Tropicana Products, Inc.

views updated May 29 2018

Tropicana Products, Inc.

555 West Monroe Street
Chicago, Illinois 60661
U.S.A.
Telephone: (312) 821-1000
Web site: http://www.tropicana.com

Division of PepsiCo, Inc.
Incorporated: 1947 as Manatee River Packing Company
Employees: 4,000
Sales: $3 billion (2004 est.)
NAIC: 311421 Fruit and Vegetable Canning; 311411 Frozen Fruit, Juice, and Vegetable Processing

A division of PepsiCo, Inc. since August 1998, Tropicana Products, Inc. is the leading producer of orange juice in the United States, outselling archrival Minute Maid (fittingly owned by PepsiCo's archrival The Coca-Cola Company). In the $2.63 billion U.S. chilled juice sector, Tropicana holds a commanding 44 percent share. The company was a pioneer in the not-from-concentrate, chilled orange juice sector, and it accounts for as much as two-thirds of U.S. not-from-concentrate sales. Operating only in the United States and Canada, Tropicana's main brands include the flagship Tropicana Pure Premium (the number three food brand in the U.S. supermarket sector), Tropicana Season's Best, Dole juices, Tropicana Twister, and Tropicana Smoothies. The firm's former international operations are now the responsibility of a separate PepsiCo division, PepsiCo International. Tropicana Products was headquartered in Bradenton, Florida, from 1949 (two years after the firm's founding) to 2004, when PepsiCo management shifted the head office to Chicago, the home of the PepsiCo Beverages & Foods North America division. The company's products continue to be made at and distributed from its Bradenton plant.

Midcentury Founding by Sicilian Immigrant

The founder of Tropicana was Anthony T. Rossi, who was born in Messina, Sicily, in 1900, and had immigrated to the United States in 1921. Sailing from Naples, Italy, he landed in New York City with $30 in his pocket. He and four other friends came to the big city to make enough money to finance an adventure in Africa, where they planned to make a film. But Rossi found that he liked the United States and its moneymaking opportunities too much to leave, and the African expedition was quickly forgotten. After working in a machine shop, and as a cabdriver and chauffeur, in the late 1920s he purchased the first self-service grocery store in the country, the Aurora Farms market on Long Island, which he ran for 13 years.

In the early 1940s, longing to live in a climate similar to his native Sicily, Rossi—after first relocating in Virginia where he was a farmer—moved to Florida, settling in Bradenton, a small gulf coast town in Manatee County south of Tampa. He grew tomatoes on a 50-acre rented farm there, and also bought a cafeteria in downtown Bradenton, where his freshly prepared food proved popular. Dreaming of owning a chain of restaurants, he bought the Terrace restaurant in Miami Beach in 1944. Wartime gasoline rationing, however, crippled the Florida tourism industry, leading Rossi to exit the restaurant business.

The same week he sold his restaurant, Rossi embarked on a new venture, that of selling gift boxes of Florida citrus fruit to such department stores as Macy's and Gimbel's in New York City. Finding surprising success in this business, he moved in 1947 to Palmetto, a town just north of Bradenton, where he purchased the Overstreet Packing Company, renaming it the Manatee River Packing Company. Rossi was now able to buy his citrus directly from nearby growers rather than from retail supermarkets in Miami, cutting his costs and improving his product's freshness.

Rossi's gift boxes grew even more popular, and were soon being distributed across the country. He next expanded into selling jars of chilled fruit sections. But since only the largest fruit was selected for the boxes and the sections, Rossi needed to find a way to use the smaller fruit that was going to waste. He decided to squeeze the smaller oranges into juice, and ship it to the Northeast along with jars of fresh fruit sections, using specially modified refrigerated trucks. In 1949 the company moved to Bradenton and changed its name to Fruit Industries, Inc. That same year Rossi also entered the burgeoning market for frozen orange juice concentrate, purchasing an evaporator to extract the water from the juice. In addition, he registered "Tropicana" as a trademark and began using it on his fruit section and juice products, which proved so successful that he abandoned the marketing of the fruit gift boxes.

Personified brands, such as Speedy Alka Seltzer, were popular in the early television days of the 1950s, and Rossi joined the trend in 1951 when he commissioned the creation of "Tropic-Ana," a grass skirt- and lei-wearing, pigtailed girl balancing a large bowl of oranges on her head. The character provided an instantly recognizable symbol for the still-young company and helped establish it in the consumer market as Tropicana products began appearing in supermarket cases, mainly in the Northeast and Southeast. In 1953 the company moved to larger quarters, the former Florida Grapefruit Canning Plant in Bradenton, which served as the firm's headquarters until its relocation to Chicago in 2004.

Pioneer of Chilled Juice, Mid-1950s

The key event in the early years of the company came in 1954. That year Rossi, not wanting to be just one of a number of frozen juice concentrate producers, pioneered a flash pasteurization method that raised the temperature of freshly squeezed orange juice for a very short time, extending the juice's shelf life to three months while maintaining its flavor. This method—combined with American Can Company-commissioned packaging consisting of waxed paper cartons in half-pint, pint, and quart sizes—made possible the mass marketing of fresh chilled, not-from-concentrate juice into supermarkets and through home delivery services. Although Tropicana Pure Premium chilled orange juice quickly gained a following in much of the country, sales to New York City were particularly large, accounting for as much as 40 percent of overall sales in the 1960s and early 1970s.

