EDITORIAL

The future must be now

7/30/99 One reason public corporate boards hire new CEOs who aren't prepared to lead a company through and out of a crisis is that these boards tend to be weighted in composition toward retired chief executives. Often these executives unconsciously favor applicants who are like themselves and not up to the task of strategic planning for a future very different from the era during which they presided over a company. Ocean Spray's board, composed as it is, exclusively of successful cranberry growers, doesn't have that problem, but they are human beings and are just as prone to unconsciously selecting someone they're comfortable with rather than someone with the skills to lead the cooperative into the 21st century.

A 1997 article in Industry Week about selecting CEOs bluntly states: "board members lack the skills and knowledge necessary to make sound and savvy selection and development decisions." The authors of the article state that few corporations even have a director with expertise in management development, organizational design, and strategic change management.

Boards frequently hire outside firms to conduct searches for likely candidates, but ultimately make the final decision themselves. In point of fact, Ocean Spray directors couldn't sort through and rank the resumes from scores of applicants for the position without hiring outside help. But if the past is prolog, those who depend on cranberries to earn a living should give pause.

Ocean Spray's board should study Dr. James Tillotson's article "Juices in the 21^st Century: A Futuristic Vision of the Global Fruit & Vegetable juice Industry" (below),   and hire a CEO with true "vision". Otherwise, they may so focus on regaining market share lost to Northland and other independents that they will miss the boat sailing into the millennium. In fact, to spend any of the grower's dwindling treasure on regaining market share is counterproductive. Ocean Spray will either lead the cranberry industry into the future by opening new markets, or through it's preoccupation with brand protection, and its use of bully tactics against companies that it perceives as a threat, will sink the entire industry.

Is the cooperative up to the task to break into emerging markets alone? Can a CEO be found with a stellar track record who wants to leave corporate America and lead a  cooperative like Ocean Spray into emerging markets?

The Board of Directors of Ocean Spray must seriously consider the two options to going it alone. One is "going public" with all or part of the company. This is a tempting option for directors who don't want to relinquish total control. The other is being acquired by a corporation like Pepsico, which has the ability to assure that ten or twenty years from now the entire world will be drinking not just orange juice, but cranberry juice products as well. The Board must do this now, not next week or next month. Because the Ocean Spray board is composed of fellow farmers, they cannot in good conscience allow statements like ''.... speculation about Pepsico is inaccurate...we look at companies from time to time, companies look at us. But we're moving forward as Ocean Spray.'' (Chris Phillips, in The Boston Globe) to represent cooperative planning. Whatever strategic advantage may come from withholding information from grower/ owners should be carefully weighed against the consequences with the grower / owners.

Who can forget the annual meeting a mere six months ago? The growers leaving on a high after hearing the rosy predictions for the future. They returned home to the news that prices were dropping precipitously.

Cranberry farmers economic survival depends on one simple law of economics: supply and demand. Again, as Tillotson points out, the demand will be there for those companies with the vision to successfully market to the world. To paraphrase a quote from the movie "Field of Dreams", if we grown them, they will drink.

7/29/99  The other day someone asked me what I would do if I knew that today would be my last day on earth.  In other words, he wanted to what I would do today if I knew I was going to die tomorrow.

That's a troublesome thought.  Well, for sure I wouldn't work on my income taxes. CONTINUED

7/27/99 Stressline has obtained a copy of the Complaint filed by Ocean Spray against Sunsweet on July 21, 1999 with in the United States District Court for the District of Massachusetts from the Clerk of the District Court in Boston. The complaint alleges trademark and trade dress infringement, unfair competition and dilution under the Lanham Act of 1946. Read the entire story, and judge the merits of the case for yourself: here.

7/29/99 In response to the July 21, 1999 Complaint filed in U.S. District court against prune giant Sunsweet, a number of companies have decided to avoid both Ocean Spray's ire and costly litigation, and withdraw products that may infringe on the trademark and trade dress infringement claimed by Ocean Spray. Story and pictures

Correction: An alert reader has pointed out that I erroneously attributed ownership of Snapple to Pepsico. In point of fact, Snapple is owned by Triarc.

