of Discontent; Low Cranberry Prices Shake Farmers' Faith in Ocean
By CONSTANCE L.
Sept. 22, 1999 New York Times
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MIDDLEBORO, Mass. --
Cranberries have been good to Betty Brown's family for generations.
Her grandfather staked out cranberry bogs here on the sandy shoulder
of Cape Cod in the 1930's, and now Mrs. Brown and three of her cousins
farm the land they are in the process of buying from their parents.
And the family has been
good to Ocean Spray, the 69-year-old company that dominates the
cranberry business and sold about $1.4 billion of cranberry drinks and
other products last year. Mrs. Brown even had her photograph featured
in last year's Ocean Spray annual report.
But lately the
relationship has soured, and Mrs. Brown has become one of the
company's most vocal critics.
''One of the hardest
things we had to do was look the two dads in the eye and say, we can't
pay you this year,'' she said.
They cannot pay because
Ocean Spray, besieged by crises ranging from an oversupply of
cranberries to increased competition to some costly marketing
mistakes, has sharply cut the price it pays farmers for the fruit. The
situation has become so dire that management has commissioned a total
review of its operations, hiring Bain & Company and Merrill Lynch &
Company as its consultants.
The review could lead
to big changes that might include a sale of Ocean Spray to a
consumer-products company like Unilever or Pepsico. ''At this point,
every possible solution is being evaluated,'' said Paul Jonjak, a
Being under someone
else's wing would be a radical departure for Ocean Spray, a
cooperative based in Lakeville, Mass., that is owned by 920 cranberry
farmers and citrus growers, most of them in the United States. The
company has historically prided itself on coming up with its own
answers to its problems, though not always in the most methodical
''Their culture can be
summed up as ready, fire, aim,'' said one analyst who follows the
Indeed, part of the
problem may be the cooperative structure itself. Ocean Spray has a
board composed exclusively of growers who are also the owners and
suppliers of key raw materials and who may not be the most objective
critics of the rest of the business.
''This company was a
trend-setter,'' said Michael Bellas, chief executive of Beverage
Marketing, a trade group. ''What happened was they didn't keep
What also happened was
that Ocean Spray lost control of the cranberry supply, something it
had carefully managed over the years, and with it went prices. The
company now confronts bulging inventory and growing overproduction
with no quick fix in sight.
''Some people say it
will be 10 years,'' said David N. Farrimond, who oversees cranberry
marketing for the Agriculture Department.
Mrs. Brown blames a
series of mistakes by management. Tom Bullock, the 53-year-old
departing chief executive, announced his retirement in June after less
than three years at the helm, but he plans on staying around for at
least a year.
''There have been
oversupplies and all kinds of problems in the past,'' Mrs. Brown said,
perched on the edge of a bog recently and nibbling tart raw
cranberries, something she said was an acquired taste. ''We've been
able to overcome them with good marketing and management. But our
marketing and management have let us down. They have dropped the ball
For the last few
months, a Web site run by Mrs. Brown's husband, Hal, a clinical social
worker who helps out on the bogs as well, has provided a forum for
comments from farmers, not all of whom are disgruntled. ''Ocean Spray
is so poor in communicating,'' he said. ''They treat growers as if
they aren't really the owners of the company.''
Activity on the Web
site (www.cranberrystressline.com) escalated in February, after Ocean
Spray announced, at the co-op's annual meeting in Florida, that prices
for a 100-pound barrel would fall to a range of $42 to $48 from $55
the year before. Mr. Brown posted a picture of the Titanic with an
article about the company's problems, and the comments flowed in.
Ocean Spray dismisses the Web site as divisive, but others say it has
''He's made it
impossible for the growers within the organization to ignore the
outside world,'' said Tom Gelsthorpe, a grower based in Sandwich,
Mass., whose father is a former executive at Ocean Spray. ''The
disadvantage of a private company is, if the company's not well run,
there's no dispassionate analyst to shed a different light on things.
Secrecy has turned out to be our worst enemy.''
Analysts describe an
organization divided against itself. ''It does appear that the whole
board-management interaction the last few years has been somewhat
dysfunctional,'' said Rex Green, a managing director at Advest in
At the root of all this
is the sudden price collapse. For most of the last decade, farmers who
belonged to the Ocean Spray cooperative received about $60 a barrel.
Last year, the price fell to $55, and in June, only a few months after
the February announcement, the company said it would pay just $32 to
''Part of it is the
surplus, and part of it is the competitive activity,'' Mr. Bullock
said. ''People are unhappy,'' he said of the growers. ''These are
good, solid, hard-working farmers, and this is their paycheck. They'll
remain unhappy until this turns around. We're doing a lot of things,
but it's going to take a while.''
