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Produce Business

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American Food & Ag Exporter

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Will Retailers Wait For A Trial To Act On Ocean Spray Controversy?

Jim Prevor’s Perishable Pundit, May 25, 2007

The controversy between Ocean Spray and the Nolan’s has broken out into common knowledge for the industry as a result of a lawsuit, so inevitably the articles written have focused on legalities.

Yet, now that this is public, it is highly unlikely that retailers, who may feel they were wronged by Ocean Spray’s pricing policies, will wait for lawsuits to be resolved in order to press their claims.

Our piece, Ocean Spray Trial Will Shed Light On Business Practices, drew on a fascinating article that appeared in PRODUCE BUSINESS, a sister publication of the Pundit. The feature, entitled Special Report: Ocean Spray Sued By Longtime Associates, highlights a complaint filed against Ocean Spray by Jim and Theresa Nolan and their organization, the Nolan Network. For now, at least, Ocean Spray isn’t talking.

The piece we ran in the Pundit focused on allegations that Ocean Spray offered special deals to both Costco and H.E. Butt. The complaint claims this violated both anti-trust law and Ocean Spray’s own policies.

Here at the Pundit, it seemed to us that if Ocean Spray, or any company, is going to publish an official price announcement, telling everyone what the price will be, it ought to stick to that price or, at least, change it for everyone.

Leaving club stores aside for a moment, just the idea that HEB may have been given preferential pricing is enough to get many people on the retail side of the business looking at what their claims might be against Ocean Spray.

Des Hague recently started with Safeway as The First President of PerishablesItal. Well, Safeway spent $1.8 billion to buy Randall’s, at the time this complaint claims that H.E. Butt was getting preferential prices. Randall’s, along with sister concepts Tom Thumb and Simon-David, competed with H.E. Butt.

Mr. Hague is bound to ask Ron Anderson, Vice President of Produce, and Steve Neibergall, Senior Vice President of Produce and Floral, to huddle with Accounting and Legal and see what would be legitimate to ask for.

If Safeway were buying Ocean Spray’s fresh product at the time, they would clearly ask to be made whole on the price, on the rebate, on the truck load transportation charge — but there is a lot more. What about the reputational loss if customers kept finding the Safeway divisions to be overpriced?

Talk about reputational loss… Ron McCormick, Wal-Mart’s Vice President of Produce, along with his new boss, Pam Kohn, who is now Wal-Mart’s Chief Perishable Executive, have to be irate when they read this article in PRODUCE BUSINESS.

Not only was Wal-Mart Ocean Spray’s single largest customer, but Wal-Mart’s single toughest battle has been with H.E. Butt.

What is the loss to a chain such as Wal-Mart if the consumer perception of Wal-Mart as the low price leader gets sullied because Wal-Mart is out of line due to being charged more than its arch competitor? Does Ocean Spray have enough money to pay what would be due if these kinds of damages were to be substantiated?

Of course, does Wal-Mart need these claims to be substantiated by a court? Since when? Surely all Pam and Ron will want to know is the facts: Was Wal-Mart charged more than H.E.B. for fruit and freight? If so, the normal practice would be to demand compensation.

And we could go down the list. Reggie Griffin, Vice President Produce & Floral at Kroger, is not the kind who would take this lying down. Who owns this claim from the old Albertson’s? Who owns the Fleming claim? What about the Winn-Dixie Texas claim? There is Brookshire, Affiliated Foods, Minyard, Whole Foods and more.

This is now a matter of public record. Many of these companies are public and their executives have fiduciary responsibilities to pursue claims like this on behalf of their shareholders. It is hard to imagine any of these companies not looking to see if they have a claim against Ocean Spray.

The typical produce response to learning competitors were getting discounts on a published price item is a demand for compensation. One of the exhibits in the case is a memo from Ken Ryan, who handled the cranberry procurement for C&S, which supplied BJ’s.

It appears that their own price tracking made them suspect they weren’t being treated correctly by Ocean Spray.

C&S didn’t wait for judges to rule — the company demanded compensation with the implicit threat that it was important to settle this before they discussed new business.

You can read Ken’s memo here. And the PRODUCE BUSINESS article right here.

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