Cranberry Stressline
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To June 7, 2000
Pepsi has big plans for FruitWorks6/6/00 With its marketing savvy and revenue, Pepsi will provide heavy competition for Snapple, Fruitopia, Nantucket Nectars and other youth oriented single serve fruit drinks this summer. They are taking an uncharacteristically non-glitzy approach to introducing FruitWorks, with precisely targeted advertising aimed at the 12-24 year old market, using MTV's Total Request Live and a new interactive FruitWorks web site as major marketing tools to create a buzz among young people. From a New York Times article... "with Pepsi's powerful distribution system, FruitWorks' potential cannot be underestimated. Mr. Hemphill (an industry analyst) said he believed Pepsi aimed to do in the juice-based category what it did in the single-serving iced-tea market. Snapple created that category back in the 1980's, but it was overtaken by Lipton several years ago. Lipton Iced Tea is marketed by the Pepsi-Lipton Tea partnership. 'For Pepsi, it's really about their distribution system; that sets them apart from the competition,' Mr. Hemphill said. 'I think this gives FruitWorks an excellent opportunity to be successful.' " Read New York Times article.
Company computing Nantucket Nectars: Last year's "customer relations nightmare" turns around6/1/00 Ocean Spray has had well publicized trouble with its own SAP ERP system. Nantucket Nectars, largely owned by Ocean Spray, faced an unheralded customer relations crisis due to its computer system a year ago. Customers were unable to get information about their accounts and were receiving inaccurate orders. Continued
Ocean Spray names lawyer as second outside director5/25/00 Jerome Jenko, who previously served as general counsel at General Mills, Pillsbury and Minnetonka and who currently serves on several other boards, was named to the Ocean Spray board. Jenko currently is an acquisitions and merger advisor. Press release.
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6/6/00 The
Cranberry Marketing Committee has adopted this alternative to the three proposals already on the
table
5/30/00 -- Dean C. Pappas, CEO of Clement Pappas & Co.
writes:
A May 24th Stressline article (May 16 "Summit" Could
Change Rules) inaccurately described a meeting at USDA that included
Clement Pappas, Cliffstar, Ocean Spray and others concerned about the
structure of a volume control regulation. The
meeting was convened by USDA to discuss the proposal that was forwarded
to the
Department by the Cranberry Marketing Committee (CMC). Clement
Pappas and
Cliffstar are concerned that this proposal, although well intentioned,
would be
unfair to many growers. Indeed, everyone at the meeting, including
Ocean Spray,
agreed that the CMC's proposal would have an inequitable impact.
By all accounts, the meeting was productive, and a number of alternative
methods
of calculating a grower's sales history were discussed.
Alternative methods
were discussed for one reason - to ensure that growers are treated
fairly and
equitably. The May 24th Stressline article described one option
that would require growers to dispose of over 30% of their crop. This option
was
discussed. The 30% figure, however, was calculated by the CMC
after it had the
opportunity to see how grower history calculations would change.
Neither Clement
Pappas nor Cliffstar would support a proposal that would require our
growers to
dispose of 30% of their crop.
The article also indicated that the meeting may have included a
discussion or an
agreement to sell fruit or concentrate at or below cost. This did
not occur,
and given the number of competitors in the room it would probably have
been
illegal. The meeting focused only on the CMC's proposed volume
control
regulation and its method for calculating a grower's sales history.
Clement Pappas and Cliffstar remained committed to protecting their
growers.
The CMC made an admirable attempt to craft a volume control regulation,
but that
proposal is fundamentally flawed because of its inequitable impact.
Hopefully,
the USDA meeting will help move this process toward a fair and equitable
conclusion.
"It's
disguised as a sports beverage, so as not to anger Coke; but in
reality it's a major entry in the general beverage industry. You
see kids walking around drinking Gatorade - they're not
sweating.'' Nomi Ghez of Goldman, Sachs 5/29/00 The Boston Herald says
"it crushes the competition on sidelines, finish lines and
checkout lines. Its name is as synonymous with sports drinks as
Kleenex is with tissues and Frisbee with flying discs."
Parent company Quaker Oats president Robert Morrison says its
biggest enemy is tap water. You
don't even have to read between the lines in this article from
the Boston Herald to see that Gatorade intends to dominate the
non-alcoholic beverage market.
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USDA files proposed marketing rule
71% of best year of six
"...the Department is proposing a change in the way growers' sales histories are computed. If this change is adopted, each grower's sales history would be recalculated. The Committee staff reports that this would result in a new industry total sales history of 7.6 million barrels. Using the 5.4 million barrel marketable quantity recommended by the Committee would result in an allotment percentage of 71 percent."
