New twists for the Ocean Spray people
Ocean Spray Cranberries Inc. has turned a tart fruit into a sweet business.
The owner-controlled cooperative first changed berries from a seasonal specialty into a year-round business. It did it by pushing cranberry-based beverages with steady consumer appeal. Meanwhile, less effort went into hawking cranberry sauce and whole berries, where sales are tied to holiday turkey eating. As a result, Ocean Spray's profits have more than doubled in the last three years, to $89.4 million.
Now Ocean Spray president Harold Thorkilsen is launching a two-pronged offensive to keep the bottom line juicy. The cooperative is spearheading the use of a new packaging method in a bid to make cranberry drinks more affordable and convenient. And the firm will soon try to crack the $600 million-a-year market for pure apple juice drinks.
''Our mission is to absolutely maximize the marketing opportunities on cranberry products,'' Mr. Thorkilsen says from his office, overlooking Plymouth Rock. ''But we think we can make the cranberry business more profitable to the owners by disciplined diversification.''
Both moves will be necessary to meet the cooperative's goal of doubling revenues from $302 million last year to $650 million by 1985. Thorkilsen admits it will be hard to keep sales climbing at the 28.4 percent rate they did in 1981 . ''We don't expect to tack on the same incremental sales this year as we did last. But I think compound sales growth of 15 to 20 percent should be manageable.''
To help expand cranberry sales to meet that goal, Ocean Spray was the first major US company to introduce a new ''paper bottle'' for its drink products. The foil-lined paper containers, now being sold on the East Coast, are much lighter than glass bottles and, unlike waxed paper containers, require no refrigeration.
Ocean Spray figures the lower packaging and shipping costs will let retailers offer single-serving paper bottles for 10 percent less an ounce than Ocean Spray's single-serving cans. And savings to the consumer are projected to climb to 20 to 25 percent an ounce when a one-liter paper bottle, slated for introduction this summer, is compared with 32-ounce glass bottles.
In the near future, Ocean Spray also hopes to package juice concentrates in paper bottles, thus eliminating the cost of freezing the contents. The cooperative plans to offer juice concentrates to consumers at a saving of 25 percent an ounce over frozen juice. The goal is to boost the tiny 2 percent of Ocean Spray's sales which come from concentrates.
Without the new aseptic containers, Ocean Spray executives worried that rising packaging and transportation costs would cut the appeal of its premium-priced products. ''We were not sure there was going to be enough of a segment left by 1990 to sustain the kind of growth we must achieve,'' Thorkilsen says. By 1985, Ocean Spray expects 25 percent of its drinks to be sold in paper containers.
Initial shopper acceptance of the new paper bottles has been ''fine,'' says a spokesman at Stop & Shop Companies Inc. in Boston. ''It is one of our most successful'' new products, adds an official at the Star Market Company in Cambridge, Mass. But full cost savings may not be passed onto the consumer during the introduction period, a Star spokesman says.
Ocean Spray officials hope the more convenient paper containers will help the cooperative win a place on fast-food chain menus. ''We expect to be in one (chain) this year,'' Thorkilsen says. Now only 7 percent of Ocean Spray's sales come from restaurants, a figure he calls ''unacceptably low.''
The cranberry-based corporation also hopes to use new packaging to get a piece of the large and fast-growing apple juice market. At the moment Ocean Spray does not have an entry in the apple juice segment, which has been growing 30 percent a year or more, although it does sell a cranberry and apple juice blend. Pure apple juice and cider now account for 22.2 percent of all bottled and canned fruits sold in supermarkets, compared with 9.9 percent for cranberry juice, according to Karen Brown, a Food Marketing Institute vice-president.
To bite into the apple juice market, Ocean Spray has reached agreement in principle with Red Cheek Inc., an apple growing cooperative in Fleetwood, Pa. The tentative plan is for Ocean Spray to package apple juice from Red Cheek in paper bottles under an Ocean Spray label. ''We will be in the apple juice business before the fall of 1982,'' Thorkilsen says.
The apple juice entry is just one of five new drinks Ocean Spray hopes to launch by 1986, three of which will not be based on cranberries. Ocean Spray's first experience with products not grown in a bog came in 1976, when it organized a cooperative of citrus growers in Florida's Indian River region and began selling grapefruit juice. Now Ocean Spray holds the largest share of the US bottled grapefruit juice market.
Diversification into grapefruit helped absorb some of Ocean Spray's overhead, thus boosting the return to cranberry growers. In 1976 the return on a barrel of cranberries was $13.59. By 1980 each barrel brought $33.07, although tight cranberry supplies helped.
While the diversification into grapefruit has been a major success, the cooperative's early experience with tomato juice has been less upbeat. In 1980 Ocean Spray purchased the Firehouse Jubilee tomato juice cocktail brand. Firehouse faces tough competition from Campbell Soup Company's V-8 vegetable juice, among others.
To boost sales, Ocean Spray redesigned the Firehouse label and boosted the marketing budget for the line. ''While we got a rocky start on it, we have solved our problems,'' Thorkilsen contends.
If apple juice, tomato juice, and other new entries take off, cranberries will account for a somewhat smaller portion of sales at Ocean Spray than the 85 percent share they now produce. ''It is inevitable that the business represented by cranberries will be somewhat reduced, but it will still be the dominant part of our business,'' Thorkilsen says.