Ocean Spray Cranberries, Inc.

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Ocean Spray Cranberries, Inc.

also known as: ocean spray

founded: 1930

Contact Information:

headquarters: 1 ocean spray dr.
lakeville-middleboro, ma 02349 phone: (508)946-1000 fax: (508) 946-7704 toll free: (800)662-3263 url: http://www.oceanspray.com

OVERVIEW

Ocean Spray Cranberries, Inc. harvests, processes, packages, promotes, distributes, and sells almost all of the cranberries grown in the United States and Canada. In 1997 it had more than 950 growers who elect a 25-member board of directors from within the membership, which is charged with hiring company management responsible for finding markets for the growers' fruit. Ocean Spray is best known for its fresh and processed cranberries, but this grower-cooperative also counts grapefruit growers among its members. The organization is the marketing arm of its grower-members. Ocean Spray's trademark blue and white logo can be sound on supermarket shelves in many countries worldwide.

The Ocean Spray cooperative was formed in 1930 to centralize marketing of cranberries and cranberry products. The company develops and markets products and devises better ways to grow and harvest their growers' crops. The company has also been an innovator in containers, producing the first juice boxes and plastic containers for juices.

Ocean Spray's primary objective is to create increasing demand for cranberries and grapefruit. In addition to introducing new juice blends every year, the company has developed a line of 100 percent fruit juices and licenses its name to other companies that put Ocean Spray cranberries in their products, such as cookies, gelatin, and candy. Looking ahead, the cooperative wants to continue expanding its product line and develop new products with health and nutrition claims.

COMPANY FINANCES

Ocean Spray reported record sales of $1.44 billion in 1997, up just 0.35 percent from sales of $1.43 billion in 1996. Profits were up 9.2 percent in 1997 to $273 million. The company's 1996 sales were 5.3 percent higher than 1995, a reported $1.36 billion, while profits were down 9.4 percent for the year, $250 million from $276 million in 1995.

ANALYSTS' OPINIONS

Some analysts look favorably upon Ocean Spray, pointing to the cooperative's willingness to experiment. Instead of concentrating just on cranberry drinks and blends, the company is willing to explore other fruit combinations. The New York Times proclaimed that "Ocean Spray Cranberries, Inc. has managed to take the homely, tart-tasting little cranberry beyond the familiar sauce of the holiday season to a range of products like sherbet and yogurt, cookies and muffins, and even bagels."

HISTORY

In the early 1900s, Boston lawyer Marcus L. Urann developed a recipe for cranberry sauce that could be preserved in tin cans. He began marketing his product under the name "Ocean Spray." Limiting his product line to whole or jellied cranberry sauce, he acquired a reputation as an expert promoter and producer, and he soon became known as the "Cranberry King." A shrewd businessman, Urann saw the benefits of joining with other cranberry growers to market and sell cranberry products to the general public. In May of 1930 he approached the owners of the Makepeace Preserving Company and Enoch F. Bills Company with a monumental proposal. Urann told the cranberry growers that competition between the three was hurting each company and suggested that they form a partnership. That same year, the companies merged, creating a new grower cooperative called the Cranberry Canners, Inc.

The newly formed company immediately began recruiting independent cranberry growers to join the cooperative. Originally, most growers were from Massachusetts, but by 1940, the cooperative boasted members from Wisconsin, Washington, and Oregon. In 1997 the cooperative contained more than 950 growers across the United States and Canada.

At first, Cranberry Canners produced whole and jellied cranberries, introducing the first cranberry juice cocktail in the late 1930s. During World War II, sugar and tin shortages could have spelled disaster for the cooperative, but it was found that dried cranberries served as a convenient and nutritious food item used by the armed services. After the war, the company introduced fresh, bagged cranberries for purchase by consumers. In the 1950s new introductions included frozen relishes, cranberries mixed with other fruits, and a line of dietetic cranberry products as well as frozen whole cranberries. During this time, the company's name was changed to Ocean Spray Cranberries, Inc. to take advantage of the popular brand name. Near the close of 1959, Ocean Spray had posted sales of $25 million. Trying to expand and create more demand, Ocean Spray introduced a new line of cranberry drinks in the 1960s. First came CranApple, followed by GrapeBerry (now known as CranGrape). Sales soared and in 1974 the cooperative reached $100 million in sales.

With new products being introduced and demand rising, new harvesting methods were developed. Before the early 1960s, growers manually scooped cranberries. After that time, dry harvesting with mechanical pickers became the norm. This method allowed for more cranberries to be harvested, enabling supply to keep up with demand for the fruit.

FAST FACTS: About Ocean Spray Cranberries, Inc.

Ownership: Ocean Spray is a privately owned company.

Officers: Tom Bullock, CEO; Kevin Murphy, Exec. VP & COO; John Henry, VP Grower Relations & CFO

Employees: 2,500

Chief Competitors: Ocean Spray competes against other growers of cranberries and grapefruit. It also competes against makers of fruit juices and other fruit products. Some competitors include: Del Monte; Dole; and Northland Cranberries.

