BOSTON — The cranberry and grapefruit growers who own Ocean Spray Inc. have narrowly rejected PepsiCo Inc.'s offer to buy a stake in the agricultural cooperative.
About 900 farmer-owners in Massachusetts, Wisconsin, New Jersey, Florida, Oregon, Washington and Canada voted 52 percent to 48 percent to turn down PepsiCo's bid to acquire half its branded business, Ocean Spray announced Tuesday.
Ocean Spray officials said in a statement that the vote means the board of directors "will cease all talks with PepsiCo and other potential equity investors, focusing all efforts instead on working with management to build the Ocean Spray business for the future."
The board had spent more than a year exploring a range of partnerships that would help Ocean Spray's juice products reach a wider audience.
The vote to remain independent could be risky as bigger beverage makers expand their distribution networks and put smaller competitors at a disadvantage, said John Sicher, editor and publisher of the trade publication Beverage Digest, in Bedford Hills, N.Y.
"Ocean Spray had the chance to link up with Pepsi's powerful distribution systems and retail access," Sicher said. "Ocean Spray is a powerful brand, but trying to go it alone is difficult in the current consolidated distribution and retail climate."
Ocean Spray had net sales of about $1 billion in 2003, but the cooperative is tiny compared to its primary competitors, PepsiCo's Tropicana and Coca-Cola Co.'s Minute Maid.
The cranberry industry is emerging from a prolonged slump caused by a glut of crop and decreasing demand. Prices dropped from a high of about $80 per barrel to $13 a barrel in 1999, well below the estimated production cost of about $35 per barrel. Cranberries have been selling at about $35 per barrel this spring.
Ocean Spray will continue to explore opportunities to work with other companies, the statement said.
Sicher said it was possible Ocean Spray could still reach terms on a distribution deal with a larger competitor.
Spokesmen for Ocean Spray and PepsiCo, based in Purchase, N.Y., declined to reveal details of the rejected offer. PepsiCo spokesman Mark Dollins said his company was disappointed.
"As evidenced by this very close vote, change is always difficult, especially when considering a fundamental change in how the long-standing co-op and its brand could be managed," Dollins said.
Early last year, Ocean Spray rejected an $800 million offer for its juice business from Northland Cranberries Inc., accusing its smaller rival of trying to sow dissension among Ocean Spray's growers.
PepsiCo shares closed up 28 cents at $54.95 on the New York Stock Exchange.