Six MBA students say a single-strength tart cherry juice produced and marketed by a grower cooperative could be a marketplace winner.
What the tart cherry industry needs is a cooperative of growers that focuses on growing and marketing one outstanding product, like natural, healthful cherry juice.
If that recipe sounds familiar, it should be. In recent years, Ocean Spray, Welch’s, and Sunkist have ridden that formula to success with cranberries, grapes, and oranges. Ocean Spray, with its humorous advertisements featuring growers standing in hip boots in cranberry bogs, has converted a sour Thanksgiving-only fruit into a year-round superfruit and greatly increased cranberry consumption through juice products.
Who says that would work with tart cherries? Well, six city slickers do. The six, all MBA students at the Stephen M. Ross School of Business at the University of Michigan, took on a study of the tart cherry industry for an important class project that determined a quarter of their grade for the entire year. They spent 1,600 hours last year interviewing growers, processors, marketers, and marketplace rivals—traveling from Michigan’s urban southeast 250 miles to the state’s northwest tart cherry country, sometimes getting lost with their cell-phone-based map apps in the hills of Leelanau County. There was a ticket for speeding on a country road involved as well.
In an amusing presentation called “The Art of Tart: Learning and Adventures of Six City Slickers,” two of the students described the work at the annual luncheon meeting of the Cherry Marketing Institute in Traverse City, Michigan, in January.
Institute President Phil Korson reassured the growers that CMI is not planning to create such a cooperative. CMI had merely grabbed an opportunity that could help growers. Each year, students at the Ross School of Business undertake consulting projects on businesses that are chosen from applications. CMI is an organization that carries out generic promotion of cherries, but it doesn’t own them or sell them. But CMI did make the application on behalf of the industry—and of the 50 applications, CMI’s was ranked number one, Korson said.
Six students took on the project: Jason Bortz, who came to Ross with a degree from the University of Pennsylvania; Caroline Dickerson and Katherine Klabau, both from Wellesley College; Emmy Gladney, University of California at Berkeley; Ralph Lerman, from Tufts University; and Alex Linkow, from Skidmore College.
Korson said CMI paid less than $5,000 to help cover travel costs—a terrific deal, in his estimation. CMI spent $3.1 million last year promoting cherries. This year, with smaller revenues following a small crop on which producers pay a per-pound fee, it has budgeted $1.2 million for advertising and promotion, $300,000 for health research, and $25,000 for market research. It gets some matching Market Access Program funding and will use that this year to develop markets in Germany, Japan, and the United Kingdom.
Its major promotion program this year focuses on the ability of tart cherries to aid in pain reduction and muscle recovery after strenuous exercise—and it is sponsoring marathons in six cities this year as vehicles for the message. It depends on free publicity generated by these efforts. The program is a combination of advertising and public relations.
Industry in decline
The students characterized the industry as being in decline, with acreage having fallen to less than 35,000 now compared with 50,000 in 1987. Despite promotion, consumption has also fallen from 1.2 pounds per person in 1995 to 0.72 in 2005. By comparison, the average American eats nearly 50 pounds of apples and more than 50 pounds of grapes. Tart cherry growers and processors have little bargaining power, and most of the products are positioned as industrial ingredient commodities for which substitutes are available, the students said.
Ocean Spray, by contrast, has consolidated the cranberry industry, eliminated rivalries that reduce bargaining power, created a strong brand that is unique and differentiated from substitutes, and promoted the brand to build consumer demand.
The tart cherry industry has “underutilized goodwill,” the students reported, as there is no direct connection between CMI’s PR campaign based on “The Power of Red” and industry products available for sale. They also concluded that single-strength tart cherry juice is the strongest product the industry could use to lead the way for a national brand that might later be followed by other products.
Currently, tart cherries are processed into canned and frozen pie fillings, dried cherries, and juice and juice concentrate. The industry sold 235 million pounds of tart cherries in 2007, at a price of 26 cents a pound to growers, for farmgate revenue of $61.1 million. The value of final products was $165 million. Revenues were $48 million from frozen cherries, $18 million from dried cherries, $90 million from canned pie filling, $4 million from water-packed cherries, and $5 million from concentrate and juice.
The students’ suggestion to focus a new cooperative on juice would expand the smallest sales category. In a small taste test, 17 tasters preferred tart cherry juice and 13 preferred pomegranate juice—and nobody chose the third option, 100 percent cranberry juice.
Tart cherry products would benefit from a strong image and brand loyalty. While cherries and berries of all kinds are capitalizing on health benefits of antioxidants, tart cherries have carved out a special niche with promotion of their high melatonin levels as a sleep aid and their ability to reduce joint inflammation, relieve pain, and speed muscle recovery after exercise. But cherries cost more. Cranberry and grape juice sells for 6 or 7 cents an ounce, compared to 12 cents for cherry juice. Grapes sell for 12 cents a pound as raisins, while dried cranberries cost 33 cents a pound and dried tart cherries $1 a pound.
Korson said the students had prepared “a turnkey concept, a business model that can work for somebody.”
Whatever happens, he said, “It was quite an experience. I loved working with them. They’ll never forget us, and we’ll never forget them.”