Ocean Spray Cranberries, Lakeville-Middleboro, Mass., has made the cranberry such an American staple that it’s easy to forget how unique its product really is. The cranberry is one of only three fruits (along with the blueberry and the Concord grape) native to North America, and left to its own devices, it is a bitter and fairly unpalatable berry. But during the past 75 years, the company has turned that berry into a variety of flavorful products that span everything from traditional holiday gatherings to modern health-conscious product choices.

Ocean Spray even has a term for cranberry’s singular status, the “cranberry mystique.” It’s a term that has guided the company when introducing cranberries to new markets abroad, and it also could be used to describe the renewed sense of self with which the company is approaching its North American market.

During the past year, Ocean Spray has had a lot of opportunity to examine what makes it unique. As the branding and marketing arm of a cranberry and grapefruit growers’ cooperative, Ocean Spray made headlines in 2004 as its grower-owners debated the possibility of selling the company or creating a joint venture with another beverage group. At issue were several years of low demand and low returns on cranberry crops that had growers wondering if they could compete in today’s market. During the mid-90s growers were receiving record prices for cranberries, as high as $60 per barrel. But the years that followed saw slower demand that left a glut of cranberries and prices as low as $11 per barrel in 2000.

Last year, the growers weighed several options for ownership that included a joint venture with PepsiCo. In a vote last July, the grower-owners elected to maintain their independent cooperative, but Ocean Spray President and Chief Executive Officer Randy Papadellis says the vote did not endorse a business-as-usual approach.

“Change was a given,” he says. “Everyone recognized that in order to be successful in this new century, we needed to do things differently. The vote was about who would lead that change. Our grower-owners chose to remain independent, putting their trust in their own management team.”

Papadellis says the vote indicated confidence in the company’s new business plan, and the growers’ desire to maintain some influence over the way their crops are used and marketed to consumers, giving them greater control over the value of their fruit.

As part of its new business plan, Ocean Spray has opened the doors on cranberry’s product potential. The company is expanding its lineup, which includes both red and white cranberry juices, plus a variety of food products, with a number of new products slated for introduction this year. It also is more aggressively moving into new markets around the world, and making sure consumers know about the fruit’s many health benefits. Its business model stresses innovation in core areas and partnerships with other companies in non-core areas.

“We grow and harvest cranberries better than anybody in the world,” Papadellis says. “We process those cranberries, and we innovate behind cranberries better than anybody else. We are good at many other things as well… but we don’t believe we necessarily do them better than anybody else.” And in those areas, including manufacturing and distribution, Ocean Spray has sought partners, in the United States and abroad.

“Until a couple years ago, we controlled everything. From the cranberry bog or grapefruit grove to the shelf, it never left Ocean Spray,” Papadellis says. “It was a great model for control, but it was somewhat antiquated in terms of being able to maximize availability.”

The new model was already working by the time the growers took their vote last year, and proof of the new effort can be seen in the year-end results — net sales of $1.11 billion were up 14.3 percent over 2003, with a $26 million increase in domestic beverage sales; and cranberry growers received $35 per barrel for their fruit, $9 more than year before. The company also gained two market share points in its core businesses, and increased advertising $10 million over 2003 levels, four times the amount it spent in 2001.

Although not common in the U.S. juice business, Papadellis says the partnership model Ocean Spray chose to pursue often is used in industries such as pharmaceuticals. And it already has helped Ocean Spray gain a foothold in several markets outside of the United States. For example, the company has created an alliance with Nestlé. It also has a strong business in the United Kingdom, where it works with Gerber Foods Soft Drinks Ltd., a partnership that recently took Ocean Spray into France. In Japan, the company works with Sapporo, and it has partnered with Masterfoods in Australia, and a Coca-Cola bottler in Israel.

“If you look at the international business, we started taking it seriously in the mid-90s,” says Stu Gallagher, senior vice president, chief operating officer, international. “Prior to that, it was a little more opportunistic. But we thought we’ve got the whole rest of the world and this surplus of cranberries… we’ve got to start thinking about this a little more strategically because we can really move some fruit outside the borders.”

The term “cranberry mystique” came about as a result of Ocean Spray’s efforts to introduce consumers in citrus-heavy foreign markets to cranberry’s unusual attributes and the company’s heritage as a grower cooperative. “We have an opportunity with the unique taste profile of cranberry to position ourselves against all these orange or citrus-based juices,” Gallagher says. “And in some markets, the fact that we’re an American cooperative is a benefit, too.”

According to Gallagher, the international business has grown at a compound rate of 20 percent during the past 10 years and represents about $300 million in sales.

