Cranberry Stressline
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Deloitte & Touche offers settlement to coop owners

7/29/02 According to articles in The Food Institute Report (7/15/02) and the Modesto Bee (7/18/02), Deloite & Touche (D&T), the accounting firm, has offered $6.38 million to the 500 + grower/owners of Tri Valley Growers. The 68 year old California company was considered one of the nation's premiere fruit and vegetable cooperatives.

Tri Valley growers lost hundreds of millions of dollars when Tri Valley declared bankruptcy in 2000. The grower/owners filed suit against the former CEO, Joe Famalette and the board of directors. If the growers accept the D&T offer, they will be dropped from the suit against the CEO and the board.

Unsecured Tri Valley creditors also sued to recover some $350 million in damages. The growers have agreed to pay the creditors 70% of whatever they receive from their law suit. Further information about Tri Valley bankruptcy.

Cliffstar Northland litigation

7/28/02 Northland Cranberries reports in their latest 10Q  to the SEC that  "on June 7, 2002, the court granted the Company's motion for summary judgment and dismissed Cliffstar's fraud claim."

According to the Northland 10Q "the action is in the final stages of discovery, with expert discovery scheduled to be concluded by August 16, 2002. Trial is scheduled to commence on October 7, 2002."

On June 7, 2002 Northland filed a separate suit against Cliffstar seeking access to
their relevant books and records related to the earn-out calculations under the Asset Purchase Agreement and claiming that Cliffstar Corporation breached the Asset Purchase Agreement by failing to pay Northland earn-out payments for the years 2000 and 2001. Northland is seeking compensatory damages in excess of $ 1,000,000 plus attorneys' fees.

Read the relevant excerpt from Northland's SEC report here.

Northland and Nestle

On January 25, 2002, we were notified by Nestle USA ("Nestle"), a customer for whom we produce and package juice beverages, of its intention to transfer production and packing of bottled beverages to our principal competitor, Ocean Spray Cranberries, Inc., by September 30, 2002. Nestle has notified us that it does not intend to transfer production of canned juice beverages, so we
anticipate that we will continue to produce and package canned juice beverages
for Nestle. We had net revenues from production and packing of bottled beverages
for Nestle of approximately $1.7 million and $4.8 million in the three and
nine-month periods ended May 31, 2002, respectively. We are currently reviewing
alternatives for replacing the lost Nestle business and maximizing utilization
of our Jackson, Wisconsin manufacturing facility." (Excerpt from 10Q)

Northland's numbers

7/28/02 The following are excerpts from the Northland Cranberries 10Q SEC report:

Total net revenues for the three months ended May 31, 2002 were $24.2 million, a
decrease of 11.3% from net revenues of $27.3 in the prior year's third quarter.
Net revenues for the nine months ended May 31, 2002 were $78.5 million, a decrease of 20.2% from net revenues of $98.4 million in the prior year's nine month period. The decrease resulted primarily from (i) reduced sales of Northland and Seneca branded products; and (ii) the sale of our cranberry sauce business and a manufacturing facility in June 2001, which reduced co-packing
revenue and revenue from cranberry sauce sales and which accounted for approximately $1.7 million and $8.7 million of net revenues, respectively, for the three month and nine-month periods ended May 31, 2001.
These net revenue decreases were partly offset by (i) increased sales of cranberry concentrate; and (ii) reduced trade spending and consumer coupons (which are reported as a reduction of gross revenues). Trade industry data for the 12-week period ended May 19, 2002 showed that our Northland brand 100% juice products achieved a 5.6% market share of the supermarket shelf-stable cranberry beverage category on a national basis, down from a 6.8% market share for the
12-week period ended May 20, 2001. The total combined market share of supermarket shelf-stable cranberry beverages for our Northland and Seneca branded product lines was 5.6% for the 12-week period ended May 19, 2002 compared to a 7.6% market share for the 12-week period ended May 20, 2001.

In fiscal year 2001, due to our general lack of available cash, we were unable to fund a meaningful advertising campaign. In fiscal year 2002, following our Restructuring, we were able to resume media advertising of our Northland brand 100% juice cranberry blends. The resumption of media advertising, combined with our trade promotion spending has provided a more balanced marketing approach in fiscal year 2002. Our promotional and pricing strategies focused our efforts on
profitability as opposed to revenue growth and as a result we anticipate that our total net revenues for fiscal year 2002 will be less than those of fiscal
year 2001.