The Institute of Food Technologists' Annual Meeting & IFT Food Expo^® is brings together food science professionals and others in the food and beverage industry from all over the world. Researchers from major universities are presenting cutting edge papers and workshops which will influence corporate decisions well into the 21st century. Unlike "in-house science" kept under the cloak of corporate secrecy, this information is presented in the true spirit of science, for all to benefit from. This premier event is being held in Chicago, Ill., on July 24 - 28, 1999.

Science: Corporate, university and public sector
Hal Brown

7/24/99 This is the weekend of the big IFT meeting in Chicago. Looking over the huge and diverse workshop schedule, one would be hard-pressed to find scientists employed by corporations sharing the results of their research.   Indeed, most of these individuals are forbidden to share proprietary information outside of their own labs. Proprietary, from what I gather, means all and any information from whether they drive a company car to the secret formula for Zippy Treats. While some states like California, have enacted legislation limiting these contractual "gag" clauses to periods of time after which scientists are free to publish   or share research elsewhere, others are bound virtually for life to the non-competition rule.Continued

Playing Hardball: Pepsi vs. Quaker

7/23/99 Two major corporations that may be considering acquisition of Ocean Spray had a go-round in court recently according to Constance Bagley, Stanford University Business School senior lecturer in law and management, as reported in today's Business   Wire. The point of contention involved written "noncompete" and "trade secrets"  agreements. It is likely that at least some employees who left Ocean Spray either signed these on hire or were required to sign agreements such as these in return for lucrative severance packages. This is  common business practice.

Pepsi successfully litigated the case involving an executive who had strategic marketing information about AllSport drink who resigned   to work for Quaker Oats, which owns Gatorade. Pepsico prevented the executive, who had signed a confidentiality agreement, from working at Quaker Oats for six months -- a period which in the world of marketing might as well be a decade. Although it is unprovable whether his knowledge really would have given Quaker a "leg up" on Pepsi,  they argued that it  would be inevitable that he would transfer some of his knowledge to Quaker Oats, and that Quaker would be able to anticipate Pepsico's maneuvers in the sports-drink market.    

7/23/99: The European Union's antitrust chief warned Coca-Cola (KO: news, msgs) Co. not to "bully" competitors.  here

The Wall Street Transcript Publishes Beverage Stock Report, Including Analyst Commentary on Coca-Cola's European Crises

NEW YORK, July 22 /PRNewswire/ -- Leading analyst David Goldman of Banc of America Securities examines Beverage Stocks in a report from The Wall Street Transcript:

In an in-depth report on Beverage Stocks (6,500+ words), analyst David Goldman reviews price targets for beverage stocks, PepsiCo's transformation, beneficiaries of strong growth in premium wine demand, an ingenious new ice business, and the outlook for Coca-Cola and Coca-Cola Enterprises following the ongoing crises in Europe.

Following the biggest recall in Coca-Cola's history, changes in quality control are forecast. Goldman asserts, ``These are behind-the-scenes changes and are not likely to be discussed openly with investors.''  Continued

Free Legal Research for the Ocean Spray lawyers

7/30/99 Lest the cooperative waste too much of the growers' money leaving no stone unturned to protect CRAN, as a service Cranberry Stressline is providing a list of some of the organizations and companies that are using the CRAN trademark or trade dress. Continued

7/29/99 Ocean Spray is suing  Sunsweet over the use of CRAN in their new product, CRANLINGS (see story left and down).  Putting the question of the law of the land aside, there are certainly questions as to whether certain marketing practices violate the rules of fair play. In the CRANLINGS case, there no doubt whatsoever that Sunsweet meant their product to be identified by the consumer as an alternative to CRAISINS.

In a press release published by Sunsweet in The Produce News (May 24, 1999), entitled "Sunsweet adds 'Cranlings' to line of specialty dried fruits" they state "CRANLINGS are intended to compete head-to-head in the dried fruit category with Ocean Spray's CRAISINS. (Sunsweet's North American vice president for marketing Howard) Nagler said Sunsweet expects to gain significant market share in the dried cranberry category due to Cranlings; unique processing method that retains more of the natural cranberry flavors."

