There is a serious economic lesson here. It is that the prime agency for the industry is what we often call a monopoly player in terms of the marketing, but a forced buyer in terms of actual production. The company itself is actually owned by those producers thus they have not been able to drive prices down and bankrupt producers in order to suppress private ownership to their advantage.
I do think that this is the way agriculture must organize itself. Producers do need long term premium purchase contracts because the marketing company can push costs out which the producer cannot.
The problem with Canadian supply management milk production ends when new marketing companies do enter the market if they are then obliged to buy local product at the established premium price.
Once set up this way, the company then concentrated on expanding their market penetration.
The USA needs to shift all milk production to organic and a similar system would work well and naturally support a massive craft industry as well..
The improbable story of the cranberry’s path to global domination
WRITTEN BY
Gwynn Guilford
April 10, 2018
https://qz.com/1246514/the-us-china-trade-war-has-turned-cranberry-farmers-into-an-unlikely-pawn/
The secret of the cranberry’s success has always been stealth. After two centuries of cranberry-free Thanksgivings, the fruit quietly became a holiday staple thanks to US general Ulysses S. Grant’s 1864 holiday feast. It slipped into lunch sacks across America by pioneering juice boxes, and craftily came to dominate the juice aisles by commingling with apple juice. In the 1990s, a little shape-shifting allowed dried cranberries to infiltrate baked goods and trail mixes. In recent years, it crept its cranberry creep over to China, nestling into the palms of health-conscious young people across the Middle Kingdom.
And now, the bitter red bog-berry finds itself in the midst of the burgeoning US-China trade war. According to the latest list of items on which China is considering slapping duties, the duty on Chinese imports of American dried cranberries will total 40% if the proposal goes into effect.
America’s cranberry-growers are upset—and they should be. “Overall, exports represent about 31% of annual cranberry sales,” says Terry Humfeld, executive director of the Cranberry Institute, a nonprofit industry group based in Massachusetts. “As a result of significant investments by the US cranberry industry, the Chinese market has been grown over the last several years to represent about 7% of those exports or about $45 million annually.”
The industry’s angst is illustrative of a much bigger problem. As sipping and snacking sensations go, the cranberry is an unlikely one. It’s managed to succeed with marketing innovation—which includes taking advantage of the forces of globalization.
The cranberry industry needs new sources of demand to keep growing, and that’s meant nurturing foreign markets like China. A trade war could cost the US its comparative advantage in a tiny, but irreplaceable, symbol of American commercial ingenuity.
A brief history of cranberries
America doesn’t have much in the way of native fruits grown at any commercial scale. Three, to be precise: the Concord grape, the blueberry, and the cranberry.
Many millennia ago, at the end of the Ice Age, retreating glaciers pocked New England with what are called “kettle holes”—craters filled with dense, decaying muck and layers of wind-scattered beach sand. Cranberries grew wild in these bogs, the chill rains that filled the kettle holes in autumn insulating the fruit from deep-winter frosts.
The Wampanoag who settled the area more than 10,000 years ago harvested the berries, drying them to mix with deer jerky and tallow into pemmican—essentially the planet’s first energy bar. Pemmican kept for months, which made it a vital commodity for fur traders, as National Geographic notes. Native American also ate them fresh and—presaging the cranberry health craze centuries later—as medicine.
European colonists, however, mainly used cranberries the way they used the similarly sour berries back home: in a sauce to moisten up fowl. Then, in 1622, the honeybee arrived North America—and with it, a way to turn cranberry sauce from sour to merely tart.
Until the 1800s, settlers plucked the wild cranberries that flourished in natural bogs—particularly in the peaty pits that flecked Cape Cod’s marshlands. Then, in 1816, a former Revolutionary War veteran named Henry Hall noticed that wild cranberries thrived when sand blew over them. Hall transplanted the berry’s vines into what he called “cranberry yards,” and dusted them with sand—and within a few years was shipping his product from Cape Cod to New York City. Hall’s impressive harvests paved the way for commercial cultivation.
