Cranberry Stressline

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July 8-14, 2000

7/14/00 Farrimond, Decas and Phillips - in The Middleboro Gazette | 7/14/00 On the Kenosha plant layoffs - from The Kenosha News | 7/13/00 Property tax relief for S.W. Washington - from Farm Bureau News | 7/13/00 Pillsbury and General Mills may join - from Reuters. | 7/13/00 Tropicana up 10% in quarter as Pepsico scores overall gains - from Press Release |7/13/00 - Do you know who Dennis Derammelaere, (a.k.a. "dRom") is? Snapple hopes your kids do. | 7/13/00 Muskrat troubles - in The Standard Times | 7/13/00 Cranberries a new cash crop in....Maryland? from The Washington Post | 7/13/00 Cranberry grower sues town officials in E. Bridgewater - from The Patriot Ledger | 7/12/00 Marketing order gets a mixed reaction - in The Cape Cod Times

On food industry consolidation

7/14/00 Connie Hays, who covers Coke, Pepsi, and Ocean Spray for the New York Times, writes "in a move that could mean the corporate union of Betty Crocker and the Pillsbury Doughboy, General Mills Inc. said yesterday that it was in talks to acquire the Pillsbury division of Diageo P.L.C." She suggests that the recent mega-mergers of food companies are corporate reactions to the globalization of the supermarket industry under a hand full of international players stating that "in recent years, consolidation among supermarket chains has left the industry with a handful of large multinational players, leaving food makers scrambling for position. The prevailing thinking, that larger food companies make better global suppliers, has led to mergers like the $20.3 billion proposed acquisition by Unilever of Bestfoods, which was announced last month, and the $14.9 billion proposed purchase of Nabisco by Philip Morris."

Could the joining of General Mills and Pillsbury open the door to the newly formed food giant expanding onto the beverage aisle with a cranberry based line? The following is an excerpt from the New York Times article:

A sale of Pillsbury "would open up other options," said a Diageo spokeswoman, Kathryn B. Partridge, adding that the company was likely to purchase brands "within the beverage-alcohol category."

Read entire article in The New York Times


Inaccurate story on USDA cranberry purchase hits the media via article in the Philadelphia Inquirer

7/11/00 8:00PM Updates and clarifications in red.  -- An article in the 7/10/00 Philadelphia Inquirer (click here) said:

Call them welfare berries.
The federal government has said it will help bail out the cranberry industry by beefing up its commitment to buy unwanted fruit. The U.S. Department of Agriculture has agreed to buy 30.4 million pounds of cranberry products in the coming months through its commodities-surplus program. The move is meant to help save farmers from overproduction and a dramatic drop in prices.
The agency is negotiating with programs that feed the poor to find out if the cranberry products - cranapple juice, canned cranberry sauce, and trail mix with cranberries - are wanted. "We call it a bonus buy," said George Chartier, a USDA spokesman. "It's an estimate of what we intend to buy if we have the takers." He said the agency would know in the coming weeks if it could go ahead with the purchase.

Update: 7/12/00  On June 5th, 2000, Kathleen A. Merrigan, administrator of the USDA's Agricultural Marketing Service, issued the following announcement (see below in red) regarding cranberry purchases for the needy families and child nutrition, and other related domestic programs as listed below:

  • dried cranberries - 30 oz size - 120,000 cases

  • cranberry sauce - 24 x 3000 - 229,500 cases

  • canned cranapple - 46 oz. - 273,600 cases

  • trail mix - 24/1 lb. - 145,600 cases

  • trail mix - 5/5 lb. - 72,800 cases

As noted below, cranapple is 12-18% cranberry; and trail mix is about 20%. Deliveries will be made between July 1 and Sept. 30, 2000.

You can read this AMS announcement in PDF here. According to USDA spokesperson George Chartier "The June 5 announcement is not an invitation to bid. On June 5 AMS announced its intention to buy, pending subsequent investigation and, hopefully, confirmation from FNS that adequate matching recipients exist.  Only then would we issue a formal invitation to bid. That hasn't happened yet."

Bloomberg News, a business wire service, picked up this story yesterday and Greg Gatlin, the Boston Herald business reporter who covers the industry called Stressline about it last night just before deadline. This was the first that we had heard of it. The Boston Herald put the story in their morning edition with the headline "Feds will buy 30.4M. pounds of cranberries" (click here), and the Boston Channel 7 news carried it in their early morning report, making it sound almost like a "done deal." The Boston Herald reported accurately that "the USDA was said to be negotiating with programs that feed the poor to find out if cranberry products are wanted. Ocean Spray Cranberries Inc. spokesman Chris Phillips could not confirm the plan." The crucial part that was left out in these reports was George Chartier's last quote in the Philadelphia Inquirer that the USDA "would know in the coming weeks if it could go ahead with the purchase." 