In the 1980s Ocean Spray introduced the first line of non-cranberry juices, with Mauna La'i (a blend of Hawaiian fruits) being the first. Through the 1980s and 1990s new cranberry blend drinks continued to be introduced, as well as a line of grapefruit drinks and blends. The cooperative also developed non-drink products, such as Craisin, a dried and sweetened cranberry, and licensed its name for candy and other products. In the late 1990s, Ocean Spray began testing a new line of single-serve juice drinks called Wild Cider. Targeting 18- to 22-year-olds, Wild Cider came in four flavors: Cranberry Crabapple, Kiwi Watermelon, Peach, and Cherry. During this time, the company also moved into the cereal market. Kraft Foods introduced its Post Cranberry Almond Crunch, which featured Ocean Spray sweetened dried cranberries as a main ingredient.

STRATEGY

From 1987 to 1997, increase in volume has been the route to prosperity. Return has been held at $55 per barrel as the company invested in expanding its business. Through this period, cranberry volume increased 48 percent, while producing acreage increased just 24 percent. The improved productivity resulted in part from better agronomic practice brought about by Ocean Spray research, training, and monitoring on behalf of the growers. Yields at specific sites have been increased from 120 barrels per acre to as much as 300 barrels per acre.

Ocean Spray wants to capitalize on its brand name to expand more into fruit businesses not associated with cranberries or grapefruit. The cooperative would like to make these subsidiaries outside of the Ocean Spray company, taking them public or selling them.

In 1998 Ocean Spray acquired part of Nantucket Nectars, a producer of single-serve juices. Nantucket would operate as an independent unit, making its own drinks and those under the Ocean Spray label. The acquisition gives Ocean Spray a single-serve line popular with young consumers and beefs up its distribution line. Ocean Spray distributes its single-serve products through Pepsi-Cola Company, an alliance that has been uneasy at best. While Ocean Spray extended its agreement with Pepsi through 2001, the acquisition of Nantucket gives the cooperative more options.

INFLUENCES

Ocean Spray was devastated right before the Thanksgiving of 1959, when a U.S. Department of Health, Education & Welfare report was released stating that a newly used pesticide sprayed on cranberries caused cancer in laboratory rats. A simple inconvenience for those wanting to celebrate a traditional Thanksgiving dinner complete with cranberry sauce, it almost bankrupted the company. Grocers quickly pulled all cranberry products off of store shelves, and sales for that year's crop plummeted.

The "cancerberry" scare was unfounded, but it brought to Ocean Spray the realization that it was too dependent on a single product line and needed to diversify. Parlaying market sensitivity and resource-multiplying strategic partnerships, Ocean Spray has completely reinvented the cranberry in new products, distributed into new outlets, and penetrated foreign markets, building a $1.5 billion business without the acquisitions typical of the industry.

The 1970s brought increasingly health-conscious consumers looking for alternatives to soda pop. Ocean Spray had the answer, and marketed its juice line with the slogan "It's Good for You, America!" Responding to this growing concern over healthy diets and the company's desire to diversify its product line, Ocean Spray joined with citrus growers in Florida's Indian River to market the first shelf-stable citrus beverage in 1976.

In the early 1990s, growers from outside the cooperative received 10 to 15 percent more per barrel from independent buyers than Ocean Spray paid its members. The independents were able to do this by capitalizing on Ocean Spray's successful marketing of cranberry products. Ocean Spray's market share dropped from 90 percent to 78 percent in about a four-year period, as more private-label (those used by supermarkets) cranberry drinks appeared. Ocean Spray executives predicted that in the near future, cranberry supplies would increase and prices to independent growers would lower, all to the benefit of Ocean Spray. However, in 1997 Ocean Spray's market share dipped to 75 percent and a shortage of cranberries hampered the cooperative's quest for global expansion. Instead, the cooperative expanded domestically, adding cranberries to more than 200 products, including gelatin, bread, cereals, vodka, and candy.

CHRONOLOGY: Key Dates for Ocean Spray Cranberries, Inc.

1912:: The Ocean Spray name is conceived by Marcus L. Urann for his cranberry sauce
1930:: Three major cranberry companies merge under Urann to form Cranberry Canners, Inc. marketing the Ocean Spray brand
1939:: Cranberry Juice Cocktail and Ocean Spray Cran debut
1941:: Wisconson, Oregon, and Washington growers join the cooperative
1944:: Cranberry Canners becomes National Cranberry Association
1959:: Department of Health, Education and Welfare found a weedkiller used on Washington and Oregon berries caused cancer, ruining sales for that year; company name changes to Ocean Spray Cranberries, Inc.
1963:: Ocean Spray introduces its first ever juice blend with Cranapple
1974:: Sales reach $100 million for the first time
1979:: The Federal Trade Commission decides not to file antitrust proceedings against Ocean Spray
1985:: Acquires Milne Fruit Producers
1992:: Ocean Spray signs an agreement with PepsiCo for distribute single-serve juices
1993:: Nabisco and Ocean Spray team to make Cranberry Newtons
1998:: Ocean Spray purchases Nantucket Nectars

CURRENT TRENDS

Ocean Spray led the way in drink packaging, being the first to introduce what are called juice boxes. The company also was the first to offer drinks in plastic, recyclable bottles and now also offers a plastic gallon container.

