom Lochner, executive director of the Wisconsin State
Cranberry Growers Association: "The growers need to resolve their issues,
and the industry needs a strong leader. Ocean Spray has been a strong leader
in the past."
Brown says the Wisconsin and New Jersey growers - who do
more volume than Ocean Spray growers in Massachusetts, on the West Coast and
in Canada - are wary of outside partners.
The minority growers all but confirmed this in giving notice
of the proxy fight in January, when they pleaded to maintain "a strong and
independent Ocean Spray."
"Ocean Spray should always seek new, mutually beneficial
relationships," the group said.
"However ... the current board ... appears to be deeply
committed to strategic options that would result in the sale of the very
asset that has made our cooperative strong - its premium brand."
Indeed, the familiar Ocean Spray wave - already good for $1
billion in annual sales on the strength of supermarket and foodservice
dominance - would almost certainly be a juggernaut in the single-serve
market with the required capital investment and access to distribution
channels.
The smart move: The window may have shut for big-money
alliances with either Coke or Pepsi. That leaves as potential investor/
partners Vestar Capital Partners - a management buyout firm
with stakes in such consumer brands as Celestial Seasonings
and Birds Eye Foods, and Kohlberg Kravis Roberts & Co., with past
investments in Beatrice and RJR Nabisco.
The next big battle: How much control over the sacred Ocean
Spray brand will the growers actually deal away? Recent history suggests
another ugly episode is possible.
But if the votes are indeed there, figure this is the
direction the expanded board will pursue.
Because even in Wisconsin, they have to know things aren't right as they
are.