The Philadelphia Inquirer missed another important fact. According to George Chartier, USDA public affairs specialist, he told the Inquirer the following:

Before the USDA, through their Agricultural Marketing Service, can even open bids for a commodity, their Food and Nutrition Service has to make sure there are matching recipients, and they must establish exactly how much product is needed. This determination has yet to be made. The specific number of 30.4 million pounds of cranberries, which tended to give credence to the story, is based on the reporter's miscalculation of the figures. Preliminary estimates are as follows:

  • 6.4 million pounds of dry cranberries
  • 6.9 million pounds of canned cranberry sauce (purchasing this traditionally seasonal cranberry product and will help promote the idea that cranberry sauce isn't just for the  turkey holidays)
  • 10.2 million pounds of cranberries and apples for cranapple which is from 12 to 18% cranberry
  • 5.3 million pounds of cranberries of trail mix which is about 20 % cranberries (about a million pounds of cranberries)

These figures don't add up to 30.4 million, so it is unclear just how this number was determined. The actual figure will be more like 15.5 million pounds.

Another error in the article is the statement that the "long-term solution is for consumers to buy more. Toward that end, cranberry growers have agreed to pay into a nationwide campaign fund to boost sales." While the Cranberry Marketing Committee would administer such a program, the establishment of a  domestic generic promotion program is in a  preliminary fact finding phase.  Economist and marketing expert Dr. Harry Kaiser of Cornell University is offering suggestions to the CMC subcommittee on generic promotions. According to David Farrimond, preliminary figures are that a modest program, without television, would cost from $750,000 to $1,000,000 and would be paid for by the cranberry industry itself.

Opinion:

Welfare berries, indeed...

The first sentence of the Inquirer article says "call them welfare berries."  By using the term welfare and then continuing with "the federal government has said it will help bail out the cranberry industry by beefing up its commitment to buy unwanted fruit," the article puts a negative connotation on the well established practice of tying in government food program purchases with the needs of agriculture through the Commodities-Surplus program.  Excess cranberries are not unwanted fruit, they are a surplus that can be used to  good advantage. Since AMS uses Federal dollars to purchase foods for the National School Lunch programs and other Federal Feeding programs, the cranberries will be used to help feed, and nourish, many less fortunate Americans. 

The Philadelphia Inquirer should not have allowed editorializing in a news story; and they should have made sure they had their facts straight as well. In one short article, indeed, in one sentence, they managed to slam both the Commodities-Surplus program and the National School Lunch program. 

Northland drops support for CI

7/14/00 According to an announcement in the July/August Cranberry Institute newsletter, Northland Cranberries has declined to pay its annual dues for the 2000/2001 fiscal year. Northland has been the CI's second largest Supporting Members since 1994.  Northland CEO John Swendrowski is quoted as follows: "..the Institute is an excellent organization If the economic climate changes, we will be back." 

From the newsletter: "The CI wishes Northland a return to economic stability and looks forward to their return as a CI supporting member."



Ocean Spray hopes for the Hawthorne magic


Tomato co-op files bankruptcy, cites mismanagement and over-supply

7/11/00 In a scenario eerily reminiscent of the crisis at Ocean Spray,  California's Tri-Valley Growers has declared Chapter 11. The Sacramento Bee states that "the cooperative claims that the tomato business, plagued by oversupply, is at the root of the problem. But growers, who own the operation and hire a management team to run it, see the problem differently. Oversupply of tomatoes is one problem, some grower-owners contend, but a bigger one is years of mismanagement."

The cooperative has 500 grower members and is one of the largest tomato co-ops in the United States. It processes and packs fruit for such brands as S&W and Red Pack tomatoes. Article in the Sacramento Bee


Makepeace development plans, not quite as big as Disney World 

"New England's largest cranberry grower, the A.D. Makepeace Co., wants to build a community of village centers, with an office complex and retail stores, interspersed across the landscape that for 130 years has been known as cranberry country."

 7/10/00 Boston Globe South Weekly


BevNet announces selections for 10 hottest summer beverages

7/12/00 BevNet predicts many thirsty consumers will bypass the Pepsi and Coke machines and vendors this summer and choose instead to quench their thirst with the following:

  • 1. Clearly Canadian Sparkling Waters
  • 2. Red Bull Energy Drink
  • 3. Snapple Elements
  • 4. Nantucket Nectars Freshly Blended
  • 5. Jones Whop Ass Energy Drink
  • 6. SoBe Lean Diet Beverages
  • 7. Mistic Zotics
  • 8. Virgin Hi-Energy Drink
  • 9. Arizona Rx Enhanced Elixirs
  • 10. Stewart's S Diet Sodas

Read press release here.

 

 

Welch hopes to promote single serve from sponsorship of Sail Boston 2000

According to Sail Boston's organizers, roughly 40 companies have agreed to pay about $50,000 each in sponsorship fees, either in the form of cash or services, or a mix. A $50,000 sponsorship may be a comparative bargain. Ocean Spray Cranberries Inc. of Lakeville agreed to pay $5 million to be a sponsor of a tall-ships event called OpSail.

