7 ms·

Can the Ocean Spray CEO Save the Cranberry Business?

62 points by samsolomon 11y ago

astrodust 11y ago
I did not know that about Ocean Spray. Makes for an interesting case study in ownership and management.
sbov 11y ago
Does anyone know, by what logic are the auctions price fixing? Generally they seem like one of the fairest ways to determine a price - are they doing something odd in their auctions? Or are they just grasping at straws?
- tyingq 11y ago
  The auctions are run by the dominant leader in the space (Ocean Spray). Supposedly they are selling off "excess product". The accusation is that they are selling with a starting bid that is lower than the actual cost to make the cranberry concentrate...on purpose, to manipulate the market. Typically called predatory dumping.
  - scottkduncan 11y ago
    But it is still an auction, right? As in, if the starting price is less than the market price it should still get bid higher and there won't be a market irregularity?
  - cptskippy 11y ago
    It sounds like the demand for is juice low due to sugar labeling requirements. The demand for the husks is high however and the left over juice is a byproduct of harvesting the cranberry husks for craisans. So what is the right answer? Dump the juice in the river? That's like throwing away money since it seems like someone is willing to buy it.
  - morgante 11y ago
    I don't see how this can be considered predatory though. It's still an auction. It should sell at the market price. In theory, they should be able to open their action at $1 and that would be totally fair. If they were selling at $1 that would be a different matter, but the auction structure should guarantee that goods aren't sold at substantially below-market.
    - tyingq 11y ago
      I assume that's why it's currently just an accusation and not a given. It is still possible to control pricing with an auction if you dump enough product with no reserve price...basic supply/demand. A cynic might say they chose the auction route specifically to avoid the appearance of dumping, but ensured they would dump enough volume to get the effect they wanted. Nobody seems to be debating that the sales price is currently lower than the actual cost to produce the product.
- jtchang 11y ago
  The idea is to force other people out of the market because they can't continue to sell at your price. If Apple gave away their iPhone for free (and could sustain that with the cash they have) they could drive every other phone manufacturer out of the market (assuming everyone wanted iPhones). This works better if the product is homogenous. In web products maybe Gmail is an example? Hard to compete with free and the # of features they have. It's hard to come up with a better example because features is a big differentiator. Once your competitors go out of business you're the only guy left in town so you raise your prices to the moon and profit.
  - thaumasiotes 11y ago
    > Once your competitors go out of business you're the only guy left in town so you raise your prices to the moon and profit. Has there ever been a case of this happening?
    - ceejayoz 11y ago
      https://en.wikipedia.org/wiki/Monopoly#Historical_monopolies https://en.wikipedia.org/wiki/Monopoly#Historical_monopolies
      - thaumasiotes 11y ago
        Please identify something in the article that matches this description.
        ceejayoz 11y ago
        > De Beers is well known for its monopoloid practices throughout the 20th century, whereby it used its dominant position to manipulate the international diamond market. The company used several methods to exercise this control over the market. Firstly, it convinced independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to control prices through limiting supply.
Aelinsaar 11y ago
"...but now the bitter economics may spell disaster for Massachusetts’ largest commercial crop." I had no idea that cranberries of all things, fit the bill as the largest commercial crop in Massachusetts. I'm shocked actually.
- twoodfin 11y ago
  We don't grow much else in commercial quantities. Tough climate to find any competitive advantage.
- DiabloD3 11y ago
