COMMENT: Ocean Spray - going it alone
Ocean Spray growers have narrowly voted to reject Pepsi's joint venture bid.
Ocean Spray is facing increasing competition from beverage giants with wider distribution networks and stronger market penetration. Having chosen to forgo a joint venture with Pepsi, the cooperative now needs to look for innovative ways to leverage its independent image and grow its audience.
Founded in 1930 as a cranberry growers' cooperative, Ocean Spray has grown into a brand leader among non-refrigerated juices. With its small distribution network, however, the cranberry cooperative lacks market penetration in convenience stores, vending machines, and cafeterias. As a result, Ocean Spray has been searching for a partner to increase its audience and increase growers' profits.
However, earlier this week the Ocean Spray collective rejected Pepsi's US$100m joint venture bid, an offer that was viewed as effectively giving the beverage giant control of the company, albeit while improving distribution. The move is a surprising one as the juice company has found it increasingly difficult to compete against companies such as Pepsi and Coca-Cola. These companies control around 75% of the non-carbonated drink market, according to former Ocean Spray board member Jim Tillotson, speaking to the Boston Globe. Grocery and retail chains typically prefer to deal with the industry leaders, which can supply a wider array of products, than the small cooperative.
A previous unsuccessful partnership with the beverage giant may have contributed to the rejection of Pepsi's bid. From 1992 to 1998, Pepsi distributed single-serving containers of Ocean Spray juices to a wider audience, only to terminate the partnership and purchase a competitor, Tropicana. Members of the cranberry cooperative have also argued that the partnership with Pepsi could prove disastrous to their livelihood, limiting crop prices and destroying the cooperative system. Ocean Spray has announced plans to continue its search for another distributor, one that would allow it to maintain its independence.
Its strong history as an active cooperative makes Ocean Spray reluctant to relinquish its independence. Without a big enough budget for large-scale advertising or the resources for wider market penetration on its own, Ocean Spray's image as a small, independent company is its strongest asset. If it is to go it alone, the juice cooperative should look to leverage this image through less expensive means such as viral marketing strategies.
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