New products and intensive marketing to boost Ocean Spray

- Last updated on GMT

Related tags: Ocean spray, Cranberry

Product development, once a main force behind the company's
success, but recently a division lacking innovative fire, has also
received a major infusion of cash.

Gazing out over the flooded field at Four-Mile Brook in the historic seaside town of Plymouth, Ben Gilmore sees more than just a few thousand pounds of bitter red berries floating in the sun. He sees a once-profitable but now struggling $2 billion (2.23 billion euros) business, a prominent part of an American feast and a threatened way of life. In short, he sees a cranberry bog in the midst of the annual harvest. This year, with Americans likely to stay near the hearth and traditional festivities taking a larger role in the aftermath of the Sept. 11 attacks, Thanksgiving feasts promise to be more heartfelt than usual, and that's good news for the growers. ``We do well when people stay close to the home front,''​ said Chris Phillips, a spokesman for the Ocean Spray cooperative that markets most of the U.S. crop. Still, the tradition-bound cranberry business is loath to discuss any possible impact from the disaster. Phillips addressed the issue only reluctantly and said firmly there will be no special promotions or steps to boost shipments. Thanksgiving, he said, is always good to growers. But the Thanksgiving tradition, dating back to the arrival of the pilgrims in Plymouth in 1620, has offered cranberry growers only small comfort as their way of life has been threatened by a crisis of oversupply and falling prices, Gilmore said. ``Tradition plays a role in what we do, but the driving force is the business of making a living,''​ he said. Until the late 1990s, cranberry farmers at the Ocean Spray cooperative enjoyed what seemed like a permanent cycle of increasing production and growing demand. Their crops sold readily at prices that allowed good profits and a pastoral lifestyle that was the envy of many other farmers. ``For years, you could earn a comfortable living with about 25 acres of land, which was very unusual for a farmer,''​ Gilmore, who farms about 70 acres of cranberries in southeastern Massachusetts, said during a recent trip through the heart of cranberry country. ``We thought it would go on forever, but we learned that was not the case,''​ he said. As the demand for cranberries exploded in the 1990s, pushed by strong marketing, new products and studies showing health benefits from the tart juice, prices spiralled higher and growers put more acreage into production. Competition for cranberries led some growers to start their own companies and put even more fruit on the market. But decades of growth in sales of cranberry products slowed in the 1990s and the industry tumbled into crisis under pressures brought about by a glut of fruit, plummeting prices and poor product innovation at the Ocean Spray cooperative, the nation's largest cranberry producer. Returns on 100 pounds of Ocean Spray cranberries, known in the industry as a barrel, peaked at $60.50 in 1996 after more than a decade in the $50-$55 range. Independents were able to get $80-$100. As production boomed and demand growth slowed, the industry came crashing back to earth. Prices fell, and then fell some more. In 1999, the industry bottomed out. That year, a barrel of cranberries was worth only $11.23, far below the roughly $30 a barrel cost of production. In response the federal government enacted crop limits to buoy sagging prices. Things got so bad late that year, the grower/owners of Ocean Spray looked hard at selling the company after more than 60 years of cooperative ownership. Instead, Ocean Spray removed its leadership, fired virtually its entire board and hired veteran corporate executive Rob Hawthorne from food company Pillsbury to turn things around. Now, Ocean Spray says the crisis is easing and that a restructuring of its business, new product launches, increased marketing and control of the supply of fruit have sparked a turnaround that will return its cranberrygrower/owners to their once-profitable life. After taking over in January 2000, Hawthorne wasted little time before giving Ocean Spray a good shake. He shrank the board and added several outsider members. He cut the coop's costs by $80 million (89.5 million euros) and reorganised its cranberry, grapefruit and ingredients teams to work together more efficiently. The company has also moved to boost demand with new product launches and increased marketing. Product development, once a main force behind the company's success, but recently a division lacking innovative fire, has also received a major infusion of cash. Along with crop limits, these efforts have started a turnaround, said Ocean Spray's Phillips. ``For nine consecutive months, we've had growth in base sales volume,''​ Phillips said. ``Market share has come back to about 50 per cent from a low of 40 percent.''​ Ocean Spray is forecasting returns per barrel of berries of $17-$22 for the 2000 crop, rising to $21-$27 per barrel for the 2001 crop and up to $27-$37 per barrel for the 2003 harvest. White cranberry juice, produced using berries harvested several weeks earlier than normal, hit stores in September backed by a $15 million (16.78 million euros) advertising campaign. A further $15 million (16.78 million euros) campaign is expected to boost Ocean Spray's traditional juice line. The efforts should lift proceeds to growers, which were $59 million (66 million euros) in fiscal 2000, to $142 million (158.9 million euros) in fiscal 2001 and $172 million (192.5 million euros) in fiscal 2002, Phillips said. Officials are pleased by the reversal, but they have no illusions that the job is done, Phillips said. ``Even though we're feeling that momentum here at headquarters we are very mindful of the fact that the pace of the turnaround may not be fast enough for the growers,''​ he said. ``We have a long way to go before we regain their confidence and return them to the way of life they deserve.''

Related topics: Suppliers

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