"SUMMARY: This rule would establish 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 Cranberry Marketing Committee (Committee), the agency responsible for local administration of the cranberry marketing order, recommended a marketable quantity of 5.4 million barrels and an allotment percentage of 85 percent. This rule invites comments on the Committee's recommendation as well as two alternative levels of regulation being proposed by the Department. This action is designed to stabilize marketing conditions and improve grower returns. Fresh and organically-grown cranberries would be exempt from the volume limitations to facilitate marketing of these products. Also proposed are improvements in the way producer allotments are calculated, including proposals initiated by the Department to revise the way in which growers' sales histories are computed and to suspend certain dates in the order which are impractical." Continued
From the proposal:
"...the Department is proposing a change in the way growers' sales histories are computed. If this change is adopted, each grower's sales history would be recalculated. The Committee staff reports that this would result in a new industry total sales history of 7.6 million barrels. Using the 5.4 million barrel marketable quantity recommended by the Committee would result in an allotment percentage of 71 percent. To retain an allotment percentage of 85 percent, the marketable quantity would need to be increased to 6.46 million barrels. The Department is soliciting comments on the Committee's original recommendation of marketable quantity and allotment percentage as well as the two alternatives proposed by the Department. To summarize, the three options are as follows (the marketable quantity and total sales histories figures are all in million barrel units):
Total
Marketable Sales Allotment
Quantity Histories PercentageCommittee 5.4 6.35 85%
RecommendationUSDA Option 1 5.4 7.6 71%
USDA Option 2 6.46 7.6 85%
"The Department believes a further modification is needed to lessen the differential impact a volume regulation would have on individual cranberry growers. For this reason, The Department is proposing that a sales history for each existing grower be calculated using the best single sales year in the past six years. For a grower with less than six years of sales, the sales history would be the highest year of sales available."
The Department is proposing that a sales history for each existing grower be recalculated, using the best single sales year in the past six years. For a grower with less than six years of sales, the sales history would be the highest year of sales available. This change is being proposed to take care of potential inequities that could result from the current process of computing sales histories. Specifically, newer growers are restricted to a greater extent than more established growers. That is because a cranberry bog does not reach full capacity until several years after being planted. Using an average of early years' sales (which are low) would likely results in a sales history substantially below current sales potential. A more established grower, on the other hand, would have a sales history more reflective of his or her production capacity.
If adopted, each grower's sales history would be recalculated. The Committee staff reports that this would result in a new total industry sales history of 7.6 million barrels (compared to the current total of 6.35 million barrels). Since the allotment percentage is determined by dividing the marketable quantity by the total sales history, a change in the total sales history could impact the level of volume regulation.
If the 5.4 million barrel marketable quantity recommended by the Committee is used, the allotment percentage would change from the 85 percent recommended by the Committee to 71 percent. Increasing the restricted percentage from 15 to 29 percent could result in a higher level of restriction than recommended by the Committee.
Quote:
"Today's House vote is an important victory for American farmers and the American people. Despite the strong national economy, American farmers are struggling. While there is no panacea for the low prices and tough times our farmers face, expanded trade will certainly help. In fact, we estimate that the passage of PNTR for China will help boost American farm exports by $2 billion per year by 2005. I applaud the President's leadership and the House's wise vote on this vital economic and national security issue."
5/24/00 -- Dan Glickman, Secretary of Agriculture
Cranberry Marketing Order
May 16th "summit" could change the rules5/24/00 -- Stressline has learned that on May 16 a "summit" was held in Washington D.C. between representatives of Ocean Spray, Cliffstar and Pappas to negotiate an agreement on a volume regulation for cranberries. Cliffstar and Pappas have both been against a volume regulation, stating that they had no surplus, and that a reduction of crop delivery to them would be a hardship. USDA officials reportedly have been surprised at the amount of negative comment on the regulation proposed by the Marketing Committee. Ocean Spray maintains that most of negative comments come from a faction of independent growers. Enrique Figueroa, from USDA, presided over the meeting which was also attended by CMC Chairman Rob Hiller, and CMC manager David Farrimond, who learned of the meeting after it was already scheduled and flew to Washington to attend.One proposed agreement was to change the formula to include each grower's highest yield in six years and then calculate the reduction down to a marketable number of 5.5 million barrels. The dumping amount in that case would be over 30% (or deliver under 70% historic highest yield). That formula would give clear advantage to acreage with expansion and spiked yields over those with a steady sales history. There will also be an abbreviated comment period. Significant flexibility is offered in this proposal to these parties which was not discussed during the deliberations of the Cranberry Marketing Committee. It remains to be seen to what extent, if any, the USDA is willing to bend the rules to circumvent what many believed were USDA regulations. What benefits would accrue to Cliffstar and Pappas if the "30% - best year of six arrangement" is approved is not clear. Whether or not there was any agreement to sell fruit or concentrate at cost or below is not known. Presently Cliffstar and Pappas contract growers are paid significantly more than Ocean Spray Growers. |