“The shining star, without a doubt, during that time has been the United Kingdom,” he says. “It’s really the model on all fronts — how to partner, how to market cranberries in virgin territories — that we’re trying to replicate moving forward.”

In addition to introducing the cranberry to the rest of the world, Ocean Spray has been working on getting it in front of more consumers in its home territory. The company has made innovation, particularly in the areas of packaging and sampling opportunities, a priority.

“We don’t just mean innovation in a narrow, what’s-in-the-bottle way,” Gallagher says. “It can include the bottle itself. It’s an expanding definition of what innovation is.”

While new flavors are always a possibility — the company introduced White Cranberry Wildberry last year — today’s efforts are focused more on availability and increasing household penetration.

“Our mission is to get into every household,” says Ken Romanzi, senior vice president, chief operating officer, domestic. “We may not get there totally, but there is a lot of opportunity, and the way we’re going to do that is having the right packages for convenience. If you look around the store — not only at beverages, but at food — in the most popular flavors of any brand, there are about eight or nine different ways to get into that brand.”

The company has introduced several new packaging options, including a 3-liter bottle with a handle that will replace its 1-gallon package; 8-ounce Dispense Pack refrigerator multipacks; 12-ounce four-packs of Light Cranberry Juice Cocktail, and an easy-open cap for 64-ounce bottles. It also has brought back an oldie, the 48-ounce bottle.

“The entire industry moved away from 48-ounce about three or four years ago and kept promoting the 64-ounce size,” Papadellis says. “The assumption was that the 48-ounce consumer would trade up to 64-ounce. In reality, these were households loyal to a particular size and when that size went away, they moved on to other beverage categories.”

New products last year included Ocean Spray Sparkling Juice Cocktails in champagne-style bottles and Ocean Spray Juice & Tea. Romanzi says the Juice & Tea product was a good lesson in keeping a rein on flavor options and putting more emphasis on packaging. Going forward, the line will consist of two flavors rather than the original four.

“It wasn’t as incremental as we wanted it to be,” he says. “It’s a great product, but it’s another flavor in a 64-ounce bottle. So in the future, we’re going to push the edge of the envelope to make products even more different than they are and offer them in different packages rather than just one.”

In addition, the company is emphasizing development of non-grocery channels such as convenience, mass merchandise and club stores. Until 2001, Ocean Spray partnered with the Pepsi-Cola system for single-serve distribution, and that is a particular area of focus these days.

“We continue to look for ways of expanding our brand in certain trade channels in North America,”  Papadellis says. “We believe we’re underdeveloped in the fountain area and in the single-serve area — although we have a decent presence, we could do better. Although we’ve done very well, there’s still almost 80 percent of the world’s population that doesn’t have Ocean Spray products available to them, so we continue to seek distribution partners to get to that 80 percent.”

A message that resonates with consumers in any market these days is health, and that’s something Ocean Spray has in spades. Modern science has been proving the healthful properties of cranberries that holistic medicine has advised for centuries. In addition to their well-known protection against urinary tract infections, cranberries’ high antioxidant content and anti-adhesion benefits, which prevent bacteria from sticking in the body, are thought to provide cardiovascular benefits and protect against gum disease and stomach ulcers.

Health is a big part of the “cranberry mystique,” and when it entered the market in France, the company was able to have a urinary tract health claim approved by the French government, allowing information to be placed right on the label. In the United States, the National Institutes of Health has dedicated millions of dollars to researching cranberry’s impact on health.

“Health and wellness is a major consideration right now in the beverage industry,” Papadellis says. “We’ve been the healthy alternative for years, we just haven’t promoted it as much, and we need to and will do a better job of telling people about all these health benefits.”

Alongside juice’s healthful properties are concerns about sugar. There, too, Ocean Spray feels it has an advantage. Its light juices are among its biggest growth drivers these days, boasting compound growth of 20 to 25 percent.

“Mother Nature did not bless the cranberry with natural sugar,” Papadellis says. “For most of our 75 years, we looked at that as a liability because we’ve always had to add some type of sweetening agent in order to make it palatable. That liability has now flipped into an advantage because we’re able to use other sweetening systems for our light business and maintain 100 percent of the nutrients in the cranberry. You cannot do that with other fruits. In order to generate a light product using other fruits, juice has to be taken out. There’s a huge advantage that we have in the area of health.”

Ocean Spray’s grapefruit business also offers healthy, low-calorie product potential. The cooperative includes about 100 grapefruit growers, and although the business has been suffering in recent years, particularly due to last year’s devastating hurricane season, the company plans to boost grapefruit offerings.