The Cranlings package is shown in a picture next to the very different packages for the eight other dried fruit products. The press release makes it clear that among the nine products, only one, Cranlings, is going to be marketed specifically as an alternative to another companies product. I have little doubt that  Sunsweet not only wanted to differentiate Cranlings from the other products in their new Specialty Fruit line, but wanted to do so in a way that suggested it was a new consumer choice on the shelf where it would "reside" next to or near Craisins. It seems to defy logic that they would want consumers to pick up a Cranlings package when they intended to buy Craisins - (compare the packages here). There are many "above board" ways (mini-packages and in store samples, for example) to get a consumer to taste a new product. But clearly Sunsweet intended for the Cranlings package to  look close enough to Craisins for the consumer to know that it was in the same category as the leader in the dried cranberry market. The names of course aren't close at alI.

Ocean Spray isn't alleging that Cranlings sounds like Craisins, only that the use of CRAN impinges on their "ownership" of that "word", because they use it in advertising ("it's amazing what a little CRAN can do"), and, so they claim in their complaint, they made the mark famous. It could be argued that Ocean Spray made cranberries famous, as the cooperative did take fruit used primarily as sauce used to complement turkey dinners at Thanksgiving and Christmas, and made it into  a successful year round juice.

Regulating unfair competition is important. Litigation is often the only recourse a company has, and it is frequently justified. Courts now are being asked to make what shoud be common sense decisions about the ownership of trademarks and trade dress, and most interestingly, of actual words.

Ocean Spray has gone to court against giants (Pepsi) and comparative midgets (Sunsweet, and Sunmark - see below). They seem to respond to any threat to their brand aggressively, a costly endeavor when makes them appear to be a bully, or when it doesn't "pay off" in increased sales.

They also have been sued themselves. Virtually everyone in the cranberry and raisin industry knows that the court has established that a "c" added to a raisin does not a raisin make.  In a lesser known 1995 case the court also established that the words sweet and tart do not belong to Sunmark, which produced SweeTARTS, a popular fruit-flavored sugar candy most often sold in a tablet form similar to a brightly colored aspirin. Ocean Spray was sued by Sunmark under the Lanham Act and the Illinois Anti-Dilution Act because the cooperative often used the words sweet and tart, or "sweet-tart" to describe their juices. Sunmark was unhappy with the hyphenated version and took the case to court, where they lost after a three day hearing, with a magistrate judge disparaging Sunmark's chances of prevailing on the merits. Read the case decision here.

by James E. Tillotson, Ph.D., MBA
Professor of Food Policy & International Business, Tufts University

Editor's Note: Dr. James Tillotson has earned a Ph.D. from M.I.T. (Food Science and Technology, 1964), an M.A. in Biology from Boston University, and an M.B.A. from the University of Delaware. He received his undergraduate degree at Harvard University in behavioral sciences. He is the author of numerous scholarly papers. He is well known in the cranberry industry, having worked at Ocean Spray as vice president for technical research and development from 1969 to 1989. For the past ten years he has pursued his academic interest in business strategy and international business. He is Professor of Food Policy and International Business at Tufts University and adjunct professor at Michigan State University (Food Science and Human Nutrition), Fletcher School of Law and Diplomacy (International Business), and Tufts School of Medicine.

After hearing about the paper prepared at the request of the International Federation of Juice Producers for their 50th anniversary meeting in Paris, I contacted him to see if he would agree to my republishing it on Cranberry Stressline where it would be readily accessible via the Internet.

Professor Tillotson is a highly respected scholar who writes about the global juice business, not just cranberries. His article is thought provoking and must reading for those interested in what happens to the food and agribusiness sector into the next two or three decades. He raises questions that must be understood, addressed, and responded to in the marketplace by any company that wants to remain competitive in the future.