  I think it's because Massachusetts has nothing that can be described as a large commercial crop. However, it isn't the largest, and Massachusetts isn't the largest producer of them. Wisconsin produces 60% of cranberries in the US(1), with Massachusetts producing half of what Wisconsin does(2), 201k tons vs 94k tons, out of 343k tons total. The rest of the producing states combined are half of Massachusetts. As for, what is their largest crop, if it isn't Cranberries? Nursery products like ornamental flowers and shrubs(3). 1: http://www.agmrc.org/commodities-products/fruits/cranberries/ http://www.agmrc.org/commodities-products/fruits/cranberries... 2: http://archive.boston.com/news/local/massachusetts/2012/10/20/cranberry-production-state/tFqFOnL323v1fsCdcL00lO/story.html http://archive.boston.com/news/local/massachusetts/2012/10/2... 3: http://www.netstate.com/economy/ma_economy.htm http://www.netstate.com/economy/ma_economy.htm
  - Aelinsaar 11y ago
    So... Wisconsin... The Cranberry State? TIL!
dustinmoorenet 11y ago
After reading the whole story, I feel that cranberries are a crop most people don't care much for but is easy for a section of the country to grow. There should be less growers to match demand.
- zanny 11y ago
  And this is where economics conflicts with reality. The farther north you get, the more limited your crop options are, especially in the boggy farmland that hosts cranberries. If the world made sense we would have the southernmost growers transition to alternate crops more likely to prosper in their regions, but in practice go try telling PA farmers they need to change crops while the MA ones can keep continuing on as they always have. And that is the problem with Ocean Spray - its a coop of too many farmers making too much of a crop, and it is hard for such an arrangement to just cut its own workforce when all are meant to be equal.
dghughes 11y ago
This reminds me of the Quebec maple syrup "mafia" the FPAQ you do what they say or else you don't get to sell your syrup.
- rhizome 11y ago
  I love Quebec syrup, but are you implying that there are freaky alternative maple preparations that never see the market? See also: having to smuggle raw milk cheese into the US.
Animats 11y ago
$16 a barrel wholesale? Somebody needs to figure out a cranberry-based alternative to Soylent and find a VC who considers that a "tech startup".
p1mrx 11y ago
Why don't they sell unsweetened craisins? Even the "reduced sugar" version just replaces the added sugar with sucralose.
- tyre 11y ago
  Cranberries are incredibly bitter to the average palette. While they have a distinct taste, they need sugar to balance out the bitterness enough to enjoy it. Grapes have the opposite problem. If you've ever wondered why there isn't grape ice cream (long shot!), it is because all of the flavor in a grape is in its skin. The center is a generic, unidentifiable "sweet". That's great for juices, where other fruits can add taste, but bad for ice cream. Grape skins don't do well in ice cream—the texture freaks people out.
  - coredog64 11y ago
    Ben (or was it Jerry?) managed to make grape ice cream but it killed the dog of the girl he was trying to impress.
    - shrikant 11y ago
      You're probably being downvoted because: a) either someone wants a citation or, b) that story is pure fiction http://www.snopes.com/food/ingredient/grapeicecream.asp http://www.snopes.com/food/ingredient/grapeicecream.asp
  - calbear81 11y ago
    I throw bags of green grapes into the freezer and then they become balls of grape ice sorbet. Just gotta eat them before they melt otherwise they become a sad soggy mess.
  - IIAOPSW 11y ago
    In my experience, if you put grapes in the freezer they come out with the approximately the same texture as icecream. So if you really want to know what grape icecream would taste like there's an easy way to find out.
kobayashi 11y ago
It's an interesting read, but I think it leaves me with more questions than answers. - Why did Ocean Spray create the '85% auction rule'? - What effect did Craisins have on the raisin market? - I'd like more details on the dropped anti-trust suit, which seems glossed over in the article. I'm intrigued by the article, but left feeling unsatisfied. This is not top-tier writing.
- rhizome 11y ago
  I would guess that craisins have had a lot bigger impact on the crouton market.
deleted 11y ago
[deleted]
kevin_thibedeau 11y ago
Stopped buying Ocean Spray when they hit their bottles with the shrink ray two years ago. Don't cheat your customers if you want to stay in business.
megablast 11y ago
So the company was saved 13 years ago because the CEO had a brilliant moment to market Craisins more? Does anyone else find this hard to believe? All the people working for him, pushing possible solutions, and HE is the one that saw the other guys eating these things as a snack, and that is what saved the industry?
- toomuchtodo 11y ago
  Fedex was saved by a night at the casino. Anything is possible.

