Can Ocean Spray CEO Randy Papadellis Save the Cranberry Business?
Throughout the years, the fruit’s value continued to rise at an astonishing rate. When adjusted for inflation, the price of cranberries jumped at a compound rate of 6.3 percent every year for almost 25 consecutive years, outperforming stalwarts such as apples and oranges. The cooperative added acreage, took on new members, and encouraged farmers to plant more vines. All the cranberries in the world, it seemed, couldn’t satiate Ocean Spray’s appetite for the bitter fruit. As the business grew, though, Ocean Spray’s cooperative of farmers started to splinter and competition increased. In 1993 Northland Cranberries, the single biggest cranberry grower, ditched the brand to find its own fortune. Other rivals, such as beverage behemoths Coca-Cola and PepsiCo, also began dipping deeper into the juice market.
To stay competitive, Ocean Spray tried to find new ways to push berries onto consumers—partnering with Mars to make cranberry-red M & M’s and with Nabisco on Cranberry Newtons. Cranberry barbecue sauce and cranberry beer soon followed. But in the late 1990s, Ocean Spray foolishly slashed its marketing budget, and consumption of the fruit finally plateaued. Blinded by decades of uninterrupted growth, Ocean Spray’s farmers didn’t see the warning signs and kept harvesting more berries than ever, smashing records in 1997, 1998, and again in 1999.
Unable to shoulder the glut of all those cranberries, Ocean Spray buckled, and the entire industry collapsed. In 1999, while the price of cranberries plummeted, some 100 Ocean Spray executives were shuffled around the company or axed.
Papadellis—then an executive at the grape juice company Welch’s—didn’t know it at the time, but this was his mess to clean up.
It’s a cold and rainy afternoon outside the Ocean Spray headquarters in Lakeville, 40 miles south of Boston. A small bog looms in the background as Papadellis and I stare at each other from across a conference table. It’s hard to ignore his resemblance to comedian Martin Short. A C-suite geek who quotes lessons from the bestselling business book From Good to Great, Papadellis espouses the power of cranberries with dead sincerity. “If I can get a person to visit a farm or drive by a farm on the day they happen to be harvesting, I’ve got them,” he tells me. “There’s just no way you can go by a cranberry harvest, watch the grower-owners and what they do, and not become a cranberry fan by the end of the day.”
Papadellis grew up in Massachusetts, but home was a long way from cranberry country. Raised in Framingham by Greek parents, he hardly spoke English until grade school. His mom was a homemaker; his dad owned a pair of burger and ice cream joints, where Papadellis got his first taste for managing a business. As a student at Colby College, in Maine, he waffled over whether to attend law school or business school after graduation. Then, on a chance trip to Florida in his junior year, he attended a lecture by soft-drink marketing wiz Donald Kendall, then the CEO of PepsiCo. The logo-laden, slogan-slinging, hyperanalytical world of consumer packaged goods tickled Papadellis’s inner nerd and set him sprinting down the executive track.
The early part of Papadellis’s career was punctuated by stints with some of the biggest food brands in the world. After cruising through Cornell’s MBA program, he ventured west of the Mississippi for the first time to work in the chips division at Frito-Lay’s Texas headquarters. There he learned the difference between selling junk food and selling indulgence. “If you’re going to, in a sense, waste calories,” he says, “do it with something really good.”
After five years, Papadellis left Frito-Lay for Cadbury Schweppes, where by age 30 he was the British company’s second in command in North America. Success, however, came at a cost. If he wanted to continue scaling the ladder at Cadbury, he’d eventually have to take his family overseas to South Africa, Singapore, perhaps even India. “I didn’t want to take my new wife and my parents’ grandchildren and move,” he says. So he accepted a job 14 miles from where he grew up—at Welch’s, in Concord. It was his first exposure to the wonky world of agricultural cooperatives. He spent six years heading up marketing efforts at the grape juice company before turning to cranberries in 2000.
During Papadellis’s first week as chief operating officer at Ocean Spray, the company announced it would pay its farmers a dismal $12 a barrel—a far cry from covering the cost of production. For the first time in decades, it was all but impossible for growers to turn a profit, thanks to the string of monster crops and the resulting surplus of fruit. “I didn’t realize the situation was quite as acute as it was,” Papadellis reflects.
Still, it didn’t take long for Papadellis—nicknamed “Eeyore” for his constant brooding—to realize that Ocean Spray’s problems extended far beyond having an oversupply of fruit. Northland Cranberries, the huge Wisconsin grower that abandoned the cooperative years earlier to go it alone, had filed a federal antitrust lawsuit alleging that Ocean Spray was a cartel that used dirty tactics to “destroy competitors,” including “surreptitiously rearranging” store shelves and paying retailers to remove Northland products.