Rossi now had a product that clearly distinguished his company from its competitors; he soon stopped offering Tropicana in frozen concentrate form. In 1957 he changed the name of the company to Tropicana Products, Inc. to reflect the increasing popularity of the brand. That same year Tropicana—not able to expand its truck fleet—began shipping orange juice from Florida to New York via an 8,000-ton ship the company had purchased, which it christened the SS Tropicana. Carrying at its peak use 1.5 million gallons of juice each week, the ship would land at Whitestone, Queens, where Tropicana had built a plant for receiving, packaging, and distribution. The Tropicana made its final orange juice voyage in 1961, and the company began relying exclusively on truck and rail transport.

In 1958 Tropicana Coffee made its debut. Marketed as a concentrated liquid in a push-button aerosol can, the product failed in part because it had a faulty valve that made it difficult to accurately shoot the liquid into a cup. In 1962 the citrus industry was rocked by one of its periodic freezes. More than one-third of the Florida orange crop was destroyed by a December freeze. Desperately in need of fruit, Tropicana boldly put processing equipment on a ship, which it anchored off the coast of Mexico, a nation with a large and cheap orange crop. After some initial and profitable success in getting Mexican orange juice to the U.S. market, the Mexican government raised the price of oranges, scuttling the venture. Tropicana sold the ship and the equipment onboard, losing $2 million in the process.

Public Company, 1969–78

Tropicana in the early 1960s began shipping more of its orange juice in glass bottles, aided by the company's development of a high-speed vacuum-packing method. With its base in sand-rich Florida, Tropicana took the next logical step of building its own glass plant, for the manufacture of the increasing amounts of glass bottles that were needed. The glass plant opened in 1964. Five years later the company became the first citrus industry company to operate its own plastic container manufacturing plant. Meantime, Tropicana in 1966 began selling its not-from-concentrate Florida orange juice overseas for the first time, shipping 14,000 cases of juice in glass bottles to France. The 1960s ended on another high note, when Tropicana Products, Inc. went public in 1969. Initially sold over the counter, the stock soon gained a listing on the New York Stock Exchange under the symbol TOJ. Revenues increased from $31.2 million in 1964 to $68.4 million by the end of the decade.

The infusion of capital from the stock offering set the stage for even more rapid growth at Tropicana. By 1973, in fact, revenues had reached $121.2 million, while net income grew nearly sixfold, to $10 million. Among the developments of the early 1970s was the launch of a company-owned train (the "Great White Train," later painted orange), which shipped bottles of juice from Bradenton to a distribution center in New Jersey. Continuing its moves to lessen its dependence on outside suppliers, Tropicana opened a box plant in 1972 and began making its own corrugated boxes. The following year Tropicana opened a new processing facility in Fort Pierce, Florida, a town on the Atlantic side of the state.

Although the so-called orange juice wars would not begin in earnest until the 1980s, a few skirmishes between Tropicana and Coca-Cola's Minute Maid took place in the 1970s. Coca-Cola in 1973 took direct aim at Tropicana's stranglehold on both the New York metropolitan area market and the chilled juice sector with the introduction into that area of Minute Maid chilled juice that had been reconstituted from frozen concentrate. This was the beginning of a long-running debate between the companies over which had the superior product. Tropicana contended that notfrom-concentrate chilled juice was obviously superior because it was bottled (after being pasteurized) right out of the orange. Minute Maid argued that the concentrating process gave it the opportunity to blend the juice of oranges picked at different times of the year, thereby overcoming seasonal variations in orange taste and quality and giving the resultant juice a more consistent flavor and better overall quality. In any event, Minute Maid, backed by Coke's deep pockets, gained one edge—it quickly became the first nationally available chilled orange juice. The Tropicana-Minute Maid rivalry heated up further in 1975 when the former reentered the market for frozen concentrate.

Company Perspectives:

With a 50-plus year history of consistent growth, Tropicana Products, Inc. stands today as the world's only global citrus juice business. A unit of PepsiCo, Tropicana has an impressive track record of continuous innovations in production, packaging, marketing and distribution.

By the mid-1970s, Tropicana had expanded its market range within the United States (though it still was not a national brand) and had gained a presence in the Bahamas, Bermuda, the West Indies, and several countries in Europe. Despite the Minute Maid entry into the chilled juice sector, Tropicana was the main beneficiary of the faster growth of chilled juice versus frozen concentrate. Whereas in the late 1960s chilled juice accounted for only 20 percent of the overall orange juice market, by the late 1970s it accounted for 31 percent. Tropicana was growing rapidly, with sales increasing 19 percent each year on average, reaching $244.6 million in 1977. Earnings were increasing 21 percent a year, standing at $22.5 million in 1977.