As we start the next century, the global juice industry is entering a new period of rapid change, driven by changing consumer tastes and uses for commercial beverages. To be successful in increasingly competitive markets in the new century, juice producers will need to monitor these changing consumer needs and be prepared to modify their business operations rapidly to satisfy the lifestyles of 21^st century consumers.

This paper takes a futuristic view of the changing fruit and vegetable juice market, attempting to predict changing consumer taste and usage patterns, and what strategies the industry will pursue to answer future consumer expectations on the time frame of the next few decades. CONTINUED

Ocean Spray denies being acquisition target

7/26/99 Denying reports in Cranberry Stressline, Ocean Spray spokesman Chris Phillips stated, in an article in the July 25, 1999 Sunday Boston Globe South Weekly, "Gadfly* on the Web tweaks Ocean Spray" by Davis Bushnell, that Pepsico and other corporations are not interested in acquiring the cooperative. Phillips is quoted as saying that Stressline's "speculation about Pepsico is inaccurate...we look at companies from time to time, companies look at us. But we're moving forward as Ocean Spray." At least one such company hired the top tier consulting company, The Boston Consulting Group (see story), to interview Ocean Spray growers in Massachusetts and Wisconsin about their opinions about the cooperative and how they would feel about an acquisition. Stressline stands by the suggestion that companies may be more than merely looking at an Ocean Spray acquisition.

* A gadfly, according to Webster's New   World College Dictionary: is "a person who annoys others, esp. by rousing them from complacency"

7/24/99 Food Processing: The Magazine of Strategy, Technology and Trends*, in their July 1999 front page article entitled "The 10 Best Food and Beverage Companies to Work for" by Jack Neff,  ranks Ocean Spray as number five, behind General Mills, Kraft Foods, Proctor and Gamble and Frito Lay. Numbers six through ten are Celestial Seasonings, Tyson Foods, Hershey Foods, Wm. Wrigley Jr. and Co., and Gardetto's Snacks. These ten beat out a stellar group of honorable mentions: Gerber, H.J. Heinz, the French Groupe Danone which makes Evian and Dannon, Nabisco, Kellogg and  Quaker Oats.

Aside from the obvious factors of compensation, room for advancement, job stability, location and an atmosphere that fits with the individual's personality, emphasis was put on who was at the helm of the company, whether the industry has a positive growth trend and how empowered employees feel.

Ocean Spray, the article notes, has two things going for it: somewhat geographically challenged they indicate the Cape Cod location of its headquarters, and cranberries. Who can argue with the later. Another plus they include is its "reputation for good management and strong marketing and sales operations."

The article minimizes the recent problems by prefacing their list with "sure, the cooperative has plenty of problems..." before they list the cranberry surplus, the law suit against Pepsi, and what they refer to as the "dogfight" with Northland.

They counter these negatives with the purchase of Nantucket Nectars, without mentioning the unpaid debt, and the recognition of the health benefits of cranberries. "Big growth potential" is predicted "for the cooperative that controls the lions share of the world's supply.

*The July issue is not yet on the magazine's web site, but when it does it can be read in its entirety at www.foodprocessing.com

7/22/99 Cranberry Stressline has devoted a fair amount of space to speculating about which corporations might be exploring the possibility of acquiring Ocean Spray, and which might benefit from owning the name in cranberries.

There are clearly two routes that the cooperative can take to pull itself, and the cranberry industry on its coat tails (like the "in good old days"), out of the red ink and back into the glory of those red berries at harvest time. One is a drastic restructuring based on smart, not necessarily expensive, strategic planning. And the other is being bought out by a much larger company which will do the same, only with much deeper pockets. Continued

PURCHASE, N.Y., July 22 /PRNewswire/ -- The Board of Directors of PepsiCo, Inc. today declared a quarterly dividend of 13-1/2 cents per share. The dividend is payable September 30, 1999 to shareholders of record on September 10, 1999. SOURCE: PepsiCo, Inc.

Earlier July articles: July 15-21, 1999 | July 8 - 14, 1999 | July 1- 7, 1999