I. Industry Analysis

Threat of Substitutes
Threat of substitutes occurs when companies within one industry are forced to compete with industries producing substitute products or services. Substitutes can be competitive when the switching cost is low and there is less differentiation between products. With surplus cranberries and changing American households some enterprising growers began canning cranberries that were below-grade for fresh market. Competition between canners was fierce because profits were thin. Threat of substitutes is a strong competitive force. Other fruit-based juices, beverages not containing fruit, and water are considered to be strong substitutes for cranberry juice – especially in single serving packages. There are fewer substitutes for cranberry products sold for seasonal consumption.

Threat of New Entrants
Threat of new entry is a weak competitive force for NCC due to excess production capacity already and competition for retail shelf space. Northland Cranberries had recently entered the fruit juice industry, but had yet to gain notable success and only contributed to a further price war among producers. PepsiCo and Coca-Cola have entered the fruit juice industry through acquisitions and have met with far greater success. However, both of these beverage powerhouses were able to leverage their vast distribution capacity and bargaining power with retailers to become successful. Both companies also have tremendous scale advantages in production and bottling costs. Threat of Buying Power
Threat of buying power for National Cranberry Cooperative (NCC) is a strong competitive force. Retailers are the primary buyers for cranberry-based products, but distributors play a major role in making products available to retailers. Both of these are able to exhibit considerable leverage – retailers because of their control of space allocation and placement, and distributors because of their importance in getting the product to market.

Threat of Supplier Power
The power of suppliers is low from one view point and high from the other because National Cranberry Cooperative’s raw products come from their own cranberry farm since the organization is formed by the growers of cranberries to process and market their berries. This negates the dependency on suppliers and manufacturers to whom production is to be out-sourced. Hence, National Cranberry Cooperative is in a comfortable position vis-à-vis its competition in relation to suppliers.
But above all this, its suppliers are a weak competitive force. Cranberry growers are very weak in their negotiations with cooperatives and other buyers. Growers have no ability to negotiate for higher prices since processors pay market prices for commodities like cranberries and other crops. In addition, growers have contributed to the dramatic price decreases in the industry since 1996 by producing far more cranberries than what has been demanded.