The health of Tropicana was reflected in an endless stream of suitors that attempted to woo the company in the 1970s. Among these were Philip Morris, PepsiCo (in an ironic twist), and Kellogg. On three separate occasions—in April 1974, June 1976, and July 1977—Tropicana and Kellogg, the cereal giant which sought to extend its breakfast offerings to include orange juice, agreed in principal to merge only to have Rossi walk away from the deal before it became final. Following the third failed Kellogg takeover, articles in the press focused on Rossi's inability to "let go." The company founder still controlled 20 percent of Tropicana stock, dominated a more or less rubber-stamp board of directors, and held onto the positions of chairman, CEO, and president at the age of 77. Observers also worried about the company's lack of a succession plan. In October 1977 Rossi finally gave up the presidency, appointing to that post Kenneth A. Barnebey, an executive vice-president and director who had joined the company in 1955 as sales supervisor.

Era As Beatrice Subsidiary, 1978–86

In August 1978 Tropicana was finally sold to Beatrice Company for $490 million in cash and stock. The acquisition immediately ran into regulatory difficulties, and in 1980 a Federal Trade Commission (FTC) administrative law judge ruled that the purchase violated antitrust law because Beatrice could have expanded its own chilled juice brand, which had a market share of 1 percent, instead of buying Tropicana. The judge ordered Beatrice to divest Tropicana and pay to the government any Tropicana-derived profits. Following Beatrice's appeal, the FTC overturned the judge's ruling in 1983, finding that the acquisition was not illegal.

Key Dates:

1947:: Sicilian immigrant Anthony T. Rossi founds Manatee River Packing Company in Palmetto, Florida, originally to ship gift boxes of Florida citrus fruit to the Northeast but soon shifting to orange juice.
1949:: Rossi moves the company to nearby Bradenton, changes its name to Fruit Industries, Inc., enters the market for frozen orange juice concentrate, and begins using the Tropicana brand.
1951:: First use of the "Tropic-Ana" character.
1954:: After pioneering a flash pasteurization method, company begins selling fresh chilled, not-from-concentrate juice.
1957:: Company changes its name to Tropicana Products, Inc.
1969:: Tropicana is taken public.
1978:: Beatrice Company purchases Tropicana for $490 million.
1986:: Kohlberg Kravis Roberts & Co. takes Beatrice private through LBO and begins stripping it of assets to pay down debt.
1988:: Tropicana is sold to The Seagram Company Ltd. for $1.2 billion; company introduces Tropicana Twisters.
1995:: After acquiring the global juice business of Dole Food Company, Tropicana is rechristened Tropicana Dole Beverages.
1998:: Seagram sells Tropicana to PepsiCo, Inc. for $3.3 billion; now a division of PepsiCo, it once again adopts the name Tropicana Products, Inc.
2001:: PepsiCo's acquisition of Quaker Oats Company (and the Gatorade brand) leads to numerous changes at Tropicana, to the latter's detriment; responsibility for Tropicana's international operations is shifted to PepsiCo Beverages International, meaning that Tropicana Products is now focused exclusively on the United States and Canada.
2002:: Tropicana becomes part of the PepsiCo Beverages & Foods North America division.
2004:: The headquarters of Tropicana is shifted to Chicago, home of PepsiCo Beverages & Foods North America, in order to market Tropicana and Quaker Foods breakfast products together.

Barnebey headed up Tropicana Products following the acquisition, but by 1982 Richard Walrack, a 30-year Beatrice veteran, had taken over as president of the Beatrice subsidiary (Rossi died in 1993 at the age of 92). Two important events in 1983 shook the orange juice industry and intensified the "orange juice wars." The Procter & Gamble Company (P&G) launched the Citrus Hill brand, offering both frozen concentrate and from-concentrate chilled juice. By 1984 the marketing power of P&G had quickly made Citrus Hill into a fairly strong third player. That year the declining frozen concentrate sector was led by Minute Maid's 25 percent share, with Citrus Hill holding 7 percent and Tropicana 4 percent. Tropicana still held the top spot in the rapidly growing chilled juice sector with a 28 percent share, with Minute Maid claiming 18 percent and Citrus Hill 9 percent. The second key event of 1983 was an orange freeze that forced Tropicana to raise the price of its not-from-concentrate chilled juice three times in quick succession. Amazingly, the company saw no drop-off in purchasing, as customers were clearly willing to pay a premium for what they perceived to be a superior product—the not-from-concentrate juice. Funds from the higher prices were used to begin expanding the Tropicana brand outside of its strongholds in the Northeast and Southeast. Around this time, Tropicana, with the help of Beatrice, became more sophisticated in its marketing and product positioning. It rebranded its not-from-concentrate chilled juice Tropicana Pure Premium, while the from-concentrate version, which it had sold for a number of years, was first called Gold 'n Pure and then Tropicana Season's Best. Under Beatrice, Tropicana was also more aggressive about introducing new products, such as the 1985-debuted Tropicana Pure Premium HomeStyle orange juice, which featured added pulp.

Meanwhile the door to the Tropicana president's office became a revolving one, as Walrack resigned in June 1984 for "personal reasons," and his replacement—Wesley M. Thompson, who had been hired away from a Coca-Cola executive marketing position—did the same only nine months later. Stephen J. Volk, who had previously worked at PepsiCo, was named president in March 1985. Sales in the United States of chilled orange juice outpaced concentrate for the first time in 1986, as consumers continued to buy increasing amounts of convenience foods. Tropicana was well-positioned to take advantage of this trend.