Mr. Bullock announced
his retirement only a day after an advisory committee of growers
expressed no confidence in management, although the company said that
was not a factor in Mr. Bullock's decision. He remains in charge of
day-to-day operations, including the job of choosing his successor,
and says he has an agreement to stay on for a year to insure a smooth
''I think it's time for
a change,'' he said, explaining his retirement, ''and that's what
they'll have -- a change.''
Others note that as
strained as relations may have become between growers and management,
the farmers might not like the alternative any better.
''Someone like Kraft or
Coke or Triarc is going to come along and seduce them, and then
someone they can't control will be controlling them,'' one industry
analyst said. ''The Ocean Spray brand would become just another brand
in some company's big-brand portfolio.''
Ocean Spray created the
cranberry-juice market in the 1960's when company executives were
casting about for ways to expand beyond the fruit's
once-or-twice-a-year appearance on holiday tables. The cranberry,
believed to have been served in stew form at the first Thanksgiving,
had long had patriotic associations.
Ocean Spray pushed the
health aspect of drinking cranberry juice, citing its high vitamin C
content and other attributes -- a tactic that helped the company grow
from $300 million in sales in 1969 to more than $1 billion by 1991.
Yet the health aspects
of Ocean Spray drinks have come back to haunt the company lately. In
1996, Northland Cranberries, founded by a renegade Ocean Spray member,
came out with a 100 percent juice version of Ocean Spray's top-selling
Cranberry Juice Cocktail. The marketing took dead aim at the
ingredients in Ocean Spray, noting that it was only 27 percent juice.
At the same time, a new
Federal labeling law required companies to display the sugar, sodium
and other ingredients prominently on packages. Since then, Northland
has carved out about 10 percent of the cranberry juice market at Ocean
''The labeling law was
going into effect, and I asked what we were going to do,'' said John
Swendrowski, Northland's founder, recalling his decision to break away
from Ocean Spray in 1993. ''They said it was no big deal.''
Ocean Spray, countering
with a study of its own that tried to convince consumers that sugar
was sugar, whether it came from fruit juice or corn syrup, thought the
appeal of Northland's 100 percent juice would only be fleeting, Mr.
Bullock said. ''It's been around for years,'' he said of such
products, ''and when Northland came into the market, we thought it was
more of the same.''
Ocean Spray finally
struck back a year ago with a 100-percent-juice product called
Wellfleet Farms, proudly proclaiming the move as the ''most successful
new product launch'' in company history.
however, sold badly, hindered by what Mr. Bullock called ''a little
trouble communicating'' with consumers.
Wellfleet Farms is
slowly vanishing from store shelves, and the company plans to
reintroduce the product next month as Ocean Spray Premium, belatedly
taking the advise of critics who said the company made a mistake not
capitalizing on its well-known name.
With Northland outside
the fold, Ocean Spray also lost control of its careful balance between
cranberry supply and demand. ''Northland is what people now point to
and say, that was the beginning of the Bataan Death March,'' a
consultant who knows the business well said. ''People are saying now,
under no circumstances should they have let the Northland growers
leave the co-op.''
company's efforts to upgrade its computer systems wreaked havoc. A big
$30 million investment in a system from SAP that is intended to manage
the business from farm to grocery shelf went on line in February.
''During the summer, we
had difficulty with people learning to run the system,'' Mr. Bullock
said, calling the change a difficult transition. Deliveries were
snarled, and options were limited with the new system when it came to
correcting them, others in the company said.
The company plans to
introduce several products this fall, including a new variation on its
grapefruit drink to be called Ruby Red Strawberry. And it will soon
introduce a vitamin- and calcium-enhanced cranberry drink aimed at
''We want to reassert
our cranberry leadership with the customer,'' said Nancy MacDermott,
the company's senior vice president for sales and marketing.
meanwhile, are working together in search of alternatives to the way
Ocean Spray is run. One of them is the A. D. Makepeace Company, a
founder of Ocean Spray, and the co-op's largest single grower.
''At this time we would
like to encourage debate, discussion and information-sharing among the
growers to build understanding of the strategic merger alternative,''
said Robert L. Rosbe Jr., Makepeace's vice president for finance.
''We've defined that as merging the juice company and consumer
packaged goods with a major global giant,'' while keeping the co-op
A report from Ocean
Spray's consultants is expected by the end of the year.
''People are trying to
figure out the best way to handle the change in the industry,'' said
Mary Brazeau Brown, who has 330 acres planted with cranberries in
Cranmoor, Wis., and is not related to Betty Brown. ''It's not an easy
solution for anybody.''
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