Ocean Spray Cranberries, Inc. Business Information, Profile, and History

Company Perspectives:

Ocean Spray is North America's leading producer of canned and bottled juices and juice drinks. Ocean Spray has been the best-selling brand name in the canned and bottld juice category since 1981, selling more than the combined total of its three biggest competitors.

History of Ocean Spray Cranberries, Inc.

Ocean Spray Cranberries, Inc. is a marketing cooperative owned by almost 1,000 cranberry and grapefruit growers in the United States and Canada. A leader in the marketing of shelf-stable juice drinks, Ocean Spray Cranberries, Inc. is responsible for 75 percent of the cranberries sold worldwide. Since its beginning, the company has functioned as a grower-owned agricultural cooperative; however, its strong emphasis on new product introduction, advertising, and packaging places it in direct competition with many publicly owned companies. Once known only as a seasonal cranberry sauce business, Ocean Spray now markets blended juice drinks, bottled juices, juice concentrate, fresh fruits, and several other items to both retail and food service outlets year-round. Ocean Spray's Cranberry Division still accounts for the bulk of the company's operations. However, since the addition of grapefruit growers to the cooperative in 1976, the company has displayed an increasing tendency to develop a broad fruit-oriented product line to fortify its presence in the consumer market. Preserving a strong brand image, perfecting production forecasting techniques, and promoting operational efficiency have all led the cooperative to its position as the leader producer of canned and bottled juices and juice drinks in North America. Ocean Spray's stock is held by some 250 grapefruit growers in Florida and nearly 700 cranberry growers in Massachusetts, New Jersey, Wisconsin, Oregon, Washington, and Canada.

Early History

The history of Ocean Spray is naturally tied to the history and lore of the cranberry, an unusual Native American wetland fruit. Small, reddish, and distinguished by a strong, bitter flavor, the cranberry was first used by various Native American tribes in the New England area to make dyes as well as a high-energy food called pemmican: a concentrated mixture of dried venison, fat, and cranberries shaped into cakes. Cranberries were believed to have been present at the first Thanksgiving feast in 1621. The first cranberry juice recipe dates back to 1683. Throughout colonial times, cranberries also became widely used in tarts, preserves, and sauces.

Exports to Europe also began during this era. However, commercial cultivation of cranberries did not commence until the early 19th century, when Captain Henry Hall began experimenting with cranberry vines in East Dennis, Massachusetts. As many already knew, the Cape Cod marshland, with its high concentration of peat, was particularly conducive to cranberry growing. Hall, however, made the singularly important observation that when sand from the nearby dunes blew into the marshes, or bogs, the cranberries thrived. He began applying sand manually and found he could grow cranberries that were larger and juicier than those found elsewhere. Growers from another state in which the cranberry was native, New Jersey, soon followed Hall's lead. Among such pioneers were Benjamin Thomas and John Webb.

During the 1850s, cranberry cultivation spread to Wisconsin; three decades later, farmers in both Washington and Oregon began establishing cranberry bogs of their own. By the mid-twentieth century, mechanical pickers were invented to replace manual procedures, and soon wet-harvesting techniques were developed to take advantage of the cranberry's natural buoyancy.

The Ocean Spray name was conceived by a Boston lawyer named Marcus L. Urann, who gained a reputation as the "Cranberry King" for a cranberry sauce he packaged in tins and marketed under the brand as early as 1912, as well as for his later promotions. Urann headed the Ocean Spray Preserving Co. of South Hanson, Massachusetts, and was one of the principal proponents behind a merger of similar companies to form a large, powerful cooperative. Urann reasoned that a merger would erase the stiff competition he faced from the Makepeace Preserving Co. of Wareham, Massachusetts, and The Enoch F. Bills Co. of New Egypt, New Jersey. The merger would also allow for greater marketing clout. John C. Makepeace and Elizabeth F. Lee, the other two owners involved in Urann's proposed merger, joined Urann in signing a certificate of incorporation in June 1930. A delay by Urann in transferring the Ocean Spray trademark jeopardized the merger for a short time; however, by August, Cranberry Canners, Inc. had been formed and Ocean Spray's survival was thus ensured.