The cranberry’s popularity surged, as trade—and the fact that sailors ate the Vitamin C-packed berries to prevent scurvy—spread its popularity. Throughout the next century, growers fanned out from Massachusetts to New Jersey, Wisconsin, and, eventually, the Pacific northwest. In 1864, Civil War general Grant permanently associated the sauce with Thanksgiving when he ordered that the side dish be included in the holiday feast for the troops at the Siege of Petersburg. To this day, around 20% of all cranberries are bought in the week before Thanksgiving.
By 1900, “Cranberry Fever” swept the nation, and the industry took off, with production buoyed by technological advances that sped up harvesting and preserved the berries for shipment. In 1930, growers formed a marketing cooperative, which eventually became known as Ocean Spray. Its first product was jellied cranberry sauce.
Then calamity hit.
In 1959, just two weeks before Thanksgiving, the US government announced that an herbicide suspected of causing cancer had tainted cranberries (though in truth, it only affected a tiny share of acreage). The great Cranberry Scare of 1959, as it was known, drove the industry toward ruin, as crops were destroyed and prices tanked. US consumers turned on cranberries; in 1959, fresh cranberry sales totaled exactly zero, according to the USDA (pdf, p.180).
To revive the cranberry, Ocean Spray only had one choice: innovate.
Revolutionizing the juice aisle
Up until this point, cranberries had been marketed primarily in sauce form, selling mainly before Thanksgiving and Christmas. In 1963, Ocean Spray recruited Edward Gelsthorpe, the marketing genius behind roll-on deodorant. Soon thereafter, the company unveiled Cran-Apple, the first mass-market blended juice.
Cran-Apple was an instant hit—and it transformed cranberries from a generally seasonal item to a product that was in demand year-round. Its popularity pushed supermarkets to create entire aisles dedicated to fruit juice. Soon thereafter, Ocean Spray revolutionized those shelves with the first-ever juice boxes.
Having won kids over, Ocean Spray turned its attention to converting their parents into cranberry-juice fans, too. In the 1960s, the company began adorning its juice labels with a recipe for a “Harpoon,” made of cranberry juice and either vodka and rum, a spritz of lime, and served “over the rocks or tall with soda,” according to Difford’s Guide. The cocktail is thought to be the evolutionary forbearer of the Cosmopolitan, the iconic pink drink made famous by the HBO series Sex and the City. (Ocean Spray’s other cocktail invention attempts—e.g. the Pink Lagoon, the Firecracker, and the Boston Mist—failed to take hold.) Between 1970 and 1980, the average American’s fruit juice consumption leapt 45%, according to a 2006 case study on the cranberry industry(pdf, p.5).
The Cranberry Scare of 1959 wasn’t the only thing driving Ocean Spray innovation. Because the company is a cooperative, it must buy all of the crops its growers produce—about two-thirds of total cranberry output—at a high set price (plus a cut of profits). “Imagine if Pepsi had to maximize the aluminum it used, and at the highest price it could afford!” Randy Papadellis, Ocean Spray’s CEO, told Businessweek in 2006.
In other words, Ocean Spray faces constant pressure to nurture new sources of demand. It can’t rest on buying power to preserve margins. And that led it straight to dried cranberries.
A Massachusetts cranberry picker separates the berries from the vines. (AP/C.J. Gunther)
The sudden ubiquity of cranberry-orange muffins in the 1990s coincided with the company’s move to start shelving dried cranberries, which it dubbed Craisins, in grocery-store baking aisles. Then, in the early 2000s, Papadellis noticed his colleagues compulsively popping Craisins into their mouths as they sat in a meeting. The idea struck him: What about marketing dried cranberries not just as baking items, but as snacks?
