Wednesday, June 09, 2004

Ocean Spray to go it alone The forward march of oligopoly can be hindered. By a narrow margin, the cranberry and grapefruit growers that make up the Ocean Spray cooperative turned down a deal with PepsiCo, whereby Pepsi would package, distribute, and market their products, while they became a purely agricultural cooperative. 48% of the around 900 members wanted to sign the deal, 52% were against. Now Ocean Spray, with its fruit juices and cranberry products, is in the same awkward position in the market that it has been for the last few years. Currently, Ocean Spray has no distribution deal with the three big beverage companies (Coke, Pepsi, and Cadbury-Schweppes). It's become increasingly hard for the company to get shelf space for its products. And the shelf-stable juice area as a whole is losing ground to fresh juices from Pepsi's Tropicana and Coke's Minute Maid. And on another front, jucie drinks like Odwalla (Coke) and Nantucket Nectars (Cadbury-Schweppes) are already filling up the higher-priced niches. Ocean Spray in fact had a distribution agreement with Pepsi, but it was terminated in 2000 when Pepsi acquired Tropicana. John Sicher, publisher of Beverage Digest, is quoted in the Philadelphia Inquirer ("Ocean Spray growers vote to stay independent," 6/9/2004) as saying: "They are going to face challenges getting the distribution and retailer attention they need to strongly grow their brands.…Ocean Spray is a great brand, but it lacks the scale to compete in today's distribution and retail environment." So a slight speed bump in the road to consolidation of the beverage industry, but only a slight one. All observers agree that Ocean Spray can't go it alone for long, and the co-op is not the sole supplier of cranberries. Those who refused Pepsi's offer may have noble motives, but they have to deal with Pepsi or its two chief rivals or die a slow death. 7:23:55 PM

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