By DOUG FRASER
STAFF WRITER
2/17/04 Ocean Spray's annual shareholders meeting next month in Florida looks like it could be a repeat of last year's cranberry wars.

Cranberries are loaded onto a truck at Cutler Cranberry Co. in Juneau County, Wis., in this 1999 photo. Conflict is brewing at Ocean Spray between larger cranberry growers in Wisconsin and New Jersey, who want the company to remain independent, and smaller growers, many in Massachusetts, who want Ocean Spray to look at ways to become more competitive, possibly by merging with a larger company. (FILE PHOTO/Associated Press)

The push is on by some of the larger cranberry growers in Wisconsin and New Jersey to halt the board of directors' efforts to either merge with a larger company or find a company with the clout and expertise to better market and distribute its juices and other fruit products.

These larger growers want Ocean Spray to remain independent.

But many of Ocean Spray's smaller growers want the company to find a way to compete with multinational corporations such as Coca-Cola and Pepsi. They think those companies have the potential to outcompete Ocean Spray for the domestic and international juice market.

Using a tactic employed at last year's meeting by the current board of directors, the Committee for a Strong Ocean Spray, which represents larger growers in New Jersey and Wisconsin, advised Ocean Spray and its growers in a Feb. 4 letter that it had the percentage share of common stock necessary - at least 10 percent - to bring the issue of downsizing the board of directors from 12 to 11 to a vote before shareholders.

A downsizing would automatically trigger a new election, which CSOS would do in hopes of electing directors sympathetic to their cause.

Ocean Spray is North America's leading brand name in canned and bottled juices, with $1.4 billion in sales in 2000. The cooperative began in 1930 in Massachusetts. It is currently made up of about 800 cranberry growers from five states and two Canadian provinces, and 125 grapefruit growers in Florida. There are about 50 Ocean Spray cranberry growers on Cape Cod.

Over the past decade the juice market has become extremely competitive, with multinational companies such as Coca-Cola and Pepsi adding juice lines. Their large advertising budgets and the ability to stock supermarket and convenience store shelves through their extensive soft drink and snack food distribution network is troublesome to Ocean Spray management and growers who can't see how the 900 small businesses in the cooperative can compete.

"If we try to stand alone and do business like we have for the past 40 years, we'll be a dinosaur and we'll get rolled over," said Jim Jenkins, a fourth-generation Barnstable grower with 72 acres of cranberry bogs under cultivation.

"It is clear to us that despite assurances from the current board that Ocean Spray is not for sale, they appear to be deeply committed to strategic options that would result in the ultimate sale of the very asset that has made our cooperative strong - its premium brand," the Committee for a Strong Ocean Spray asserted in its letter.

The current board came in last March with promises to look at measures to improve operations and strengthen the brand's market position. That included a second look at an offer by Northland Cranberries Inc. to buy Ocean Spray for $800 million. That offer was ultimately rejected.

In a Jan. 28 letter to growers, the Ocean Spray board of directors said the company, and the brand name, was not for sale. The board said it wished to expand the number of directors from 12 to 18 to include some of those who are concerned the company may be headed in the wrong direction.

Jenkins is opposed to any effort to replace the current board, which he thinks is at least taking a look at alternatives to remaining independent.

Cranberry growers started to see prices improve this year after four years of decline. But local growers said the profit margin is slimmer for Massachusetts growers, whose irregular-shaped bogs are less efficient to work than the square bogs laid out on the wide-open farms of Wisconsin and New Jersey.

Basic costs, such as the doubling of the price of sand used to grow cranberry plants, have further eroded that margin.

Increasing the market share is pivotal to keeping local growers in the black, but the cost of advertising and marketing to do so is also an expense they must share.

Middleboro grower Hal Brown hosts the cranberry industry Web site www.cranberrystressline.com.

He said the board was investigating the possibility of leasing its name to Coke or Pepsi, who would buy cranberries from Ocean Spray, but the prices proved too low. Brown said the board also looked into bringing in a venture capital group with the cash - and the marketing and distribution clout - to compete with larger corporations.

"We're looking at the juice industry over the next five years and we don't see how we can compete with that advertising money on the backs of growers," Brown said.

"Everyone is competing for the stomach," said Northland Juice CEO John Swendrowski.

Swendrowski's Wisconsin-based company broke away from Ocean Spray a decade ago and headed in a different direction, creating a niche market for what he says are higher-quality, higher-priced juices.

He said the convenience store business, with its higher prices per unit, is the hardest for a company like Ocean Spray to break into.

"Unless you own the trucks that deliver them ... you have to go through alternative channels and that results in significantly reduced profit margins or the consumer pays more," he said.

Jenkins, who will attend next month's meeting in Florida, is thinking even bigger. He's worried that without the money to market on the international level, Ocean Spray and its growers could lose out on emerging markets such as China.

(Published: February 17, 2004)