And we paid people to come and haul away the hulls. In the mid '90s, we'd extract juice from the cranberry and then leave behind what we call the hulls. How about the Craisins concept and its success? And usually just one of 25 ideas really hits. Ideas usually emerge intuitively, but then we validate them with market research and consumer insight. Innovation is a combination of art and science. We were the first company to blend juices, i.e., Cran-Apple, and today over 80% of the juices on the shelf are blends. The juice box was pioneered by Ocean Spray. Almost every major piece of innovation that has occurred in the shelf-stable juice category originated here at Ocean Spray. Innovation is the lifeline of our business. The model validates the value of goodwill. And that's the value of the Ocean Spray brand and the added value. But we are on target to pay our grower-owners $64 a barrel for last year's crop. The independent market price right now is in the $20 range. When I joined Ocean Spray, in 2000, the price for cranberries was about $12 a barrel. Cranberries are our largest raw material purchase, and we actually seek to pay as much for those cranberries as we can, to compensate our grower-owners.
Can you imagine the CEO at PepsiCo or Coke seeking to maximize what they pay for aluminum cans? But that in large respects is what we try to do. the more traditional business model is that we seek to maximize the cost of our largest raw material. How do the economics of being a cooperative work? They are the only shareholders in the company, and they are the farmers who deliver the fruit that go into the majority of our products.Īt times it can be like dealing with 750 limited partners, but the reality is that they elect the board of directors, and the board of directors oversees their interests and hires and, if necessary, fires the management team that manages the brand and the business. That's roughly 700 cranberry growers and 50 grapefruit growers. We're very similar to most other major consumer packaged goods companies-we create, we innovate, we advertise-but we are very different in that our owners are 750 farmers. Randy Papadellis, Ocean Spray's CEO, and I recently spoke about managing a cooperative, about innovation-including the story of how a manufacturing byproduct became the blockbuster Craisins, selling 140 million pounds of dried cranberries a year-and about what's next on the horizon for Ocean Spray.Ĭan you tell me about the co-op model and how you manage it?
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