62 points by samsolomon 11y ago

I did not know that about Ocean Spray. Makes for an interesting case study in ownership and management.

sbov 11y ago

Does anyone know, by what logic are the auctions price fixing? Generally they seem like one of the fairest ways to determine a price - are they doing something odd in their auctions? Or are they just grasping at straws?

tyingq 11y ago
The auctions are run by the dominant leader in the space (Ocean Spray). Supposedly they are selling off "excess product". The accusation is that they are selling with a starting bid that is lower than the actual cost to make the cranberry concentrate...on purpose, to manipulate the market. Typically called predatory dumping.
- scottkduncan 11y ago
  But it is still an auction, right? As in, if the starting price is less than the market price it should still get bid higher and there won't be a market irregularity?
- cptskippy 11y ago
  It sounds like the demand for is juice low due to sugar labeling requirements. The demand for the husks is high however and the left over juice is a byproduct of harvesting the cranberry husks for craisans. So what is the right answer? Dump the juice in the river? That's like throwing away money since it seems like someone is willing to buy it.
- morgante 11y ago
  I don't see how this can be considered predatory though. It's still an auction. It should sell at the market price. In theory, they should be able to open their action at $1 and that would be totally fair. If they were selling at $1 that would be a different matter, but the auction structure should guarantee that goods aren't sold at substantially below-market.
  - tyingq 11y ago
    I assume that's why it's currently just an accusation and not a given. It is still possible to control pricing with an auction if you dump enough product with no reserve price...basic supply/demand. A cynic might say they chose the auction route specifically to avoid the appearance of dumping, but ensured they would dump enough volume to get the effect they wanted. Nobody seems to be debating that the sales price is currently lower than the actual cost to produce the product.
jtchang 11y ago
The idea is to force other people out of the market because they can't continue to sell at your price. If Apple gave away their iPhone for free (and could sustain that with the cash they have) they could drive every other phone manufacturer out of the market (assuming everyone wanted iPhones). This works better if the product is homogenous. In web products maybe Gmail is an example? Hard to compete with free and the # of features they have. It's hard to come up with a better example because features is a big differentiator. Once your competitors go out of business you're the only guy left in town so you raise your prices to the moon and profit.
- thaumasiotes 11y ago
  > Once your competitors go out of business you're the only guy left in town so you raise your prices to the moon and profit. Has there ever been a case of this happening?
  - ceejayoz 11y ago
    https://en.wikipedia.org/wiki/Monopoly#Historical_monopolies https://en.wikipedia.org/wiki/Monopoly#Historical_monopolies
    - thaumasiotes 11y ago
      Please identify something in the article that matches this description.
      - ceejayoz 11y ago
        > De Beers is well known for its monopoloid practices throughout the 20th century, whereby it used its dominant position to manipulate the international diamond market. The company used several methods to exercise this control over the market. Firstly, it convinced independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to control prices through limiting supply.

Aelinsaar 11y ago

"...but now the bitter economics may spell disaster for Massachusetts’ largest commercial crop." I had no idea that cranberries of all things, fit the bill as the largest commercial crop in Massachusetts. I'm shocked actually.

twoodfin 11y ago
We don't grow much else in commercial quantities. Tough climate to find any competitive advantage.
DiabloD3 11y ago
I think it's because Massachusetts has nothing that can be described as a large commercial crop. However, it isn't the largest, and Massachusetts isn't the largest producer of them. Wisconsin produces 60% of cranberries in the US(1), with Massachusetts producing half of what Wisconsin does(2), 201k tons vs 94k tons, out of 343k tons total. The rest of the producing states combined are half of Massachusetts. As for, what is their largest crop, if it isn't Cranberries? Nursery products like ornamental flowers and shrubs(3). 1: http://www.agmrc.org/commodities-products/fruits/cranberries/ http://www.agmrc.org/commodities-products/fruits/cranberries... 2: http://archive.boston.com/news/local/massachusetts/2012/10/20/cranberry-production-state/tFqFOnL323v1fsCdcL00lO/story.html http://archive.boston.com/news/local/massachusetts/2012/10/2... 3: http://www.netstate.com/economy/ma_economy.htm http://www.netstate.com/economy/ma_economy.htm
- Aelinsaar 11y ago
  So... Wisconsin... The Cranberry State? TIL!

