Ocean Spray Cranberry (OSC) Analysis

I.
Porter Model:

Buyers – 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.
Suppliers – 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.
Substitutes – 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 Entry – a weak competitive force
Threat of new entry is weak 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.
Rivalry – a strong competitive force