Cost of sales for the three months ended May 31, 2002 was $16.1 million compared
to $20.8 million for the third quarter of fiscal 2001, resulting in gross margins of 33.6% and 23.8% in each respective period. Cost of sales for the nine months ended May 31, 2002 was $53.5 million compared to $74.8 million for the first nine months of fiscal 2001, resulting in gross margins of 31.9% and 24.0% in each respective period. The increase in the gross margin rate in the third
quarter and the first nine months of fiscal 2002 was primarily the result of reduced manufacturing costs which were impacted by improved cost controls, improved utilization of manufacturing capacity and lower cranberry costs. Read the Northland 10Q SEC Report here.

Comment

Bog vandalism: No matter how minor, call the police

Middleboro grower's problems may be a precursor of things to come

7/19/02 An article in yesterday's Middleboro Gazette describes the skepticism of Middleboro residents who told the Board of Selectman that they doubted that a cranberry grower really plans to construct cranberry bogs on his property once his earth removal project was completed.

The Selectmen reluctantly approved an extension of the earth removal permit rather than have to deal with a site that has been described as ugly. Whether new permits or extensions to remove and sell gravel and then build bogs in the future will be approved remains in doubt, as town officials are very much aware that the crash in cranberry prices has made expansion of acreage an economically risky proposition.

Growers who were counting on selling sand and gravel to help weather the cranberry crisis, who don't already have earth removal permits (which in many towns are contingent on putting the land into agriculture once the project is completed) may be out of luck. Read Gazette article.

Stressline Forum postings by Jack Bell, an Ocean Spray Canadian grower for 48 years, and others, on the future of Ocean Spray 

7/20/02 A thoughtful and carefully crafted series of messages about the future of Ocean Spray began on the Forum early this month. You can read all of them on the Forum, or some of the more detailed ones here: Selected messages from the Cranberry Stressline Forum, July 4 to July 19, 2002.

 Notice from the Cranberry Marketing Committee

Press
Release 

Northland Cranberries, Inc. Reports third-quarter profit

USDA Release

Ocean Spray President optimistic about growth of Massachusetts cranberry industry

Ed. Note: See correction, in red, below

6/28/02 (Revised 5:50PM) In an article titled "Plymouth County economy relies on cranberry industry" the 6/27/02 edition of the South Zone B supplement to the Mariner newspaper, Ocean Spray President Randy Papadellis is reported as having told a members of the Plymouth County Development Council (PCDC) that "today, cranberries are the most profitable legal crop in the world." Correction: Patrick Apel, who is the Executive Director of the PCDC has clarified that this is a misquote of what Mr. Papadellis actually said at the meeting, which was held about two months ago. In fact, according to Apel, he said "during its heyday, cranberries were the most profitable legal crop in the world."

The article stated that he told the group of fifty business executives that "Ocean Spray is recovering from a downward trend in cranberry prices by increasing its marketing by increasing its marketing efforts and balancing the fruit supply from growers with the demand from consumers."

Papadellis is also quoted as saying that "our white cranberry juice line has been out six months and is trending to be a $100 million product for us," adding that we recently repackaged out 'light' line and sales are up 40%."

"I'd bet there's no place that's prettier in October that Massachusetts cranberry country," said Papadellis who took a helicopter ride to survey the 13,000 acres of cranberry bogs in southeastern Massachusetts two years ago.

Science news:

"Cranberry Juice and Adhesion of Antibiotic-Resistant Uropathogens"

6/19/02 The flagship Journal of the American Medical Association published a research letter by Amy Howell, PhD and Betsy Foxman, PhD in this week's Journal of the American Medical Association Research Letters. The study is receiving widespread media attention (picture from Health Watch segment on Boston's Channel 7 - click to enlarge). With growing public concern about antibiotic resistant bacteria, the authors' conclusion that thier "data suggest that consumption of cranberry juice cocktail may offer protection against both sensitive and resistant strains of P-fimbriated E coli by a mechanism that is not likely to increase selective pressures associated with antibiotic resistance" is important news for health conscious consumers.

 TEXT | PDF

Rutgers University Press Release

OS seeks second ad agency

7/3/02 According to an article in the 5/30/02 Delany Report, Ocean Spray is said to be looking to retaining a second advertising agency, in addition to Arnold. Their source said "(The assignment) will involve beverages, but not necessarily juices. Maybe 'New Age' kinds of beverages.... (OSC) is looking at what other categories it could go into such as snacks, fruit roll-ups, desserts."

Looking Back

A frightening prediction?

6/28/02 While the cranberry growing community is awaiting word from Ocean Spray on progress on their turn-around plan, we came across a sobering comment made by Cranberry Marketing Committee director David Farrimond in an article that appeared on the front page of the New York Times business section on Sept.22, 1999. The article was titled "Harvest of Discontent: Low Cranberry Prices Shake Farmers' Faith in Ocean Spray." Will there be a quick fix?"  Farrimond is quoted as saying "some people say it will be 10 years." That would put the end date at 2009.