Urann, as president and general manager, assumed responsibility for advancing the cooperative by meeting with and encouraging growers and by enlarging the demand for cranberries. Among the products introduced by Cranberry Canners during the 1930s were Cranberry Juice Cocktail and Ocean Spray Cran, both tart-tasting forerunners of later, sweetened juice and juice concentrate products. With the 1940s and the addition of Wisconsin, Oregon, and Washington growers to the cooperative, the product line expanded to include dehydrated cranberries (for U.S. troops) and cranberry-orange marmalade. By 1943 the co-op controlled 15 facilities for production, storage, and distribution. Because of the rising prominence of the cranberry and the Ocean Spray label, the cooperative renamed itself the National Cranberry Association (NCA) in 1946. During that same year, the company also began marketing fresh cranberries, in cellophane packaging, for the first time.

Facing a Serious Crisis That Began in Late 1959

The NCA, with a membership nearly double that of its modern-day variant, continued to sustain itself throughout the 1950s principally as a seasonal business that revolved around the Thanksgiving and Christmas holidays. Highlights of this decade were numerous, and included the incorporation--and then formal assimilation--of Canadian growers; the first Ocean Spray television commercials; the retirements of Urann in 1955, and Makepeace (who had served as secretary-treasurer) in 1957; the introduction of frozen cranberry-orange relish and frozen cranberries; and the final renaming of the cooperative in 1959 to reflect the central importance of the Ocean Spray brand.

On November 9, 1959, the newly-named Ocean Spray Cranberries, Inc. was faced with its first major crisis. On that day, the Secretary of the Department of Health, Education and Welfare announced that residue from the potentially cancer-causing weed killer aminotriazole had been found in cranberries produced in Washington and Oregon. Because of the ill-timed announcement--just prior to Thanksgiving--Ocean Spray's entire cranberry business was in jeopardy. Cranberries quickly became known as "cancer berries" and hopes for any profits from that year's holiday sales were dashed.

Although the co-op's new president, George C. P. Olsson, rightly asserted that the purported danger was nonexistent, it was too late to avert the widespread fear that had arisen. Grocers were forced to take all suspect products off their shelves. Ironically, "The History of Ocean Spray Cranberries" records that a membership newsletter dated December 1957 had actually alerted growers to the dangers of aminotriazole--then an unapproved weed killer--which, if used, could "cause needless expense to your cooperative and result in the condemnation of your crop." The Department of Agriculture had actually approved the compound in 1958 for use after harvests, but the linkage to cancer and the tests for detecting residues were not established until the following year.

The Debut of Juice Drinks in the 1960s

For a time, the co-op was in danger of folding, but a partial comeback in sales for 1960, as well as a government subsidy for unsold cranberries found to be free of residue, kept the business going. However, Ocean Spray's earlier successes had now created the problem of overproduction. New marketing avenues needed to be explored if the high demand for cranberries were to be revived. Edward Gelsthorpe, an executive with experience at both Colgate-Palmolive and Bristol-Myers, was brought in to develop a new, long-term marketing plan for the company.

Gelsthorpe's answer, unpopular at the time, was to emphasize juice drinks under the Ocean Spray brand. Between 1963 and 1968 the company committed itself to the consumer drinks market with Cranberry Juice Cocktail, Cranapple, and Grapeberry (later changed to Crangrape). The guiding philosophy was to compete against both the large soft drink and orange juice markets not through product imitation but through product diversity. As consumers became more health conscious during the 1960s and 1970s, the Ocean Spray formula for success struck a responsive chord. By the mid-1970s the cooperative was on the fast track to achieving Fortune 500 status and appeared all the more healthy after its bold expansion into grapefruit growing. A minor setback occurred in 1979 when the Federal Trade Commission, as part of an investigation of all agricultural cooperatives, threatened an antitrust action against Ocean Spray. No suit was launched, however, and so the company began the 1980s with its $235 million in annual revenues intact.

