Ocean Spray: From Farmers Cooperative to Fortune 500
Sep. 19, 1985
PLYMOUTH, Mass. (AP) _ A few days before Thanksgiving 1959, disaster struck America's cranberry farmers when a herbicide used by a handful of West Coast growers was found to cause cancer in laboratory rats.
Federal officials took to TV, warning consumers not to buy cranberry products. The industry's sales crashed.
That winter, a few cranberry farmers got together and decided they needed help running their cooperative. They pooled $25,000 and hired a local financial consultant who told them they needed to install professional managers soon or face financial ruin.
The meeting was providential for America's cranberry growers. It gave new direction to Ocean Spray Cranberries Inc., a once-modest business run by farmers that has since blossomed into a Fortune 500 company with 65 products, $500 million in revenues and 1,500 employees.
Today the compnay is considered one of the most innovative and entrepreneuria l of the country's 7,500 cooperatives. Ocean Spray is the third best selling juice on the market, and sales have doubled in the past five years. Profits have jumped 36 percent since 1982 to $147 million last year.
''I would characterize Ocean Spray as among the most aggressive and perhaps the most successful companies in the juice and beverage category in the U.S.,'' said Leo Plante, a former analyst with Goldman, Sachs and Co. in New York and an expert on food commodities and cooperatives.
Plante likens the Ocean Spray success story to the tale of David slaying Goliath.
''You have to look at who Ocean Spray is competing with - giant, multinational corporations like Beatrice, which owns Tropicana, and Coca-Cola, which owns Minute Maid,'' he said. ''Ocean Spray didn't succeed by muscling anyone out of the market. They did it by being perceptive, clever and gutsy.''
For Ocean Spray, being gutsy has meant introducing new products every quarter, investing heavily in experimental packaging equipment and practicing ''bottom-up'' management - encouraging new employees to change the way Ocean Spray works.
Executives say the ''Great Cranberry Scare of '59'' made risk-taking Ocean Spray's corporate credo.
''Here you had these farmers with eighth grade educations and they knew something had to be done or else all was lost,'' said James Tillotson, vice president of technical research and development. ''It turned out that these farmers are very, very hip. They were willing to take the risk of new technology and invest very heavily in marketing.
''It started as a cottage industry,'' he added. ''Now it's an agri-business succeeding when a lot of others are failing.''
American Indians were the first to harvest cranberries, one of America's three native fruits along with Concord grapes and blueberries. Cranberries grow naturally in Massachusetts, New Jersey, Wisconsin, Washington and Oregon.
Ocean Spray, whose members make up 85 percent of the country's cranberry growers, started selling cranberries and cranberry sauce in 1912.
But the 1959 crisis taught growers they could not rely just on turkey dinners at holidays.
Ocean Spray now sells juices that mix cranberries with prunes, apricots, grapes, apples and raspberries. It also sells grapefruit juice.
This fall the company is introducing Mauna La'i, a guava concoction aimed at young professionals.
They company has not been problem-free since its change of direction: a spicey tomato juice flopped, and so did cranberry juice packaged in cans instead of glass bottles.
But since the farmers' board of directors named Harold Thorkilsen chief executive officer in 1972, the company has grown steadily.
''When it comes to decisions and changes, it's never 'why.' It's 'why not?' They think young,'' Stuart Pederson, chairman of the board and a Wisconsin cranberry grower with 50 acres under cultivation, said of the company's executives.
''They're so dedicated, it brought us all together,'' he added. ''I tell you, we are family, and we trust management. They keep making money year in and year out.''
Ocean Spray executives say they are proud of the company's ''bottom-up'' management style, and boast that one worker invented a better way to bottle juice after six months on the job.
''We like fresh ideas. We want to be challenged,'' said Tillotson.
In the late 1970s, Ocean Spray spent millions of dollars to investigate ''paper bottles'' - a packaging method common in Europe but not yet approved in the United States. Executives believed the single-serving, unbreakable paper bottles - called asceptic packages - were a natural for school children.
Gambling that the federal Food and Drug Administration would eventually give the OK to the packaging technique, Ocean Spray bought European equipment and built a plant for the process in Middleboro, Mass.
When approval came in 1981, Ocean Spray was first in the country with the packages.
''They were the experts,'' said Mike Pehanich, executive editor of Prepared Foods, a magazine that follows the industry. ''They had done their homework, anticipating that the industry could be turned around considerably with some alteration in our notion as to what is a good package.''
Ocean Spray attributes its recent spurt of 22 percent growth to the success of the venture. Other juice companies have since jumped into the competition.
Ocean Spray plans to come out with a new product every quarter for the next five years and expects to pass $1 billion in revenues by 1990. Fifteen new cranberry blends are currently being tested.
''There won't be any more cranberry scares if we can help it,'' said Tillotson.