7/8/00 Boston Globe business reporter Chris Reidy, who also writes about the cranberry industry for The Boston Globe, discusses commercial sponsorship of Sail Boston 2000 here.


USDA issues marketing order

SUMMARY: "This rule establishes the quantity of cranberries that handlers may purchase from, or handle for, growers during the 2000-2001 crop year, which begins on September 1, 2000, and ends on August 31, 2001. The order regulates the handling of cranberries grown in 10 States and is administered locally by the Cranberry Marketing Committee (Committee). This rule establishes a marketable quantity of 5.468 million barrels, allows for some adjustment of this figure based on final calculations of sales histories, and establishes an allotment percentage of 85 percent. This action is designed to stabilize marketing conditions and improve grower returns. Fresh and organically-grown cranberries are exempt from the volume limitations to facilitate marketing of these products. This rule also revises the method in which growers' sales histories are computed and suspends certain dates in the order which are impractical." Read entire document here. 


Previous

Excerpts from, and links to, newspaper articles on the marketing order

Added 7/10/00 "No cranberry grower can possibly make a living at that kind of pricing," said Darlington, an Ocean Spray grower from Pemberton Township, N.J., who produced roughly 72,500 barrels of the red velvet berries last year on 350 acres of bogs.... "The surplus destroying the industry should have been foreseen" a long time ago, said Alvan Brick Jr., an independent grower from Medford, N.J. "Ocean Spray thought we could market our way out of a surplus," but they were wrong.... "We've done what mankind has done since day one. We found a void and we've filled it to overflowing," said John Sager, a stockbroker who also grows cranberries near Wisconsin Rapids, Wis. From The Philadelphia Inquirer

Ocean Spray spokesman Christopher Phillips said the market order is ``good news. We supported the crop limit as part of the solution. The responsibility is ours as the industry leader to market, market, market cranberries and do what we can to rejuvenate the industry.'' Decas Cranberries owner John Decas, an independent cranberry handler and harsh critic of Ocean Spray, called the order an "immoral disgrace'' that cannot be implemented fairly. "Whatever Ocean Spray wants, Ocean Spray gets. They are the Microsoft of the industry. They created the problem with their huge surplus of berries. This is just a dumping program to help them out," he said. From The Patriot Ledger 

"Northland as a company supported the order," said John Swendrowski, chairman and chief executive officer of Northland. Swendrowski said he wrote the USDA urging the enforced reduction. "It's an attempt to take the first step in correcting the oversupply issue we all face as an industry," he said. Tom Lochner, executive director of the Wisconsin State Cranberry Growers Association, said Thursday that the group took a neutral position on the volume regulation. "There were a lot of growers who had concerns on how it would impact their individual operations," Lochner said. "And it's a little late in the season for growers to start thinking about crop reduction."  From The Wisconsin Rapids Daily Tribune

Don LeClair, a Norwell grower, described the marketing order as necessary short-term pain. Some sacrifices must be made now to increase the chances of long-term survival. From the Boston Globe 

Crop limits won't lead to higher prices on those products for consumers, Phillips said. Ocean Spray plans to cut prices to spur sales of juices and other products, he said. Still, some area independent cranberry growers have called the quotas unfair, saying the federal limits will hurt smaller growers that, unlike Ocean Spray, don't have a cranberry surplus. But grower reaction to the crop limits has been muted, said industry tracker Hal Brown, who operates the cranberrystressline.com Web site. Some growers had expected the quotas. ``To tell you the truth, I don't think there's been as much reaction,'' Brown said. ``From a psychological impact, people are burned out. There's been so much animosity and so many hard feelings.'' Phillips conceded that some of the ``pinch may seem heavier on smaller growers,'' although he added that all growers will feel it. From The Boston Herald

Jeff LaFleur, executive director of the Cape Cod Cranberry Growers Association in Wareham, said that although the announcement is not unexpected, the timing is troublesome for many growers. "It is nearly impossible to decide when it's at peak bloom for many cranberries, that you should grow less fruit," he said. "The growers have some very tough decisions to make in the next several months. It might have helped if the USDA had made the announcement sooner." From The New Bedford Standard Times

Harwich cranberry grower Linc Thacher yesterday said he was not surprised that Secretary of Agriculture Daniel Glickman approved the marketing order. He said he supports the restriction because it may chip away at the huge surplus, but noted there will be many casualties along the way. "We can get by a year or two by borrowing, but the scary part is we don't know how long it will last," he said. "Banks are doing all they can to help growers, but all that does is buy some time." From the Cape Cod Times |

Other newspaper articles: Washington Post | Milwaukee Journal Sentinel7/6/00 - Associated Press


 

 

 

 

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