Some bigger cranberry buyers want a ‘price break’ our auctions don’t provide: Ocean Spray
That’s according to Michael Stamatakos, vice president of agricultural supply and development at Ocean Spray, and asked how auction prices (in the firm’s most recent auction on April 25 – where 175,000 gallons was sold at $30.12 to $35.10 per gallon) compared with the open market, he told BeverageDaily.com:
“We hear stories of other prices, but we can’t substantiate these, but our closing prices reflect the market conditions of supply and demand fairly accurately at the time of the auction.”
Some resistance remained – as in any industry – to the online auction platform, given that some buyers thought they were smarter than sellers, Stamatakos said.
“One thing that we don’t offer that big buyers want – is that big buyers want to believe they got a better deal than anyone else, they want some sort of price break.
“But we don’t provide that in the auction – whether volumes are large or small, whoever gets the contracts gets that price,” he added.
Buyers smarter than sellers?
Ocean Spray was more confident that its auction prices reflect the current situation of supply and demand in the market, Stamatakos said. “Oftentimes, in a small industry like this buyers think they’re smarter than sellers and vice versa – and no-one really knows where the trading points are.”
“So we believe that this allows us to get a price that is truly reflective of the demand versus supply situation in the market.”
Ocean Spray believed it represented around 20% of global cranberry concentrate sales, Stamatakos said, but the cranberry market was small in comparison with apple juice, for instance, he noted.
Around 3m gallons of cranberry concentrate were sold in 2010, with volumes going primarily into beverages – since other functional cranberry products tended to use powders – Stamatakos said, while Ocean Spray was currently selling a little less than 1m gallons per year.
Inventories ‘flat if not falling’
Given continued growth in global sales, despite a relatively large crop in 2011, the market was still at a point where inventories were flat if not falling, he added.
“That suggests that prices will hold if not build,” Stamatakos said, with a low pricing point in July 2010 ($16-17 per gallon), driven by surpluses, cut to the extent that supply-demand was fairly well balanced now, with sales at $32-33 per gallon, a price level he predicted could persist through 2012.
“Beyond that, if cranberry consumption continues to grow, then we do think demand could outstrip supply a little bit in 2013,” which was good for growers, Stamatakos said.
“[But] when prices get very high - $60-70 per gallon back in 2007 – the market reacts to that and manufacturers look for alternatives, maybe switching to apple or reducing cranberry concentrate in products. So the market will respond to high prices.”
Ocean Spray was currently seeing strong sales growth for cranberry concentrate internationally, particularly in Europe and Asia, Stamatakos said, beyond its core US market (70% of cranberry consumption).
“As a co-op we are now expanding through our partnership with PepsiCo into South America, which we think could be a very good market for cranberries in the long term,” he added.
