Cranberry Stressline

9/8 to 9/14/99

* Psychological Perspective:Why aren't more food companies merging?
* Hershey learns about SAP the hard way
* Ocean Spray - Despite rumors, coop denies consultants "actually running company"
* Media Speculation: Pepsi most logical - Unnamed Pepsi spokesman says corporation "doesn't comment on rumors"
* New Jersey: Wetland expansion questioned
* Web Sites: Communication: Co-ops and Corporations - Disclosure is what it's all about.
* Makepeace merger position clarified: "I presume major worldwide companies are major, billion-dollar companies. That's our understanding of what a strategic merger would involve.'' Bob Rosbe
* National Media: Los Angeles Times, Boston Globe print Ocean Spray story
* Northland - Ocean Spray alliance worth discussing, according to John Swendrowski
* Makepeace media statement: A.D. Makepeace Company board of directors advocates consideration of a strategic merger of Ocean Spray
* Makepeace position reported - Patriot Ledger interviews spokesmen
* Opinion - Ocean Spray International


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Psychological
Perspective:

Why aren't more food companies merging?
by Hal Brown

...a primary impediment to mergers is psychological, and perhaps even psychosexual! They say that a big hurdle is that "new CEOs at many food companies want to sow their wild oats and make their mark on their companies."  Even the symbolism is phallic as John McMillian, from Prudential Securities, is quoted "you've got a bunch of young CEOs who don't want to give up the corporate jet -- they're all in a little bit of denial".

8/14/99 According to Wall Street Journal reporters Nikhil Deogun and Shelly Branch ("Food makers facing heat to cook up some mergers", ( WSJ  fee site 9/13/99 ), the time is ripe for deal making between some of the best known food companies. Campbell Soup, H.J. Heinz, Kellogg, and Hershey have all seen profits dwindle. While Ocean Spray is conspicuously absent in the companies listed, perhaps because the cooperative doesn't quite register on Wall Street seismographs, it obviously meets the criteria as a company which can no longer go it alone, but can reemerge from a strategic merger or acquisition stronger than ever. Many companies seem to be resisting mergers. Continued | easy to print version


Hershey learns about SAP the hard way

9/14/99 According to a story in the Wall Street Journal (Sept. 14, 1999, "Hershey to miss earning estimates, expecting $150 million loss in sales"), the company once known for its great success with virtually no advertising budget will miss Wall Street predictions for annual earnings by 10%. The blame for this is one familiar to those following the introduction of the ERP / SAP  (link) program at Ocean Spray. Originally reported on in March in Cranberry Stressline, Ocean Spray budgeted over $30 million dollars to implement this high tech method of assuring efficient distribution only to find that it simply didn't work. Had they done their homework ( everything a CEO needed to know about ERP was in this article from Strategy and Business), they would have learned what corporations like Dell Computers learned the hard way. Dell spent $100 million for a similar program only to scrap it entirely in order to design their own for another $100 million. Continuedeasy to print version

Applied Tactical Systems, Inc.: Read about an SAP company that lists Ocean Spray as a client.


Pepsi Press Release:

9/14/99 PepsiCo, Inc. Names Executives to Lead Frito-Lay North America and Tropicana


Ocean Spray

Despite rumors, coop denies consultants "actually running company"

9/13/99 Quoted in the Sunday Boston Globe Business Briefs, Ocean Spray spokesman  Chris Phillips denied rumors that consultants from Bain were running the cooperative stating "that's simply not true." He did elaborate on the role of these top business consultants noting that Bain:  ''is working with our board and management team so that we can position ourselves for the future, and will continue to be involved with us for several months.''

According to the Globe article, Bain has been working with the ERP/SAP system in order to resolve the distribution problems that have plagued the cooperative, leaving store shelves empty.

The article also contained an announcement that Ocean Spray will be introducing a 100 percent juice line and a cranberry juice drink containing calcium and vitamins A, C, and E. later this month. Boston Globe article.


Media Speculation:

Pepsi most logical
Unnamed Pepsi spokesman says corporation "doesn't comment on rumors"

9/13/99 In a Boston Globe Article by Chris Reidy (9/11//99) Pepsico is named as the object of speculation as the most likely candidate to acquire all or part of Ocean Spray. Understandably, neither Ocean Spray or Pepsi will respond to "rumors". A spokesman for Pepsi is quoted as saying the corporation "doesn't respond to rumors."  Ocean Spray's spokeman has said for some time that it is not in "formal" talks with Pepsi. As printed in the Globe article, since the A.D. Makepeace letter to shareholders urged Ocean Spray to consider a merger with a global company with major marketing resources, fueling speculation. According to the Globe, "in addition to Pepsi, firms that might fit that decription include Coca-Cola, Quaker Oats and Cadbury-Schweppes."