An area with potential is selling functional foods with health and nutrition claims. CEO Tom Bullock has urged the industry to spend more on research and development to give the public the nutritious drinks it wants. Bullock is afraid consumers will become jaded from products not producing the benefits they claim. Bullock stated that open and honest communication with the public is the way to stave off unscrupulous producers and retain brand loyalty.

PRODUCTS

Ocean Spray products include fresh and frozen cranberry products, particularly blended fruit juices of cranberry and grapefruit. There have been a total of 48 new Ocean Spray products introduced since 1989. Of these, 70 percent remain on the market. The industry standard is that about 10 percent are on the market after a few years.

Ocean Spray has also taken its name and reputation to other companies, such as with cereal companies, Duncan Hines baked goods, and Warner Lambert, who now has Ocean Spray-branded Fruit Waves candy. These types of arrangements in which cranberry is used as a flavoring or food ingredient increased its use from 2 million pounds in 1985 to 25 million in 1995.

I, LITTLE WHITE HEN, TAKE YOU, LITTLE RED CRANBERRY

The end of World War II found Ocean Spray putting renewed energy into its advertising and publicity for its broadening product line. The 1948 Massachusetts Cranberry Festival was enlivened by a humorous skit featuring the "marriage" of chicken and cranberries. In a ceremony that brought the festival to a close, "the Little White Hen and the Little Red Cranberry became flavor-mates forever and vowed always to appear on the dinner tables of the nation," according to Ocean Spray. The wedding was preceded by a one-year courtship between chicken and cranberry sauce fostered by the National Cranberry Association in an effort to make the combination "as inseparable as lamb and mint jelly, pork and applesauce." In 1952 Ocean Spray launched its first television commercial—a spot plugging the year-round use of chicken and cranberry sauce.

THE EARLY YEARS OF THE CRANBERRY

Aside from blueberries, cranberries are the only fruits indigenous to America's wetlands environment. There are more than 100 different varieties of the fruit, which once provided the North American Indians with a rich source of Vitamin C and were a main ingredient in pemmican, a high-energy cake of crushed cranberries, venison, and melted fat. The Wampanoag tribe members also presented the Pilgrims with the fruit as a sign of peace, and the red berries were very likely on the menu during the first Thanksgiving feast in 1621. Early American colonists named the unusual fruit "crane-berry" because of the resemblance of the cranberry bush's flower to the head of a crane.

The fruit became popular and was exported to Europe in the eighteenth century. Whaling ships carried barrels of cranberries to supplement crews' diets; the fruit's high Vitamin C content helped ward off the scurvy that plagued sailors during the long months at sea. It wasn't until 1810, however, that they were cultivated on a large scale. Captain Henry Hall of East Dennis, Massachusetts, noticed that wild cranberries growing near his home flourished after the wind blew a covering of sand over the young spring growth. The covering caused the new shoots to root and the vines to spread more rapidly. Hall experimented by transplanting some of the vines and covering them with sand. The process worked and wholesale cranberry cultivation began soon thereafter.

Ocean Spray continues to introduce new juice blends and has announced a line of 100 percent juice drinks. New products for 1997 and 1998 include CranTangerine and CranMango. In the 100 percent juice line, Cranberry and Granny Smith Apple, Cranberry and Key Lime, and Cranberry and Georgia Peach juices have hit the shelves.

GLOBAL PRESENCE

Foreign sales account for 6 percent of Ocean Spray's total sales. The company's overseas markets include the United Kingdom, Australia, and Switzerland. The company typically establishes partnerships in which it ships unprocessed fruit to a local bottler for creation of the drinks, then works with a local marketing organization to promote its products. In some nations, Ocean Spray exports its pre-bottled juice to a local distributor.

Ocean Spray often has had problems in new markets outside the United States because the cranberry is an unknown fruit, as is the brand. The company has entered these markets with its grapefruit drinks to build brand loyalty before introducing its signature cranberry blends.

SOURCES OF INFORMATION

Bibliography

"Bogged Down." Forbes, 6 December 1993.

"The History of Ocean Spray Cranberries, Inc." HARVEST Magazine, spring 1981. issues.

Khermouch, Gerry. "OS Seen Close to Buying Nantucket." Brandweek, 1 December 1997.

"Ocean Spray Cranberries, Inc." Hoover's Online, 29 May 1998. Available at http://www.hoovers.com.

The Ocean Spray Cranberries, Inc. Home Page, 2 June 1998. Available at http://www.oceanspray.com.

Stevens, Tim. "Making Waves: Product Innovation, Widespread Distribution, and Global Expansion Set the Table for Growth at Ocean Spray." Industry Week, 18 November 1996.