dustinmoorenet 11y ago

After reading the whole story, I feel that cranberries are a crop most people don't care much for but is easy for a section of the country to grow. There should be less growers to match demand.

zanny 11y ago
And this is where economics conflicts with reality. The farther north you get, the more limited your crop options are, especially in the boggy farmland that hosts cranberries. If the world made sense we would have the southernmost growers transition to alternate crops more likely to prosper in their regions, but in practice go try telling PA farmers they need to change crops while the MA ones can keep continuing on as they always have. And that is the problem with Ocean Spray - its a coop of too many farmers making too much of a crop, and it is hard for such an arrangement to just cut its own workforce when all are meant to be equal.

dghughes 11y ago

This reminds me of the Quebec maple syrup "mafia" the FPAQ you do what they say or else you don't get to sell your syrup.

rhizome 11y ago
I love Quebec syrup, but are you implying that there are freaky alternative maple preparations that never see the market? See also: having to smuggle raw milk cheese into the US.

Animats 11y ago

$16 a barrel wholesale? Somebody needs to figure out a cranberry-based alternative to Soylent and find a VC who considers that a "tech startup".

p1mrx 11y ago

Why don't they sell unsweetened craisins? Even the "reduced sugar" version just replaces the added sugar with sucralose.

tyre 11y ago
Cranberries are incredibly bitter to the average palette. While they have a distinct taste, they need sugar to balance out the bitterness enough to enjoy it. Grapes have the opposite problem. If you've ever wondered why there isn't grape ice cream (long shot!), it is because all of the flavor in a grape is in its skin. The center is a generic, unidentifiable "sweet". That's great for juices, where other fruits can add taste, but bad for ice cream. Grape skins don't do well in ice cream—the texture freaks people out.
- coredog64 11y ago
  Ben (or was it Jerry?) managed to make grape ice cream but it killed the dog of the girl he was trying to impress.
  - shrikant 11y ago
    You're probably being downvoted because: a) either someone wants a citation or, b) that story is pure fiction http://www.snopes.com/food/ingredient/grapeicecream.asp http://www.snopes.com/food/ingredient/grapeicecream.asp
- calbear81 11y ago
  I throw bags of green grapes into the freezer and then they become balls of grape ice sorbet. Just gotta eat them before they melt otherwise they become a sad soggy mess.
- IIAOPSW 11y ago
  In my experience, if you put grapes in the freezer they come out with the approximately the same texture as icecream. So if you really want to know what grape icecream would taste like there's an easy way to find out.

kobayashi 11y ago

It's an interesting read, but I think it leaves me with more questions than answers. - Why did Ocean Spray create the '85% auction rule'? - What effect did Craisins have on the raisin market? - I'd like more details on the dropped anti-trust suit, which seems glossed over in the article. I'm intrigued by the article, but left feeling unsatisfied. This is not top-tier writing.

rhizome 11y ago
I would guess that craisins have had a lot bigger impact on the crouton market.

deleted 11y ago

[deleted]

kevin_thibedeau 11y ago

Stopped buying Ocean Spray when they hit their bottles with the shrink ray two years ago. Don't cheat your customers if you want to stay in business.

megablast 11y ago

So the company was saved 13 years ago because the CEO had a brilliant moment to market Craisins more? Does anyone else find this hard to believe? All the people working for him, pushing possible solutions, and HE is the one that saw the other guys eating these things as a snack, and that is what saved the industry?

toomuchtodo 11y ago
Fedex was saved by a night at the casino. Anything is possible.