All it takes is a review of the Fortune Global 500 list to add several other names to the list.


Boston Globe Article by Chris Reidy - 9/11//99


Related Stressline article: Making Peace with Pepsi


While it was still merely the stuff of an editor's fantasy, a possible acquisition by Pepsi was described in an article in Cranberry Stressline on July 18th.

 


New Jersey

Wetland expansion questioned

9/13/99 According to a report in the 9/13/99 New York Times, entitled "Groups say cranberry growers mislead on acreage needs",   the New Jersey Department of Environmental Protection and the state Audubon Society are saying that cranberry growers have been expanding into unregulated acreage while at the same time applying for Federal permission to expand in regulated wetlands.

New Jersey Ocean Spray grower/owner Steven Lee denied any wrongdoing. Describing modest expansion into upland areas on his bogs previously used to cultivate blueberries, he stated "but we have done it on our farm to the maximum extent possible without touching regulated wetlands. This is true of most of the other farmers. We are all tapped out."


Web Sites:

Communication: Co-ops and Corporations

9/12/99 Disclosure is what it's all about. Ocean Spray's public web site has but one short page devoted to providing company information. While Milne is listed as a subsidiary, you won't even find mention of Nantucket Nectars, which Ocean Spray owns. The web page called History of Innovation ends in 1997. The Product Page doesn't even list Nantucket Nectars, doesn't have the new Premium 100% Juice and still lists and pictures Wellfleet Farms.

PepsiCo, on the other hand, as a publicly traded corporation, has an entire web site containing detailed corporate information from S.E.C. 10-QA filings back to 1996, detailed earnings reports and complete annual reports. For the consumer, Pepsi offers a flashy and entertaining high-tech website, Pepsiworld. For nitty-gritty information, shareholders, journalists and professional or amateur industry analysts can find an incredible depth and breath of information on the corporate website, PepsiCo.com.

One can find only the names and states of residence for the members of the Ocean Spray Board in the annual report. But on the PepsiCo web site here's what the reader can learn about who guides the corporation: Continued | Easy to print version


Makepeace merger
position clarified:

"I presume major worldwide companies are major, billion-dollar companies. That's our understanding of what a strategic merger would involve.'' Bob Rosbe
9/11/99 Patriot Ledger

8/11/99 A furor in the cranberry community was caused in part by a misinterpretation of the article in the Milwaukee Journal Sentinel (9/9/99)  by other media reports leading people to speculate that talks were imminent between Ocean Spray and Northland. In fact, Northland President John Swendrowski only suggested this as a possibility he'd be interested in exploring, and the Makepeace media statement  made no mention of a merger with Northland.

It is well known by insiders that there has been a near paranoid response among Ocean Spray management to Northland's success in launching their 100% juice line. The current regime at Ocean Spray harbors great animosity towards Swendrowski, and it is difficult to see these individuals inviting him to sit down in Lakeville for civil talks.

Swendrowski, who pulled Northland from Ocean Spray, states in the 9/11/99 Patriot Ledger , "I wasn't pleased with management's performance for the grower. I have no animosity toward the growers.''

What many Ocean Spray shareholders who talk to Stressline find chilling is the statement that keeps popping up in press reports:   "the possibilities range from doing nothing to selling the company."  How, they ask, can "doing nothing"  possibly remain an option for a company that has, through mismanagement, put so many of its owners on the edge of financial ruin?


National Media:

Los Angeles Times, Boston Globe print Ocean Spray story
Business Brief in N.Y. Times

9/10/99 The first local print media to cover the story about Ocean Spray becoming an acquisition target due to poor management was The Patriot Ledger in which John Estrella, who has covered Ocean Spray for years, broke the story on 9/8/99 (Read article here).Today the story has been picked up by the national media. The Boston Globe and Bloomberg News Service have article titled, "Top investor wants Ocean Spray to deal", where John Sicher, the editor of Beverage Digest (who one might assume has inside knowledge) says that a corporation like Pepsi could be interested in acquiring Ocean Spray - ( Read article here ). The New York Times has printed a"Business Brief" indicating that Ocean Spray has hired Bain to consider options including a strategic merger.

The Los Angeles Times has extensive coverage with several interviews:

Ocean Spray spokesman Chris Philips declined to elaborate on the options being considered. Strategic acquisition proponent Bob Rosbe, representing A.D. Makepeace Company, noted that several international companies had already contacted Ocean Spray to discuss a merger.

According to the article, beverage industry analysts suggest that Ocean Spray "needs to align itself with a much larger company to be able to compete in the increasingly competitive juice market."   Skip Carpenter, a beverage analyst with Donaldson Lufkin & Jenrette stated "they've really done a poor job of staying ahead of the curve and bringing innovation to their brand.  Almost every aspect of their business seems to be stale." He went on to note that small companies like Ocean Spray don't have the "marketing firepower" to compete with giant corporations.