"Airing
the plethora of viewpoints on a topic is essential to informed,
thoughtful decision making. An informed citizen is the bedrock of
our democracy and the guardian or our rights." Op-Ed A Few Thoughts about Structure By Tom Gelsthorpe 5/24/00 -- The collapse of cranberry fruit prices over the past two years has dropped many farmers from prosperity to losses and altered our emotional states from giddy overconfidence to terrifying prospects of ruin and despair. Lifetime careers and generations of commitment to a highly tradition-bound way of life are evaporating. It doesn't have to be this way. When it first became evident that the warnings of "malcontents," "outsiders" and "troublemakers" were coming true, the reactions were disbelief, denial and resistance. People who said that Ocean Spray would not be able to compete successfully against grocery companies and food marketers attaining economies of scale by consolidating on a global scale were vilified as "disloyal" rather than listened to. People in all segments of the cranberry industry who warned that production was outstripping sales and a surplus was imminent were dismissed as pessimists. Yet the collapse has been so rapid, the gap between supply and sales has become so immense and the light at the end of the tunnel so distant, it seems in retrospect that the warnings were too mild. The "gloom-and-doomers" have been shown to be foresighted and largely correct, but they are still outcasts from the inner circles of power, both inside and outside Ocean Spray. But what of structure? How likely is it that this catastrophic situation has developed not only because of individual screw-ups, but because of weaknesses in the industry's structure? Do incentives for many of the individuals and institutions point the industry in the wrong direction? Did the wrong people get into the wrong jobs because the structure creates the wrong incentives? How seriously, really, have we looked at structure, of Ocean Spray -- the "big kid on the block" that the others fear, emulate or revile -- and also the structure of the smaller companies in the cranberry industry? How seriously have we looked at the structure of the juice business, and of the grocery business in which we are trying to succeed? Are we only a "juice business" or are we confined to that category by our small size? Could cranberries be more of a food, with more widespread uses? Continued | Easy to print version |
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With 15 % crop reduction possible and low prices, what's a cranberry grower to do?
5/19/00 -- Read article here 5/20/00 - Ocean Spray's Hawthorne endorses China trade bill Looking Back to 1977: "Whatever happened to the cranberry crisis" from The Atlantic |
5/21/00 - A New Jersey view of the cranberry crisis - Read Asbury Park Press article here. 5/19/00
- Decas responds to Ocean
Spray -- Read
all letters
Washington Post cites lobbying efforts as a "juicy dispute" at USDA - "The U.S. Department of Agriculture is in the middle of a food fight over cranberries." Read article here: Washington Post - scroll down to center of page |
Quote:On food company takeovers"Buying shares solely on the basis of takeover speculation isn't a surefire strategy, but when a true wave of consolidation sweeps through an industry, it is often the most troubled and undervalued firms that are picked up out of the ashes." From 5/18/00 press release issued by David Peltier of Individual Investor Online In the news:5/26/00 Bill approved by Congress to lower cost of crop insurance includes instructions for USDA to buy surplus cranberries. "The legislation contains provisions sponsored by Sen. Herb Kohl (D-Wis.) that would help Wisconsin dairy farmers and cranberry producers. The bill also contains language instructing the U.S. Agriculture Department to buy $200 million in surplus commodities, including cranberries, that have experienced low prices over the last two years." Read the plain language version of the bill here. | Read the entire Senate Conference Committee Report and debate here 5/29/00 Cranberry growers hopeful on quotas, in the Cape Cod Times S5/21/00 "Supporters fight to keep Massachusetts in dairy compact" from the Taunton Gazette 5/19/00 "Washington growers hear tips on saving family farm" from the South Beach Bulletin Bog tax loss amounts to $185,734, loss isn't as much as feared, from The Old Colony Memorial 5/20/00 "Carver facing tax decision, town must replace revenue from bogs" from the Patriot Ledger 5/19/00 "Comment sought on registration of cranberry pesticide" - Wisconsin Rapids Daily Tribune . Link - Bog value hits Wareham Taxpayers, The Standard Times 5/16/00: Link - Devaluation of bogs hits taxpayers; Plymouth and Carver must make up losses By TAMARA RACE The Patriot Ledger 5/15/00 Link - Lower cranberry price has Washington growers struggling in the Oregonian Press release: Wild Blueberries ... Nature's Healthy Blue Food(TM) ... Emerge as Nutritional Superstars: USDA Research Discovers Potential Anti-Aging Benefits of Blueberries, The #1 Antioxidant FruitRead entire press release here. |
Bogs: A contrarian real estate investmentRepublished
from the Rob’s
View: Who is the competition, anyway? The Juice Aisle: Labels |