KKR/Seagram Era, 1988–98

In April 1986 Beatrice was taken private through a $6.2 billion, highly leveraged buyout led by Kohlberg Kravis Roberts & Co. (KKR). Over the next two years, Beatrice was stripped of much of its assets to pay down debt. Tropicana was part of this asset sale; it was sold to The Seagram Company Ltd., the Canadian alcoholic beverage maker, for $1.2 billion in March 1988. By that time, Tropicana was a company with annual sales of $740 million and pretax profits of $100 million.

Under Seagram, Tropicana continued to expand within the United States, becoming a truly national brand for the first time. Also in an aggressive expansion mode, Minute Maid aimed squarely at Tropicana with the 1988 introduction of its own not-from-concentrate chilled juice brand, Minute Maid Premium Choice. Tropicana subsequently sued Coca-Cola over its advertising and packaging slogan for Premium Choice, which included the phrase "straight from the orange." Coca-Cola dropped the slogan rather than fight the suit. Despite the lawsuit, by 1990 Minute Maid had 11.7 percent of the not-from-concentrate, ready-to-serve orange juice market. That year, however, Tropicana edged past Minute Maid in the overall U.S. orange juice market, with 22.3 percent to its rival's 22.2 percent. The orange juice wars soon claimed their first victim when the top two orange juice brands proved to be too formidable even for P&G, which discontinued the Citrus Hill brand in September 1992. Tropicana and Minute Maid were soon battling anew to gain share in the aftermath of Citrus Hill's withdrawal. Tropicana gained the initial upper hand, and by 1993 had extended its lead in the overall orange juice market to a somewhat comfortable 30.1 percent to 25.9 percent.

Even while it was ascending to the top spot, Tropicana continued to be beset by management turnover. Robert L. Soran, who had headed the company at the time of its acquisition by Seagram and continued as president afterward, was forced to resign in September 1991 following his failure to report to Seagram $20 million in cost overruns on construction projects in Florida, New Jersey, and California, according to Alix M. Freedman of the Wall Street Journal. In February 1992 William Pietersen, president of the Seagram Beverage Group, was named president of Tropicana as well. He resigned in January 1993 for "family considerations," with Myron A. Roeder taking over.

From the late 1980s through the mid-1990s, Tropicana expanded aggressively, both outside of its core orange juice products and outside of the United States. In 1988 the company introduced the Twister line of bottled and frozen juice blends. The "flavors Mother Nature never intended" were eventually to include apple-berry-pear, orange-peach, cranberry-raspberry-strawberry, and orange-strawberry-guava. Three years later, a low-calorie Twister Light line made its debut. By 1991 annual sales of the Twister lines reached $170 million. That year Tropicana Pure Premium was launched in Canada, the United Kingdom, Ireland, and France; Germany, Argentina, and Panama were added to Pure Premium's market area in 1994. Also in 1991 a joint venture between Tropicana and Kirin Brewery Company, Limited of Japan began importing and marketing orange juice in that country. In 1993 Tropicana introduced Grovestand orange juice, a ready-to-serve product that was touted to have the consistency and taste of fresh-squeezed juice. The company acquired Hitchcock, the number one premium fruit juice brand in Germany, from Deinhard & Company in 1994. By that time, about 12 percent of Tropicana's overall sales (which were about $1.3 billion in fiscal 1994) were generated from overseas markets, compared to just 5 percent in 1992. The company gained further overseas power through the May 1995 $276 million purchase of the global juice business of Dole Food Company, which had a strong presence in western Europe. Brands gained thereby were Dole juices in North America and Dole, Fruvita, Looza, and Juice Bowl juices and nectars in Europe. Tropicana then became known as Tropicana Dole Beverages, with Ellen Marram heading up the unit and Gary M. Rodkin serving as president of Tropicana Dole Beverages North America.

As the 1990s continued, Tropicana expanded further internationally, entering several more Latin American countries as well as Hong Kong and China. The company also scored a promotional coup in 1996 when it signed a 30-year namingrights deal—for $46 million—to have the new stadium for the Tampa Bay Devil Rays major league baseball team named Tropicana Field (which opened in March 1998). In 1997, in addition to celebrating its 50th anniversary, Tropicana began construction of a $17 million research and development center in Bradenton; opened its Midwest Distribution Center in Cincinnati, Ohio; launched Tropicana Pure Premium juice products into Portugal; acquired Copella Fruit Juices Ltd., the leading producer and marketer of chilled apple juice in the United Kingdom; introduced Tropicana Fruitwise Smoothies and Tropicana Fruitwise Healthy Fruit Shakes; and also launched a calcium-fortified version of Tropicana Pure Premium.

