Ocean Spray CEO on mission to 'juice up' equity
Cranberry growers Justin and Henry have helped Ocean Spray's sales climb steadily since their first appearance more than three years ago. Standing knee-deep in a bright red bog as they boast of the berry's benefits, the two fictional friendly farmers make great salesmen.
Now, it's Ocean Spray CEO Randy Papadellis' turn to launch his own sales pitch. Papadellis says he plans to meet with many of the Lakeville, Mass.-based cooperative's 700 growers during the next few months to talk with them about the need to build additional equity in the business. The options include the possibility of selling shares in the company to the public for the first time.
Building additional equity would help ensure the company has adequate capital to update its manufacturing plants, buy new equipment and introduce new products.
Papadellis says Ocean Spray won't need the infusion of equity for a couple of years, but the planning needs to start now. The company has grown steadily in the past five years, rebounding from a time of management turmoil and member discord.
Ocean Spray is on target to reap nearly $2 billion in sales for its current fiscal year, a 7 percent increase from last year. Papadellis would like to see that grow to $3 billion in the next five years - an obtainable goal if Ocean Spray can continue to grow at its current pace.
Some of the company's recent success can be attributed to its humorous TV ads - those 30-second spots featuring Justin and Henry that gave many TV viewers their first glimpse of a cranberry bog.
Then there are all the successful product launches. Ocean Spray famously repositioned its Craisins - sweetened dried cranberries - from a simple baking ingredient to a popular health snack about five years ago. Today, Craisins represent about $140 million in annual sales, according to Papadellis, or about 7 percent of the company's total revenue.
Ocean Spray also dove into the energy drink market a year ago with Cranergy, a cranberry juice cocktail with a little extra kick thanks to green tea extract and vitamin B12. In its first year, Cranergy generated about $60 million in sales.
Next on tap: blueberries. Ocean Spray is testing three blueberry-focused juice flavors right now in the Indianapolis and San Antonio markets, with a national rollout slated for January.
As part of its growth strategy over the past several years, Ocean Spray has teamed up with two much larger beverage companies - Nestle and Pepsi - leading to reduced materials purchasing costs and expanded juice distribution, respectively.
Papadellis' driving goal has been to increase demand for Ocean Spray growers' cranberries while running the company as efficiently as possible.
But new challenges often bloom amid success. As Ocean Spray's need for additional berries grows, Massachusett's farmers will be pressed to find ways to keep up with the demand so Ocean Spray doesn't secure a greater share of its berries from out-of-state bogs.
The vines in the old bogs here aren't as productive as hybrid plants that can be grown in newly created bogs. However, the Cape Cod Cranberry Growers' Association is wrapping up a two-year study of the most efficient ways that local growers can renovate their bogs without leaving themselves high and dry.
Ocean Spray's steady growth will also soon present a quandary for the company.
Papadellis says Ocean Spray will need additional funds to continue to expand the brand's global presence. Because Ocean Spray is a cooperative owned by its growers, Papadellis says he has essentially two choices: He can ask the growers to increase their dollar-per-barrel contributions to the company to build its equity, or the company can pursue an initial public offering and raise cash from outside investors.
Papadellis says the only possible downside from an IPO would be the potential for a change in the company's culture by bringing in investors who aren't part of the cranberry industry. But Papadellis says any IPO would be structured to leave the growers with a majority voting block, keeping them in full control of the company's destiny.
A public offering would also make it considerably easier for growers to cash out. The value of their Ocean Spray stock currently remains fixed, at $25 a share, regardless of the company's success. But the stock could have the potential for significant appreciation if traded in a public market, rewarding the growers who invested in Ocean Spray with a tangible way of sharing in its growth.
Papadellis says the company placed the Ocean Spray brand into a wholly owned subsidiary last year, a legal maneuver aimed at prepping for a possible public offering. However, he doesn't expect the company's board and growers will vote on the issue for at least another 18 to 24 months. That should provide enough time for the stock market to regain some ground after last year's crash, and it should give him time to make his case to the cooperative's members.
In the end, of course, the fate of Ocean Spray will be left in the hands of its growers. But Papadellis hopes he can be at least as effective in getting the business to its next level as a couple of quirky guys in waders talking to the camera straight from the bog.
Jon Chesto is the business editor at The Patriot Ledger. He may be reached at email@example.com or www.massmarketblog.com.