“We knew that roughly 38% of American consumers ate cranberries or drank cranberries in some fashion. We also knew that about 60% of American consumers liked dried fruit,” Papadellis told Forbes in 2010. “So when you did the Venn diagram intersecting those who liked dried fruit with those who loved cranberries, it was a huge population.”
In no time, Craisins could be found scattered amidst trail mixes, breakfast bars, and snack shelves. It was a crucial breakthrough for Ocean Spray. Another came in 1994, when research by Harvard Medical School that it had sponsored revealed cranberry juice helped prevent urinary tract infections. That cemented the berry’s reputation as a health food, which would later be reinforced by the discovery that cranberries are high in antioxidants.
The dried-cranberry craze couldn’t have come at a better time. While Ocean Spray has been focusing heavily on low-calorie cranberry juices, it’s faced headwinds in recent years from health advocates who blame sugary fruit drinks, including cranberry juice cocktails, for soaring childhood obesity rates. Thanks to growing concerns about the dangers of sugar, US demand for fruit juice began slumping in the late 2000s.
On top of that, thanks to the planting cycle and the higher efficiency of new cranberry cultivars, in the last few years, the industry has been growing far more cranberries than it can sell. In 2017, growers asked the US government to allow the disposal of a large share of inventories, mostly by composting, reports Bloomberg.
The dried-cranberry craze has been vital in sopping up that oversupply—in particular, in new markets overseas.
That’s in no small part thanks to booming demand from China(paywall), particularly from young urban residents in search of healthy snacks. In 2017, China became American cranberry growers’ second-biggest export market. Demand from Europe has also proved essential to the cranberry industry, particularly since the European Union suspended the 17.6% import duty on dried cranberries in 2011.
Cranberries caught in the crossfire
This brings us to the cranberry’s current predicament. In March, the Trump administration announced a series of protectionist measures, prompting backlash from big US trading partners. In retaliation against steel and aluminum tariffs, the EU announced that it is considering raising duties on cranberries, among other things. The EU imported nearly half of US cranberry exports in 2017.
The simmering trade war with China is even more ominous. “The cranberry industry strongly supports free trade and we are disappointed that cranberries are caught in the middle of an impending trade dispute,” says the Cranberry Institute’s Humfeld, adding that “tariffs could certainly be detrimental to US cranberry growers.”
In Wisconsin—which in 1995 surpassed Massachusetts to become the biggest cranberry-producing state, with production nearing $1 billion—the head of the industry group voiced similar fears.
“We hope that the parties involved can reach an agreement that will allow us to continue our important role in providing cranberry products to consumers in China,” says Tom Lochner, executive director of the Wisconsin State Cranberry Growers Association.
The Chinese government hasn’t yet implemented tariffs on dried cranberries. Even if it does, the snack already enjoys something of a luxury status, which may help it weather the 40% higher costs.
However, the US industry also faces a threat from cranberry growers in other countries that are eager to fill the gap. Chile has rapidly expanded production in recent years, and already dominates China’s market for fresh cranberries.
Canada is also a big exporter of fresh cranberries. Although it currently doesn’t sell much to China, the leap to processing for the Chinese market wouldn’t be huge. It’s also worth noting that Ocean Spray has relationships with both Canadian and Chilean growers. For instance, the company just closed on a purchase of a Quebec processing facilityin February.
The US cranberry advantage might have begun with Ice Age kettle-holes. But it has endured thanks to a century of relentless reinvention that’s taught first the American public, and then the world, of the many different ways to savor a bitter berry. And so it’s paradoxical that even if Trump’s tariffs succeed in reviving some US industries, he risks costing his country one of its unsung innovators—a business whose improbable rise from the cranberry yards to the juice aisle and on to the snacking section of Chinese e-commerce sites is exactly, you might say, what makes America great.
The sudden ubiquity of cranberry-orange muffins in the 1990s coincided with the company’s move to start shelving dried cranberries, which it dubbed Craisins, in grocery-store baking aisles. Then, in the early 2000s, Papadellis noticed his colleagues compulsively popping Craisins into their mouths as they sat in a meeting. The idea struck him: What about marketing dried cranberries not just as baking items, but as snacks?