The PepsiCo Era, 1998 and Beyond

While Tropicana was expanding rapidly into a company with 1997 worldwide sales of $1.93 billion, Seagram was increasing its involvement in the entertainment industry. In May 1998 Seagram announced it would acquire PolyGram N.V., the world's largest music company, for $10.4 billion. To help fund the purchase, Seagram said it would divest Tropicana. Originally, Seagram planned to sell the unit to the public through an initial public offering. However, the IPO market was not as attractive as it had been earlier in the decade, and Seagram struck a deal with PepsiCo, Inc., consummated in August 1998, whereby the juice business was sold to the beverage giant for $3.3 billion in cash. Tropicana became a division of PepsiCo, once again adopting the name Tropicana Products, Inc. Marram elected to pursue opportunities elsewhere, so Rodkin was named president and CEO of the company. One sign that Tropicana was poised for a bright future was an August 1998 Tropicana press release announcing that for the first time in U.S. history, sales of not-from-concentrate chilled orange juice had surpassed those of from-concentrate juice. In November 1998 the company announced that it had agreed to license the Tropicana brand name to Greene River Marketing, Inc. of Vero Beach, Florida, for use on ruby red fresh grapefruit. This marked the first time that the Tropicana name would appear in the produce section of supermarkets.

At the time of the PepsiCo takeover, Tropicana was enjoying surging sales. This trend continued over the next two years, with revenues jumping 10 percent to $2.25 billion in 1999 and 6 percent to $2.4 billion the following year. Between 1998 and 2000, profits doubled from $110 million to $220 million thanks to Rodkin's belt-tightening initiatives. International expansion occurred during these years, including the introduction of the Tropicana brand into India for the first time and the company's entry into the Spanish market through the acquisition of Alimentos de Valle S.A., a leading producer of chilled, not-from-concentrate orange juice in Spain that sold juice in France, Portugal, and Belgium as well. In the United States, Tropicana continued to pump out new products, introducing calciumfortified formulations of Tropicana Pure Premium Grovestand and Tropicana Pure Premium Ruby Red Grapefruit. In September 1999 Rodkin was promoted to CEO of Pepsi-Cola North America. Succeeding him as president and CEO of Tropicana Products was Brock Leach, a seasoned marketer who had spent 17 years at Frito-Lay, the snack food division of PepsiCo, most recently heading up Frito-Lay's product development, innovation initiatives, and technology. In early 2000 Tropicana announced that it would increase its fleet of refrigerated railcars to more than 400, and that their orange color would gradually be phased out in favor of a return to the original white for the sake of cooling efficiency. That year, Tropicana Pure Premium passed Campbell's Soup to become the third largest brand in U.S. grocery stores behind only Coca-Cola Classic and Pepsi-Cola.

Tropicana reached another milestone in 2001 when it squeezed its 300 billionth orange into juice. On the new product front that year, the company introduced a low acid version of Tropicana Pure Premium, targeting another health-related niche of the juice sector. The firm also launched a $60 million expansion of its juice storage facilities in Bradenton, to bolster capacity by 32 percent, to nearly 100 million gallons, and provide enough room to store juice between citrus harvests. Late in the year Tropicana announced that it would shut down its glass manufacturing plant in Bradenton, ending its use of glass containers and making its shift to cartons and plastic containers complete. The glass plant, dating back to 1964, had been operated since 1993 as a joint venture with Saint-Gobain Containers Inc., a Muncie, Indiana-based glassmaker. The shutdown was completed in 2003 and entailed the elimination of about 220 jobs.

The big event in 2001 at the PepsiCo parent, and one destined to have a major impact on Tropicana, was the acquisition of Quaker Oats Company for $14 billion. Quaker was coveted mainly for its powerhouse Gatorade sports-drink brand. Following the acquisition, PepsiCo implemented a reorganization in which Tropicana was placed within the same PepsiCo division as Gatorade. Furthermore, the independent brokers who had been selling Tropicana products were fired, and sales and marketing was turned over to members of Gatorade's in-house sales force. Tropicana sales suffered, however, because the new salespeople were not as adept at selling chilled orange juice. Around this same time, responsibility for manufacturing and marketing Tropicana Twister and Season's Best products was likewise shifted to the Gatorade team. The rationale was that these products, which did not require refrigeration, were manufactured the same way as Gatorade. Sales again suffered. In yet another organizational change from 2001, oversight of Tropicana's international operations were merged with those of Pepsi-Cola and Gatorade, creating PepsiCo Beverages International. Tropicana Products, Inc. was now focused exclusively on the United States and Canada. (Two years later, PepsiCo created a new division called PepsiCo International, which took over responsibility for all of the parent company's snack, beverage, and food units outside North America.)

Tropicana tried to stem its sagging sales through new product launches. Rolled out nationally in March 2002 were Tropicana Smoothies, touted as delicious and nutritious combinations of juice and yogurt, packaged in convenient single-serving resealable plastic bottles. Simultaneously, four kinds of Tropicana Pure Premium products also debuted in single-serving bottles, which were in part aimed at the convenience store consumer. Later in the year the Tropicana Pure Premium Healthy Kids line was launched, which was designed to provide children with calcium and vitamins A, C, and E.

In mid-2002, as Tropicana's travails continued, Leach was replaced as president by Jim Dwyer, a former senior executive at the company who had more recently served a stint overseeing the merger of PepsiCo and Quaker Oats. Tropicana's operations were affected by yet another PepsiCo reorganization that same year. All of PepsiCo's North American beverage operations, including Pepsi-Cola, Tropicana, and Gatorade, were united within one division, PepsiCo Beverages & Foods North America.

