IF WE SELL WE LOSE CONTROL, RIGHT? WRONG!
by Nabiel Shawa

10/23/99 Perhaps the most frequently asked question amongst Ocean Spray Grower/Owners after the "Are we going to sell?" question is the "How are we going to obtain a fair price for our fruit if we do sell?" Some less than open minded grower/owners, including our gloomy chairman, contend that if we sell we lose control. Further, many of these same folks claim that the corporate raiders could then hold us hostage and pay us a pittance for our crops (one could counter that this is the current situation).

If one sets aside their emotional attachment to our co-op and examines the situation from a business standpoint the most reasonable conclusion is the exact opposite. The scenario set forth by the more progressive thinkers within the Ocean Spray family calls for the sale of the label and related infrastructure while retaining our co-op to handle, store, and negotiate the sale of our fruit. We would not be negotiating from a position of weakness. Although our market share of red juice drinks has dropped to the mid-fifty percent range we still produce and control approximately seventy percent of all cranberry production. And we thought OPEC had a cartel!

Now put yourself in the shoes of an executive team desiring to buy our label and production facilities. What do you think their most significant concern is? Is it the selling price of the label and facilities, or the amount of outstanding debt, or the ability to increase market share or international sales? I don’t think it’s any of these. My most significant concern would be tying up the fruit necessary to fuel this investment in order to increase market share both domestically and internationally. The biggest fear would be the bargaining power of an entity that controlled seventy percent of the raw production material. After all who could I turn to to provide a consistent supply of high quality fruit year after year if negotiations with existing Ocean Spray growers collapsed? Just for simplicity and efficiency I would prefer to deal with one organization rather than sending out a team of field representatives each year to individually negotiate price and delivery terms. And while there is presently a surplus, I have to remember that if we’re successful in significantly growing the market share (domestically and internationally) such success will attract the attention of my competitors who may show up in the fields next year bidding for that rare fruit to fuel their new product line. Therefore it would be in my best interests to insure that Ocean Spray growers received a fair price and perhaps slightly more than others. Better to establish a long term, friendly, stable relationship with the primary source of this unique commodity than to face frequent, sometimes heated negotiations which increase the likelihood that my competitor could someday skip away with it.

This viewpoint is not far-fetched. I have no doubt that this exact scenario is being discussed by every serious suitor speaking with our Merrill Lynch representatives.

There are examples of large agricultural organizations who have very long term, successful relationships with international corporations. As one example I have an acquaintance in Singapore whose family owns the world’s largest cocoa plantation. For numerous years they have sold to Cadbury and prospered. This successful relationship works for many of the reasons outlined above. The buyer wants a large, reliable source of a unique commodity and is therefore willing to pay a reasonable price to secure it for the long term.

The Ocean Spray Grower/Owner family has a tremendous opportunity to secure many years of prosperity. Think it through for yourself. If we sell and stick together we will enjoy the best of all possible options.

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