Mike Stamatakos tells Liz French how this agricultural co-op keeps costs down so its get the most bang for its crops.

In today’s business environment, companies are afraid to step outside of their comfort zone, sticking only to tasks at which they excel. And for many, this is the most fruitful strategy. But for like Middleboro, Mass.-based Ocean Spray, multitasking is a strength, and Mike Stamatakos, VP of operations, can’t imaging doing business any other way.

“We manage production from the bogs to supermarket warehouses. As a co-op, we are unique because our raw materials come from our grower-owners,” he said, explaining that, unlike some agricultural co-ops, Ocean Spray does not buy cranberries and grapefruit from its grower- owners. Instead, the company distributes the net profits from the sales of its fruits in raw or finished product form.

Mike Stamatakos, VP of Operations

When crops start pouring in, the company sends off a large portion to one of its processing plants to be turned into cranberry juice concentrate. “It is much more efficient for us to store the fruit as concentrate, so we convert it as early as possible,” said Stamatakos, adding that shipping cranberry juice concentrate costs 10 times less than shipping the same amount of whole fruit. Once the concentrate is made, it is shipped to one of the company’s eight beverage bottling and food manufacturing facilities to be turned into a finished product.

The portion of the crop not immediately turned into cranberry juice concentrate is frozen and stored, giving the company the flexibility to make sweet and dry (dehydrated) cranberries, cranberry sauce, or more juice concentrate throughout the year.

Room to grow
According to Stamatakos, Ocean Spray’s fastest growing line is its sweetened dried cranberries, a product that was stumbled on when the company developed a proprietary technology to extract juice more efficiently. Sweetened dried cranberries are a byproduct of that process, and Ocean Spray began selling them to companies such as Kellogg’s, General Foods, Dunkin’ Donuts, and Quaker as an ingredient in cereals, trail mix, granola bars, and baked goods.

“We were slow to build that business. In the beginning, we treated sweetened dried cranberries as an ingredient, and we sold it to manufacturers, but we didn’t market it very well on the retail side,” said Stamatakos. Today, Ocean Spray’s sweet and dry cranberries are sold in supermarkets under the Craisins brand, and thanks to a recent marketing campaign, it is seeing a more than 20% annual growth rate.

To keep up with the growing demand for sweetened dried cranberries, Ocean Spray has increased its manufacturing capacity by 30 million pounds per year at its Middleboro plant and by 15 million pounds per year at its Markham, Wash. plant in the last three years. Fifteen million pounds of capacity will soon be added to the Wisconsin Rapids plant in the near future.

Staying close to home
To keep logistics costs down, Ocean Spray locates its receiving stations and processing plants close to one another. For instance, all cranberries grown in Massachusetts are received at the Carver station and shipped to Middleboro for processing. From there, it is only a few hours to New Jersey where the concentrate is turned into any number of juice products. Processing plants in Toma and Wisconsin Rapids, Wisc. handle the Midwestern crops, and one in Markham, Wash., handles all of the West Coast crops.

The company’s four 24/7 bottling plants are located near the heaviest markets for ease of distribution. The NJ bottling plant manages all East Coast business; a plant in Sulfur Springs, Texas covers the Southwest markets; the Kenosha, Wisc. plant handles all the Midwest business; and the Henderson, Nev. location distributes to the West Coast.

Stamatakos explained that Ocean Spray manufactures roughly 90% of its cranberry and grapefruit juice drinks sold in the US and Canada. The other 10% are produced via co-packers. This year, Ocean Spray and PepsiCo announced a strategic alliance in which Pepsi-Cola North America will market and distribute single-serving cranberry juice products in the US and Canada under the Ocean Spray name.

Ocean Spray also has an operating alliance with Nestlé that is now in its fifth year and is primarily focused on producing Nestle’s Juicy Juice product. “We manufacture all of the Juicy Juice in the US in our processing plants under that alliance,” said Stamatakos. He added that Nestlé is a global food manufacturer with great resources. “The company brings its global productivity resources into our beverage plants to help both parties lower costs. It is an innovative partnership that enables us to get more scale across our supply chain.”

The big picture
Stamatakos said that lean and Six Sigma are not new concepts to Ocean Spray, but the last three to four years have seen a significant effort to ramp up productivity. A formal, updated Six Sigma program was put in place in 2005, and the company has trained several green and black belts since.

Ocean Spray is using both methodologies to reduce the moisture variation in its sweetened dried cranberry product. “We commissioned a team to work on improving the consistency of that product. We have another team working to reduce unplanned downtime. That is how we do it—at the team level.”

The company also has an aggressive cost savings initiative in progress. One of the biggest cost savers has been lightweight packaging, which allows for quicker changeover and increased its line speed. By doing so, the company has improved output on some of its beverage lines by 10% to 20% without investing in new equipment. “In fact, even with all the increases in benefits and wages, our labor costs per case is lower today than it was five years ago,” Stamatakos said.

But no matter what improvements the company makes, it is always looking at the big picture. For Ocean Spray, maintaining the lowest supply chain cost is one of its top priorities. “In any step in the process, you can implement a program that saves you money on the manufacturing side, but the trade off may be higher logistics costs. We understand what our total cost impact is going to be before we act.”