Harvest '99: Crisis in Cranberry Country? 10/7/99 With this year's cranberry harvest in full swing, the industry is expected to exceed last year's bumpers crops by 5%, or some 294,000 barrels, according to Cranberries, a trade magazine published by grower Carolyn Gilmore. That's not good news to Southeastern Massachusetts growers, who have seen prices drop for $85 a barrel a few years ago to $35 last year. With a two-year inventory of 2.8 million barrels, payments to growers are not expected to increase this year. :We're drowning is a sea of cranberries, " said Ms. Gilmore, who works 30 acres of bogs in South Carver and Wareham with her husband. Ocean Spray, the industry giant, is responding to the crisis with new products and an advertising campaign, scheduled to be unveiled this week, that promotes the health benefits of cranberries. The company has also hired Bain and Company, a consulting firm, to explore options including a merger with one of the major soft-drink or juice companies,and has its financial consultants, Merrill Lynch, working on financial strategies. Company spokesperson, Chris Phillips, who described the layoff of 100 employees at Ocean Spray world headquarters in Lakeville last spring as an effort to make the company "leaner and more focused" this week declared that Ocean Spray is "more than a major brand - it's a way of life, and we're here to stay." A press release announcing new marketing initiatives called the surplus of berries "a marketing opportunity to grow the category." Critics, however, range from shareholders concerned about the future of the 69 year old cooperative and independent growers who speculate about recent management changes to people like Hal Brown, a Middleboro grower who watchdogs the industry and shares information and opinions on his "Cranberry Stressline" website. The later group refers to Ocean Spray's situation as a crisis and accuses the company of moving from a "siege mentality" earlier in the year to a "bunker mentality" as the harvest got underway. A.D. Makepeace, the largest shareholder in the cooperative at about 6%, has urged the board of directors to pursue a merger. Robert Rosbe, vice president of A.D. Makepeace, said the company wrote to the Ocean Spray board in an effort to open a dialogue. "The object was to get as much discussion and debate going as possible among growers regarding a strategic merger," said Mr. Rosbe. "It's an educational process at this point." Mr. Phillips said Ocean Spray's board of directors is actively involved with consultants in developing a range of strategies that should be presented to growers early next year. "We are in the midst of looking at our portfolio of businesses to strengthen the brand and make it more profitable for growers," he said. "(Once the study is completed) we will have a clearer sense of what our options might be... The ultimate decision will be made by the board. Mr. Rosbe said A.D. Makepeace "respects the examination process going on at Ocean Spray, but we need to get better prepared to understand what the recommendation might be (from Ocean Spray consultants)>" A.D. Makepeace, in business since the late 1800's, owns 1740 acres of bogs in Wareham, Carver, Plymouth, Middleboro, and Rochester. Meanwhile, Ocean Spray has introduced a variety of new products, including a vitamin-enriched cranberry juice cocktail and two grapefruit drinks, to increase sales. The company recently announced plans to convert single serving drinks from glass to plastic containers, and renamed its 100 percent juices as Ocean Spray Premium 100% Juices. Mr. Phillips said the new advertising campaign is designed to attract health and fitness conscious adults. Concern over the financial health of the company, however, increased as Moody's Investment Services announced Sept. 22 that it had placed the cooperative's commercial paper and stock ratings under review. Standard and Poors announced Sept. 30 that Ocean Spray is on "Credit Watch with developing implications" for its reduced rating. "We still have a very strong credit rating, on a par with the strongest brands in the world," Mr. Phillips said, asserting that the bond ratings have to do with "there being so much speculation out there" about the future of the cooperative. "This hasn't affected us financially. It's just that we're accustomed to being a premium-rated company." Cranberries publisher Ms. Gilmore, who has been growing for Ocean Spray since 1980, indicated that some of the frustration among growers stems from the fact that industry experts were predicting a cranberry surplus as early as 1994, although crops at that point were far from record breaking. "Some industry leaders saw this coming," she said. "At the same time there were not enough berries that year, and the high prices attracted new growers." "Some people have thought step should have been taken (by Ocean Spray)," she said. "The USDA had been tracking the situation all along and predicted the surplus, but was told not to talk about it because there were not enough berries that year." Editorial comments on Hal Brown's web site are even less flattering to the cooperative. Mr. Brown, who asserts that growers need to take back control of the cooperative, contends that Ocean Spray has been badly mismanaged and that the board of directors was kept in the dark by a management team that was unwilling to confront problems as they became apparent. "With Ocean Spray management and the majority of Directors barricaded in a psychological bunker, their vision is myopic," Mr. Brown wrote recently. "While Ocean Spray owners outside the Boardroom see options for saving Ocean Spray, their farms, and the industry, those inside might as well be locked behind steel doors and soundproof walls." Ocean Spray spokesman Mr. Phillips said the company understands the frustration of the growers and is sympathetic. "They want a conclusion reached," he said. "We understand that some would leap ahead, but we are determined to stay the course. Its an emotional time. People's livelihoods are at stake."
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