In 1981 the company made packaging history with its introduction of the "juice box," a block-shaped juice container with attached drinking straw. The innovation captured a new segment of the juice-drinking public, children, and has since become a staple of the Ocean Spray product line. That same year Ocean Spray achieved its ranking as the largest domestic seller of canned and bottled juice drinks. The co-op fought vigorously to retain the title during the decade, as new competitors entered the fray, with a growing number of product introductions, including Mauna-La'i, a guava-lemon drink; Firehouse Jubilee, a tomato drink; Ocean Spray Liquid Concentrates; and Cranberry Fruit Sauces. By the mid-1980s, the company had reached annual revenues in excess of $500 million. The company also improved its distribution system, expanded its marketing to food services, and capitalized on the Cape Cod tourist industry by attracting millions of visitors each year to its headquarters and museum near Plymouth Rock.

Acquired Milne Fruit Products in 1985

One of the most important developments for Ocean Spray came in 1985 with its acquisition of Milne Fruit Products, Inc. of Prosser, Washington. A manufacturer of fruit concentrates and purees, Milne was once primarily a grape business but grew under Ocean Spray to process cherries, blueberries, blackberries, plums, raspberries, strawberries, and cranberries. Milne's largest customer was Ocean Spray, but the subsidiary also served such major food companies as Kraft General Foods, Gerber Products, Nestlé, Sunkist, Welch's, and Baskin-Robbins. Most importantly for its parent company, Milne tripled in size from the acquisition through the early 1990s and became a significant generator of non-patronage revenue, which was reinvested in the cooperative for future expansion.

The only blight on the company during the eventful 1980s occurred in 1988, when it was charged under the Clean Water Act with illegally dumping insufficiently treated effluent from its Middleboro plant into the town's sewer system. Ultimately, Ocean Spray was fined $400,000; the company also donated $100,000 in water-treatment equipment to the town of Middleboro. Since that event, Ocean Spray has become an industry leader in promoting environmentally sound operations, and has spent more than $26 million upgrading waste-treatment facilities.

While the cooperative reformed itself environmentally, it was also in the process of analyzing all of its internal operations. A program called Right Turn Only (RTO), dedicated to quality improvement, problem-solving, and teamwork, was adopted to aid Ocean Spray in remaining competitive while fostering an open working environment. In the area of market research, crucial in a brand-driven industry, Ocean Spray decided to take advantage of new database technologies by entering into a joint venture with Information Resources of Chicago. The result was a state-of-the-art software program called CoverStory that offered market information from universal product code (UPC) figures and trends. Other innovations included techniques to boost crop yields and forecast harvest results.

Billion-Dollar Company in the 1990s

Under John S. Llewellyn Jr. (who took over as president and CEO in 1987 from Harold Thorkilsen), Ocean Spray became a billion-dollar company by 1992 and continued to build on its strong brand image. A very important development in 1992 involved a joint arrangement with PepsiCo, Inc. to distribute individual cans and bottles of Ocean Spray juices and drinks. This agreement offered Ocean Spray a relatively inexpensive opportunity to increase its individual serving segment, which at the time of the agreement accounted for roughly $100 million in sales, through vending machine, convenience store, and related outlets. According to reporter Jon Berry, "The logic behind the New Age partnership is forceful. During the past decade, Ocean Spray has burst from obscurity to become one of the acknowledged innovators in the beverage industry. But its strength has been notable only in supermarket aisles. To become an equal power in single-serve sales, Ocean Spray would have to spend millions building a distribution system."