Starting in 2003 in particular, overall orange juice sales were down as it appeared that people on low-carb diets, such as the Atkins and South Beach plans, were shunning the product because of its high carbohydrate content. Tropicana seemed slow to react to the trend, only releasing its Light 'n Healthy product in early 2004. The new product was lower in sugar and calories and had a third less carbohydrates than Tropicana Pure Premium. In December 2003, just prior to this launch, PepsiCo shocked the community of Bradenton with the announcement that the headquarters of Tropicana Products would be shifted to Chicago, the base for PepsiCo Beverages & Foods North America. The move was completed in 2004. It affected 300 Tropicana staffers in Bradenton but left the 1,900-person manufacturing and distribution operation intact. The change in headquarters location was precipitated by another shift in strategy, again related to Quaker. In this case, however, it was the Quaker Foods operation that was involved. PepsiCo officials now wanted to market Tropicana products alongside those of Quaker Foods, because the two lines were comprised predominantly of breakfast products. The Quaker brands included Quaker Oats oatmeal, Aunt Jemima syrup, and Life and Cap'n Crunch cereals. In addition to gaining such synergies, the change in Tropicana's headquarters was also aimed at cutting costs.

Following the relocation, Dwyer left the company. Appointed as new president was Greg Shearson, who previously headed beverage operations for PepsiCo in Canada. Tropicana's struggles continued in 2004 as a price war in the orange juice industry prevented the company from increasing prices despite rising fruit costs stemming from a summer of hurricanes that devastated Florida's citrus crop. Needing to trim costs, Tropicana late in the year announced a plan to cut as many as 200 jobs from its Bradenton operations, aiming to do so by offering retirement incentives to its staff.

Principal Competitors

Coca-Cola North America; Florida's Natural Growers.

Tropicana Products, Inc.

views updated May 11 2018

Tropicana Products, Inc.

1001 13th Avenue East
Bradenton, Florida 34208
U.S.A.
(914) 747-4461
Fax: (914) 749-3983
Web site: http://www.pepsico.com

Division of PepsiCo, Inc.
Incorporated : 1947 as Manatee River Packing Company
Employees : 4,737
Sales : $1.93 billion (1997)
NAIC : 311311 Frozen Fruit, Juice, & Vegetable Processing

Tropicana Products, Inc. is the leading producer of chilled orange juice in the world. It also claims the top spot in the overall U.S. orange juice market, with a share of 33 percent, compared to archrival The Minute Maid company’s 24 percent (Ironically, Minute Maid is owned by PepsiCo, Inc.’s archrival The Coca-Cola Company). In the $2.45 billion U.S. chilled juice sector, Tropicana holds a commanding 39.8 percent share. The company was a pioneer in the not-from-concentrate, chilled orange juice sector, and accounts for more than 70 percent of U.S. not-from-concentrate sales. In North America, the company’s main brands are Tropicana Pure Premium, Tropicana Season’s Best, Dole juices, and Tropicana Twister. Internationally, Tropicana distributes its products in 23 countries, with the primary brands including Tropicana Pure Premium, Dole juices, Fruvita, Hitchcock, Looza, and Copella.

Founded by Sicilian Immigrant

The same week he sold his restaurant, Rossi embarked on a new venture, that of selling gift boxes of Florida citrus fruit to such department stores as Macy’s and Gimbel’s in New York City. Finding surprising success in this business, he moved in 1947 to Palmetto, a town just north of Bradenton, where he purchased the Overstreet Packing Company, renaming it the Manatee River Packing Company. Rossi was now able to buy his citrus directly from nearby growers rather than from retail supermarkets in Miami, cutting his costs and improving his product’s freshness.

Rossi’s gift boxes grew even more popular, and were soon being distributed across the country. He next expanded into selling jars of chilled fruit sections. But since only the largest fruit was selected for the boxes and the sections, Rossi needed to find a way to use the smaller fruit that was going to waste. He decided to squeeze the smaller oranges into juice, and ship it to the Northeast along with jars of fresh fruit sections, using specially modified refrigerated trucks. In 1949 the company moved to Bradenton and changed its name to Fruit Industries, Inc. That same year Rossi also entered the burgeoning market for frozen orange juice concentrate, purchasing an evaporator to extract the water from the juice. In addition, he registered “Tropicana” as a trademark and began using it on his fruit section and juice products, which proved so successful that he abandoned the marketing of the fruit gift boxes.

Personified brands, such as Speedy Alka Seltzer, were popular in the early television days of the 1950s, and Rossi joined the trend in 1951 when he commissioned the creation of “Tropic-Ana,” a grass skirt- and lei-wearing, pigtailed girl balancing a large bowl of oranges on her head. The character provided an instantly recognizable symbol for the still-young company and helped establish it in the consumer market as Tropicana products began appearing in supermarket cases, mainly in the Northeast and Southeast. In 1953 the company moved to larger quarters, the former Florida Grapefruit Canning Plant in Bradenton, which served as the firm’s headquarters into the late 1990s.