“We are going to be materially increasing our marketing investment behind grapefruit in the next couple of years,” Papadellis says. As with cranberry, the company plans to put emphasis on packaging options and health news.

Another market with a healthy caché is organics, and Ocean Spray will launch its first organic juices through natural and organic food retailers later this year. While the launch will be limited, the company hopes the products will broaden its consumer reach.

“It may not be a huge business in itself, but it may be very high in terms of incremental business, or bringing users in,” Gallagher says.

As it has benefited from the trend toward healthier beverage choices, Ocean Spray also has seen its product become more popular as a result of the cocktail culture. Cranberry juice is an essential ingredient in mixed drinks such as the Cosmopolitan, and Ocean Spray even inspired a new take on the drink, the White Cosmopolitan, when it introduced white cranberry juice. The drink, made with citrus-flavored vodka and lime juice, became popular on the East Coast, and Ocean Spray isn’t shying away from touting its products as social beverages.

“This whole alcohol beverage mixer piece is an important point of entry to our franchise,” Gallagher says. “For some people, it could be the first time they ever have cranberry juice.”

Later this year, the company plans to team with Absolut Vodka on a package that will pair Ocean Spray juice with vodka.

“That, for us, is more of a sampling vehicle than it is a volume driver,” Romanzi says. The company also has made use of sampling partnerships outside of beverages such as its promotion of Craisins sweetened dried cranberries through boxes of Kraft Foods’ Post cereals and on Ready Pac salad kits.

“We’re lucky that our primary fruit is cranberry and it plays in so many places,” Papadellis says. “It plays in juice consumption, in alcohol consumption, and there is something about the cranberry that lends itself to a special occasion.”

As for its own special occasion, Ocean Spray feels it has reason to celebrate this anniversary year. While it is not using the event as a consumer promotion, the company plans to commemorate the achievement with its growers. “There’s a lot of celebrating going on internally because it really is a significant milestone, not only to have survived 75 years, but to have created one of the world’s preeminent brands along the way,” Papadellis says. 

There will be at least one public event — the company will team with New York’s Rockefeller Center this fall to build a cranberry bog right in the facility. But most of the company’s efforts will continue to focus on new ways to bring consumers into the business. Says Romanzi, “We want to reintroduce the cranberry to America.” BI

It’s not often that a company gets the chance to truly evaluate its reason for being, but that’s exactly what Ocean Spray’s owners did last year. 2004 was the culmination of several years of internal debate among the company’s grower-owners over how to best move their brand forward. While they evaluated several options, including a sale of the company or a joint venture, the growers decided to keep Ocean Spray independent.

“It made every stockholder revisit why they are a member of the cooperative,” says Gary Garretson, an Ocean Spray grower-owner, and owner of Slocum-Gibbs Cranberry Co., South Carver, Mass. “We all looked in the mirror for a period of time and I think we all said we’d prefer to retain some influence over our marketing arm. There is no better opportunity for a farmer or farming company to affect its future than to be involved right from the bog to the bottle.”

Garretson says the growers value their access to Ocean Spray management and says the group has taken the opportunity to find even more ways to improve efficiencies such as spreading crop deliveries over a longer period of time and managing the manufacturing process to make the most of the company’s assets.

“It’s a different type of person who wants that give and take [with management]. It requires participation on our part,” Garretson says. “And it takes a different type of corporate executive. By partnering with these farmers, we can do some unique things and there is an opportunity here that can’t be passed up.”

Looking forward, Garretson says he is impressed with the company’s recent innovation efforts, and sees single-serve distribution and broader consumer access to products as a top priority, and one that he, at least, is willing to invest in.

“My vines go back to before the turn of the century, so we take a very long-term view of investing,” he says. “We’re willing to invest in new products and consumer opportunities for Ocean Spray.”

Ocean Spray hasn’t kept innovation in the beverage bottle; it has been busy getting cranberries into all sorts of new places. Capitalizing on the highly successful Craisins sweetened dried cranberry business, the company has rolled out two varieties of Craisins Trail Mix with nuts, chocolate and other dried fruit. This fall it also will offer a limited-time Chocolate-Covered Crainsins product, and is getting ready to launch two varieties of Ocean Spray Cranberry Salsa and Ocean Spray Homestyle Cranberry Sauce. It also plans to expand distribution of its Squeezable Cranberry Sauce in an upside-down bottle.

For healthcare operators, the company soon will offer Ocean Spray Prefer Meal Supplements, with 18 grams of protein, 210 calories and 22 vitamins and minerals. And in the United Kingdom, the company even has introduced Probiotic Cranberry Yogurts blended with other fruits and natural plant extracts.