Read LA Times article here

While it was still merely the stuff of an editor's fantasy, a possible acquisition by Pepsi was described in an article in Cranberry Stressline on July 18th.


Northland - Ocean Spray alliance worth discussing, according to John Swendrowski

3:00 PM - Update-  9/10/99 "Ocean Spray merger hinted" reads the headline in this afternoon's Patriot Ledger. President of Northland Cranberries, John Swendrowski is quoted as saying  "Maybe we ought to sit down together. It might make sense to merge brands." Ocean Sprays' Chris Phillips denied any formal merger discussions with any company. Regarding a merger with Northland in particular, and referring to Swendrowski, he said "That option has no more weight than any other. There's no reason to think that's a viable option. That's just one man talking.''  Patriot Ledger 9/10/99 article

There will be another article about Ocean Spray in tomorrow's edition of the Patriot Ledger, which comes online at noon EST.

9/10/99 Is an Ocean Spray - Northland Cranberries alliance possible? The story is being reported on the Boston radio station WBZ today almost as a fait accompli,  which is hardly the case, and accurately in the Milwaukee Journal Sentinel - ( Read article here ).

John Swendrowski, President of Northland Cranberries, is open to discussing the subject. A veteran of the "cranberry wars" of recent years himself, he told Stressline that "a long time ago Marcus Urann and A.D. Makepeace sat down together and (referring to the two competitors forming Ocean Spray) the industry was well served by that alliance."


Makepeace media statement:

A.D. Makepeace Company board of directors advocates consideration of a strategic merger of Ocean Spray

9/8/99 Wareham, Mass. The A.D. Makepeace Company board of directors has become very concerned about the strategic direction of the Ocean Spray cooperative. As the largest grower/owner of Ocean Spray, A.D. Makepeace's board of directors has sent letters to all grower/owners of the Ocean Spray cooperative outlining their strong interest in promoting consideration of a strategic merger. The letter proposes that an educational process needs to take place starting immediately to help grower/owners fully understand the benefits of a strategic merger.

Over the past ten years A.D. Makepeace's own research and analysis has increasingly demonstrated the advantage to all growers of considering a strategic merger - the merger of the cooperative's juice business with a global consumer marketing company, while continuing to own and build its business as a classic handler cooperative. A.D. Makepeace's board of directors strongly believes that this alternative would best serve the financial and personal needs of all the growers.

The goal of the board of directors of the A.D. Makepeace Company is to initiate a dialogue among all the Ocean Spray grower/owners to aggressively explore the benefits of a strategic merger to put their farms and families on a secure financial basis in the future. Print this press release


Makepeace position reported
Patriot Ledger interviews spokesmen

9/8/99 Massachusetts' Patriot Ledger reported today on the efforts by A. D. Makepeace, the largest shareholder in the Ocean Spray cooperative, to effect a "growers coup" in assuring that shareholders decide the fate of the company.

Chris Phillips, speaking for the Ocean Spray management and Board, is quoted as saying "the process exists and it's important not to leap to conclusions. Some growers are ahead of the process, which is understandable. Others are in line with each others." He goes on to say "this is going to the board first and they will boil down some of this. It's on a fast track and hopefully we'll have something to go to the growers with by the end of the year."

Robert L. Rosbe Jr., representing A.D. Makepeace, noted that merging the juice business requires "the most time for growers to get comfortable to the change. Our ongoing studies of a strategic merger would appear that Ocean Spray needs more resources to go to the next level. We really need a global infrastructure.''

Beverage industry analyst George Dahlman of Piper Jaffray is quoted "I think this is just reinforcement that Ocean Spray has backed itself into a corner. The shareholder coup has already gotten going.''

Read article here


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Ocean Spray International

9/8/99 With limited resources, Ocean Spray's plans for international expansion will be severely limited. This is one of the primary reasons the label and marketing side of the cooperative must be sold to a corporation with the wherewithall to expand overseas. With little money for market research, how could Ocean Spray even determine which populace even has a taste for cranberries?

As we know, the cranberry taste is unique, and may not appeal to all nationalities. To avoid costly market research, it might be tempting to to bring the Ocean Spray label and logo into a country which already has market for citrus, with the grapefruit line. This would compete with orange juice. But such a marketing decision would be a management blunder for another reason.  Continued | Easy to print version


Pepsi News

9/8/99 Article in the New York Times, "For resurgent Pepsi, a change at the top causes concern" by Constance L. Hays -  NY Times link.

9/7/99 Pepsi has promoted the heads of its Frito Lay division, and its $2 billion Tropicana division. Press Release

 

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