Pioneered Chilled Juice in 1954

The key event in the early years of the company came in 1954. That year Rossi, not wanting to be just one of a number of frozen juice concentrate producers, pioneered a flash pasteurization method that raised the temperature of freshly squeezed orange juice for a very short time, extending the juice’s shelf life to three months while maintaining its flavor. This method—combined with American Can Company-commissioned packaging consisting of waxed paper cartons in half-pint, pint, and quart sizes—made possible the mass marketing of fresh chilled, not-from-concentrate juice into supermarkets and through home delivery services. Although Tropicana Pure Premium chilled orange juice quickly gained a following in much of the country, sales to New York City were particularly large, accounting for as much as 40 percent of overall sales in the 1960s and early 1970s.

Rossi now had a product that clearly distinguished his company from its competitors; he soon stopped offering Tropicana in frozen concentrate form. In 1957 he changed the name of the company to Tropicana Products, Inc. to reflect the increasing popularity of the brand. That same year Tropicana—not able to expand its truck fleet—began shipping orange juice from Florida to New York via an 8,000-ton ship the company had purchased, which it christened the SS Tropicana. Carrying at its peak use 1.5 million gallons of juice each week, the ship would land at Whitestone, Queens, where Tropicana had built a plant for receiving, packaging, and distribution. The Tropicana made its final orange juice voyage in 1961, and the company began relying exclusively on truck and rail transport.

In 1958 Tropicana Coffee made its debut. Marketed as a concentrated liquid in a push-button aerosol can, the product failed in part because it had a faulty valve which made it difficult to accurately shoot the liquid into a cup. In 1962 the citrus industry was rocked by one of its periodic freezes. More than one-third of the Florida orange crop was destroyed by a December freeze. Desperately in need of fruit, Tropicana boldly put processing equipment on a ship, which it anchored off the coast of Mexico, a nation with a large and cheap orange crop. After some initial and profitable success in getting Mexican orange juice to the U.S. market, the Mexican government raised the price of oranges, scuttling the venture. Tropicana sold the ship and the equipment on board, losing $2 million in the process.

Went Public in 1969

Tropicana in the early 1960s began shipping more of its orange juice in glass bottles, aided by the company’s development of a high-speed vacuum-packing method. With its base in sand-rich Florida, Tropicana took the next logical step of building its own glass plant, for the manufacture of the increasing amounts of glass bottles that were needed. The glass plant opened in 1964. Four years later the company became the first citrus industry company to operate its own plastic container manufacturing plant. Meantime, Tropicana in 1966 began selling its not-from-concentrate Florida orange juice overseas for the first time, shipping 14,000 cases of juice in glass bottles to France. The 1960s ended on another high note, when Tropicana Products, Inc. went public in 1969. Initially sold over the counter, the stock soon gained a listing on the New York Stock Exchange under the symbol TOJ. Revenues increased from $31.2 million in 1964 to $68.4 million by the end of the decade.

The infusion of capital from the stock offering set the stage for even more rapid growth at Tropicana. By 1973, in fact, revenues had reached $121.2 million, while net income grew nearly sixfold, to $10 million. Among the developments of the early 1970s was the launch of a company-owned train (the “Great White Train,” later painted orange), which shipped bottles of juice from Bradenton to a distribution center in New Jersey. Continuing its moves to lessen its dependence on outside suppliers, Tropicana opened a box plant in 1972 and began making its own corrugated boxes. The following year Tropicana opened a new processing facility in Fort Pierce, Florida, a town on the Atlantic side of the state.

Although the so-called “orange juice wars” would not begin in earnest until the 1980s, a few skirmishes between Tropicana and Coca-Cola’s Minute Maid took place in the 1970s. Coca-Cola in 1973 took direct aim at Tropicana’s stranglehold on both the New York metropolitan area market and the chilled juice sector with the introduction into that area of Minute Maid chilled juice that had been reconstituted from frozen concentrate. This was the beginning of a long-running debate between the companies over which had the superior product. Tropicana contended that not-from-concentrate chilled juice was obviously superior since it was bottled (after being pasteurized) right out of the orange. Minute Maid argued that the concentrating process gave it the opportunity to blend the juice of oranges picked at different times of the year, thereby overcoming seasonal variations in orange taste and quality and giving the resultant juice a more consistent flavor and better overall quality. In any event, Minute Maid, backed by Coke’s deep pockets, gained one edge—it quickly became the first nationally available chilled orange juice. The Tropicana-Minute Maid rivalry heated up further in 1975 when the former reentered the market for frozen concentrate.

Company Perspectives

Half a century ago, Italian immigrant Anthony Rossi established a small fruit packing business in Florida. The company he founded has grown to become the world’s only global citrus juice business.

By the mid-1970s, Tropicana had expanded its market range within the United States (though it still was not a national brand) and had gained a presence in the Bahamas, Bermuda, the West Indies, and several countries in Europe. Despite the Minute Maid entry into the chilled juice sector, Tropicana was the main beneficiary of the faster growth of chilled juice versus frozen concentrate. Whereas in the late 1960s chilled juice accounted for only 20 percent of the overall orange juice market, by the late 1970s it accounted for 31 percent. Tropicana was growing rapidly, with sales increasing 19 percent each year on average, reaching $244.6 million in fiscal 1977. Earnings were increasing 21 percent a year, standing at $22.5 million in 1977.