Coke Watch

If life gives you lemons...

6/23/02 Coca-Cola's Minute Maid and Ocean Spray are now battling each other for a share of the highly competitive summer lemonade market. You can bet Coke is watching how their premier juice division's label does when side-by-side in the supermarket with an Ocean Spray line. Ocean Spray has two other lemonades, a cranberry and an ruby red grapefruit blend. All are 15% juice. The O.S. lemonade contains grapefruit pulp in addition to lemon juice from concentrate. Minute Maid's lemonade contains 11% juice, all lemon juice from concentrate. Ocean Spray's lemonade is a dense opaque yellow, Minute Maid's is a paler and more transparent whitish-yellow.

The sales figures for each product could influence Coke's decision as to whether or not it can successfully launch an entire line of shelf-stable juices under the familiar Minute Maid label. These would compete with Tropicana Twisters, Ocean Spray, V8 and the other labels that consumers associate with the juice aisle. Additional Picture

On the Forum

An open letter to Roy Peters by John Swendrowski, CEO
Northland Cranberries  and Oregon CMC candidate John L. Meyer states his position

Editor's Note: John Swendrowski's letter to Roy Peters was published yesterday as an Op-Ed by mistake. It was meant to be a Forum posting.

Products

Cape Cod Dry from Polar Beverages

6/14/02 From www.polarbev.com : "The Polar Cape Cod Dry 2-liter line includes Cranberry, Diet Cranberry, Cranberry Raspberry and  Diet Cranberry Raspberry, which all are made with 5% Ocean Spray Cranberry Juice from select New England Cranberries. That's a lot of juice for a carbonated soft drink! " 

OpEd:                       

Growers Right to Vote

By Gregory Gitter
 President, Wisconsin Cranberry Cooperative 

6/10/02 --- On June 4, 2002  I had the opportunity to testify at the USDA Amendment Hearings at the Mead Inn located in Wisconsin Rapids.  Our cooperative proposed (4) amendments: 929.22 Nomination , 929.23 Selection, 929.61 & 929.104 Outlets for Excess Cranberries. CONTINUED

Executive Summary,
Recommendations and
Conclusions

Consumers, Cranberries, and Cures: What Consumers Know About The Health Benefits Of Cranberries

 by
Nora Ganim Barnes, Ph. D.

Quote: The results of this study indicate there is great potential for informing consumers about the health benefits of cranberries.  Most consumers we surveyed are unaware of most health benefits of cranberry consumption and also unaware of the value of different levels of cranberry juice concentration in a beverage. 

James Nolan, recent Ocean Spray executive retiree, to play major role in new O.S. merchandising contract
More about James Nolan

6/4/02 (Photo: James Nolan, left, and former Ocean Spray CEO Tom Bullock, right, taken last year) According to an article in The Produce News (6/3/02), James Nolan, who recently retired as Ocean Spray's domestic and international sales manager for fresh fruit, will play a major role in a contract with the company headed by his wife, Theresa Nolan. His duties as vice president of The Nolan Network will include "advising Ocean Spray on such matters as pricing, trade marketing and production planning."

The article states that "merchandising of all 'Ocean Spray' branded produce — cranberries and fresh citrus from both the United States as well as several other countries throughout the world — has been consolidated for the first time this year under a single firm."

Also, according to The Produce News "DNE World Fruit Sales in Fort Pierce, FL, the largest independent citrus marketer in the United States and the exclusive agent for “Ocean Spray” branded fresh citrus, has hired TNN to do merchandising throughout the country on all produce it sells under that brand, along with other labels the company has."

"Selame points to Nantucket Nectars as a prime example of this development. "The product originated in a small regional island off of New England and focused on a specific market niche--consumers looking for a healthy drink made from natural juice and packaged with colorful island graphics that caught the consumer's eye," says Selame. "The product's creators tapped into a need that previously went unfulfilled--a convenient on-the-go healthy drink. It was different from all others in the market at that time and capitalized on the healthy lifestyle trend as it was emerging."  from "The New Face of Branding" in Grocery Headquarters.

On the Forum:

Banana Republic

6/2/02 Linda Rinta, who served on the amendment subcommittee, offers harsh criticism of the Cranberry Marketing Committee and the USDA. Doanne Andresen, who was also on the subcommittee shares her opinions, as does Kelly Rudd, a grower from Wisconsin and John Harker who attended the hearing in Maine. The anonymous industry observer and Northland shareholder "Demonjd" also comments. Read entries on one page, updated 6/3/02 1:30 PM

Archives for May, 2002