If that wasn’t bad enough, rival factions within Ocean Spray’s community of grower-owners had begun to feud. Half wanted to sell the brand to PepsiCo and cash in while they still could, while the other half wanted to stay the course in hopes that the glut would disappear and prices would rise again. “This was like Florida-hanging-chads-type stuff,” says Papadellis, who points out that the company cycled through three CEOs in almost as many years before his arrival. “All it took was a switch of a few shares and they could literally unseat a board.”
When it was finally Papadellis’s turn at the helm, he wasn’t sure he wanted it. On a Sunday in March 2003, he was loafing around his Hopkinton home when he got a call from Ocean Spray board chairman Bob Rosbe, who wanted Papadellis to fill in as interim CEO. There’d be a search to find a permanent replacement, Rosbe explained, and Papadellis would be the lead internal candidate. After a few minutes of exchanging pleasantries, he told Rosbe that he was happy to keep the seat warm. But as far as making it a full-time gig, his mind was set.“I don’t want the job,” he told Rosbe. In talking it over with his wife, Papadellis laughed that not even corporate messiah Jack Welch could save Ocean Spray from itself.
Still, the call with Rosbe gnawed at his conscience. Papadellis had spent his entire career at food companies, but taking over a failing cooperative rife with turmoil that was on the cusp of being sold to PepsiCo smacked of career suicide. In the end, though, the lure of a top post won out, and he accepted the job as interim CEO. Weeks turned to months, and the more Papadellis immersed himself in cranberries and the heritage of Ocean Spray, the more he began to convince himself that he could rally the farmers and rebuild the brand.
When Papadellis took over as Ocean Spray’s full-fledged CEO in 2003, his first order of business was to beat back the aggressive advances of PepsiCo. Farmers were scheduled to vote on whether to sell the brand, and Papadellis needed to get them on board with his vision of a 21st-century Ocean Spray. So he hit the road for a cross-country round of meet-and-greets with farmers. In southeastern Massachusetts, he donned waders and slogged into flooded bogs. In rural Wisconsin and New Jersey, he visited community centers to hear angry farmers complain about having to take a second job and even selling precious land to real estate developers just to stay afloat.
As the PepsiCo vote neared, Papadellis found himself in a community center in Bandon, Oregon, a city of around 3,000 cut along the northern Pacific coastline. After Papadellis served up his optimistic spiel about the future, a disheveled farmer and his ailing wife, who was confined to a wheelchair, took the floor. Pointing directly at Papadellis, the farmer said, “I just cashed in my last $10,000 life insurance policy because I’m betting on you. Don’t let me down.”
The vote of confidence shook the CEO to his core. “That’s way more pressure than any boss or any public shareholder could put on you,” Papadellis confides.
Pounding the pavement ultimately paid off: Growers struck down the sale to Pepsi 51 to 49 percent. It was the narrow victory Papadellis needed to push full steam ahead. In the months and years that followed, he proved himself an effective leader and problem solver. He even nipped the Northland lawsuit in the bud by buying the company’s cranberry-processing operation for $28 million, a somewhat astonishing fix to antitrust allegations. After the hefty payout, Northland dropped the case.
Still, the surplus of fruit plagued Ocean Spray farmers, and it wasn’t simply going to vanish. To cull the glut, somehow Papadellis needed to convince the world it needed to eat more cranberries.
Late one afternoon in 2003, Papadellis and his marketing team sat in a conference room racking their brains for ways to sell cranberries. Strewn across the table were bags of Craisins—sold at the time as a baking ingredient in grocery aisles next to chocolate chips, rainbow sprinkles, and butterscotch morsels.
Papadellis was well versed in the product’s quirky and contentious history. Ocean Spray first tinkered with dehydrated cranberries during World War II; amid shortages of tin and sugar, the dried fruit was easy to package, didn’t perish, and was palatable enough to eat. The concept laid dormant until the late 1980s, when a food scientist at Ocean Spray took a cranberry, cut it in half, injected it with sugar, and dried it. The Craisin was born.
When Ocean Spray first registered the trademark for Craisins, the Californian raisin industry went berserk. “All the millions we’re spending [on advertising] to build the raisin industry, and they come along and use our name by putting a ‘c’ in front of it. It’s like shirt-tailing on someone else’s success,” Ernest Bedrosian, president of the National Raisin Company, said in 1989. The raisin industry threatened lawsuits and later launched a campaign, called “Let’s Keep It Real,” that blasted Craisins for their added sugar. For all of the controversy and media buzz, though, Craisins were hardly a success, let alone a priority for Ocean Spray.
Papadellis wanted to change that. Scanning the table in front of him during that marketing meeting, Papadellis noticed that his employees were tossing Craisins into their mouths like they were potato chips to fight the so-called 3 p.m. slump. He quickly crunched the numbers: 60 percent of American consumers liked dried fruit, and 38 percent drank or ate cranberries in some form. Drop those two stats into a Venn diagram, Papadellis has said, and you had a huge population of potential Craisins customers.