“We knew that roughly 38% of American consumers ate cranberries or drank cranberries in some fashion. We also knew that about 60% of American consumers liked dried fruit,” Papadellis told Forbes in 2010. “So when you did the Venn diagram intersecting those who liked dried fruit with those who loved cranberries, it was a huge population.”
In no time, Craisins could be found scattered amidst trail mixes, breakfast bars, and snack shelves. It was a crucial breakthrough for Ocean Spray. Another came in 1994, when research by Harvard Medical School that it had sponsored revealed cranberry juice helped prevent urinary tract infections. That cemented the berry’s reputation as a health food, which would later be reinforced by the discovery that cranberries are high in antioxidants.
The dried-cranberry craze couldn’t have come at a better time. While Ocean Spray has been focusing heavily on low-calorie cranberry juices, it’s faced headwinds in recent years from health advocates who blame sugary fruit drinks, including cranberry juice cocktails, for soaring childhood obesity rates. Thanks to growing concerns about the dangers of sugar, US demand for fruit juice began slumping in the late 2000s.
On top of that, thanks to the planting cycle and the higher efficiency of new cranberry cultivars, in the last few years, the industry has been growing far more cranberries than it can sell. In 2017, growers asked the US government to allow the disposal of a large share of inventories, mostly by composting, reports Bloomberg.
The dried-cranberry craze has been vital in sopping up that oversupply—in particular, in new markets overseas.
That’s in no small part thanks to booming demand from China(paywall), particularly from young urban residents in search of healthy snacks. In 2017, China became American cranberry growers’ second-biggest export market. Demand from Europe has also proved essential to the cranberry industry, particularly since the European Union suspended the 17.6% import duty on dried cranberries in 2011.
Cranberries caught in the crossfire
This brings us to the cranberry’s current predicament. In March, the Trump administration announced a series of protectionist measures, prompting backlash from big US trading partners. In retaliation against steel and aluminum tariffs, the EU announced that it is considering raising duties on cranberries, among other things. The EU imported nearly half of US cranberry exports in 2017.
The simmering trade war with China is even more ominous. “The cranberry industry strongly supports free trade and we are disappointed that cranberries are caught in the middle of an impending trade dispute,” says the Cranberry Institute’s Humfeld, adding that “tariffs could certainly be detrimental to US cranberry growers.”
In Wisconsin—which in 1995 surpassed Massachusetts to become the biggest cranberry-producing state, with production nearing $1 billion—the head of the industry group voiced similar fears.
“We hope that the parties involved can reach an agreement that will allow us to continue our important role in providing cranberry products to consumers in China,” says Tom Lochner, executive director of the Wisconsin State Cranberry Growers Association.
The Chinese government hasn’t yet implemented tariffs on dried cranberries. Even if it does, the snack already enjoys something of a luxury status, which may help it weather the 40% higher costs.
However, the US industry also faces a threat from cranberry growers in other countries that are eager to fill the gap. Chile has rapidly expanded production in recent years, and already dominates China’s market for fresh cranberries.
Canada is also a big exporter of fresh cranberries. Although it currently doesn’t sell much to China, the leap to processing for the Chinese market wouldn’t be huge. It’s also worth noting that Ocean Spray has relationships with both Canadian and Chilean growers. For instance, the company just closed on a purchase of a Quebec processing facilityin February.
The US cranberry advantage might have begun with Ice Age kettle-holes. But it has endured thanks to a century of relentless reinvention that’s taught first the American public, and then the world, of the many different ways to savor a bitter berry. And so it’s paradoxical that even if Trump’s tariffs succeed in reviving some US industries, he risks costing his country one of its unsung innovators—a business whose improbable rise from the cranberry yards to the juice aisle and on to the snacking section of Chinese e-commerce sites is exactly, you might say, what makes America great.