Throughout the 1990s Ocean Spray rolled out a steady stream of new products. In 1991, Refreshers Fruit Juice Drinks and Ruby Red Grapefruit Juice Drink came on line. The following year Cran-Cherry Juice Drink joined the lineup, while Ruby Red & Tangerine Grapefruit Juice Drink was added in 1993. Craisins sweetened dried cranberries--a direct competitor to raisins in the dried fruit category--had their national launch in 1995, with Cran-Currant Black Currant Cranberry Juice Drink made available for purchase in 1997.

Ocean Spray also increasingly sought out joint ventures to extend its product line. The co-op joined with Nabisco in 1993 to market a cookie called Cranberry Newtons. Ocean Spray and Warner-Lambert joined forces to debut Fruit Waves hard candy in 1994. With PepsiCo, Ocean Spray that same year launched Breakers, a soft drink with 2 percent juice and available in three flavors. The following year saw the introduction of Cranberry English Muffins, a venture with Thomas' English Muffins. And Craisins were included in the 1996-introduced Post Cranberry Almond Crunch Cereal.

Ocean Spray also placed a high premium on effective advertising, signing Sarah Ferguson, the Duchess of York, in 1996 for the "It's Your Zing!" campaign. In March 1998 the co-op announced that it had signed tennis star Martina Hingis to a three-year spokesperson contract. Hingis' first promotion for Ocean Spray involved the 1998 debut of Ruby Red & Tango Grapefruit Juice Drink, the third member of the Ruby Red line.

Meanwhile, Ocean Spray continued to upgrade its manufacturing facilities, combining just-in-time inventory systems and computer integrated manufacturing in a 1995-opened facility in Henderson, Nevada, that increased output without increasing costs. In January 1997, Llewellyn retired as president and CEO of the co-op and was replaced by Thomas E. Bullock after a 16-month transition period. Bullock had to contend with the after effects of poor cranberry harvests in two of the previous three seasons, which forced Ocean Spray to delay some product introductions. He also soon faced the end of Ocean Spray's five-year relationship with PepsiCo after the soft drink giant announced that it planned to abandon the distribution agreement in May 1998. By the end of the 1997 fiscal year, the Ocean Spray-PepsiCo arrangement had helped Ocean Spray achieve $225 million in sales for its single-serving products (out of total revenue of $1.44 billion, or almost 16 percent). It had grown from number six to number two among makers of single-serve juices and drinks.

Surprisingly, Ocean Spray and PepsiCo announced in March 1998 that a three-year extension had been reached on the distribution agreement. In August of that same year, however, the partnership once again appeared threatened when Ocean Spray said that it might attempt to block PepsiCo's proposed $3.3 billion acquisition of juice maker Tropicana Products from the Seagram Company Ltd. The co-op believed that the purchase violated its agreement with PepsiCo. It was speculated that PepsiCo planned to distribute single-serving packages of Tropicana juices and drinks, which would directly compete with Ocean Spray products.

In December 1997 Ocean Spray acquired a major interest in Nantucket Allserve Inc., a juice drink company based in Cambridge, Massachusetts, and famous for its offbeat "Nantucket Nectars" line of single-serve drinks, including Orange Mango and Protein Smoothie flavors. Nantucket, whose younger clientele complemented the typical consumers of Ocean Spray products, would continue to operate independently. In July 1998 Ocean Spray acquired Sydney, Australia-based Processing Technologies International, a leading food technology research company and holder of the patents to the technologies used to create Craisins. The co-op, which renamed the acquired company Food Ingredients Technologies (Australia), planned to take the process used to create Craisins and apply it to numerous other fruits and vegetables, mainly to create ingredients for sale to other food companies. The potential for success of this venture appeared large as Craisins had proved to be a smash hit, becoming the fastest-growing product and the number-three brand in the dried fruit market. These deals proved that Ocean Spray was not going to rest on its cranberry laurels.

Principal Subsidiaries: Milne Food Products, Inc.; Nantucket Allserve Inc.; Food Ingredients Technologies (Australia).