The health of Tropicana was reflected in an endless stream of suitors that attempted to woo the company in the 1970s. Among these were Philip Morris, PepsiCo (in an ironic twist), and Kellogg. On three separate occasions—in April 1974, June 1976, and July 1977—Tropicana and Kellogg, the cereal giant which sought to extend its breakfast offerings to include orange juice, agreed in principal to merge only to have Rossi walk away from the deal before it became final. Following the third failed Kellogg takeover, articles in the press focused on Rossi’s inability to “let go”—the company founder still controlled 20 percent of Tropicana stock, dominated a more or less rubber-stamp board of directors, and held onto the positions of chairman, CEO, and president at the age of 77. Observers also worried about the company’s lack of a succession plan. In October 1977 Rossi finally gave up the presidency, appointing to that post Kenneth A. Barnebey, an executive vice-president and director who had joined the company in 1955 as sales supervisor.

Purchased by Beatrice in 1978

In August 1978 Tropicana was finally sold to Beatrice Company for $490 million in cash and stock. The acquisition immediately ran into regulatory difficulties, and in 1980 a Federal Trade Commission (FTC) administrative law judge ruled that the purchase violated antitrust law because Beatrice could have expanded its own chilled juice brand—which had a market share of one percent—instead of buying Tropicana. The judge ordered Beatrice to divest Tropicana and pay to the government any Tropicana-derived profits. Following Beatrice’s appeal, the FTC overturned the judge’s ruling in 1983, finding that the acquisition was not illegal.

Barnebey headed up Tropicana Products following the acquisition but by 1982 Richard Walrack, a 30-year Beatrice veteran, had taken over as president of the Beatrice subsidiary (Rossi died in 1993 at the age of 92). Two important events in 1983 shook the orange juice industry and intensified the “orange juice wars.” The Procter & Gamble Company (P&G) launched the Citrus Hill brand, offering both frozen concentrate and from-concentrate chilled juice. By 1984 the marketing power of P&G had quickly made Citrus Hill into a fairly strong third player. That year the declining frozen concentrate sector was led by Minute Maid’s 25 percent share, with Citrus Hill holding seven percent and Tropicana four percent. Tropicana still held the top spot in the rapidly growing chilled juice sector with a 28 percent share, with Minute Maid claiming 18 percent and Citrus Hill nine percent. The second key event of 1983 was an orange freeze which forced Tropicana to raise the price of its not-from-concentrate chilled juice three times in quick succession. Amazingly, the company saw no drop-off in purchasing, as customers were clearly willing to pay a premium for what they perceived to be a superior product—the not-from-concentrate juice. Funds from the higher prices were used to begin expanding the Tropicana brand outside of its strongholds in the Northeast and Southeast. Around this time, Tropicana—with the help of Beatrice—became more sophisticated in its marketing and product positioning. It rebranded its not-from-concentrate chilled juice Tropicana Pure Premium, while the from-concentrate version, which it had sold for a number of years, was first called Gold ‘n Pure and then Tropicana Season’s Best. Under Beatrice, Tropicana was also more aggressive about introducing new products, such as the 1985-debuted Tropicana Pure Premium HomeStyle orange juice, which featured added pulp.

Meanwhile the door to the Tropicana president’s office became a revolving one, as Walrack resigned in June 1984 for “personal reasons,” and his replacement—Wesley M. Thompson, who had been hired away from a Coca-Cola executive marketing position—did the same only nine months later. Stephen J. Volk, who had previously worked at PepsiCo, was named president in March 1985. Sales in the United States of chilled orange juice outpaced concentrate for the first time in 1986, as consumers continued to buy increasing amounts of convenience foods. Tropicana was well-positioned to take advantage of this trend.

Sold to Seagram in 1988

Under Seagram, Tropicana continued to expand within the United States, becoming a truly national brand for the first time. Also in an aggressive expansion mode, Minute Maid aimed squarely at Tropicana with the 1988 introduction of its own not-from-concentrate chilled juice brand, Minute Maid Premium Choice. Tropicana subsequently sued Coca-Cola over its advertising and packaging slogan for Premium Choice, which included the phrase “straight from the orange.” Coca-Cola dropped the slogan rather than fight the suit. Despite the lawsuit, by 1990 Minute Maid had 11.7 percent of the not-from-concentrate, ready-to-serve orange juice market. That year, however, Tropicana edged past Minute Maid in the overall U.S. orange juice market, claiming 22.3 percent to its rival’s 22.2 percent. The orange juice wars soon claimed their first victim when the top two orange juice brands proved to be too formidable competitors for even the likes of P&G, which discontinued the Citrus Hill brand in September 1992. Tropicana and Minute Maid were soon battling anew to gain share in the aftermath of Citrus Hill’s withdrawal. Tropicana gained the initial upper hand, and by 1993 had extended its lead in the overall orange juice market to a somewhat comfortable 30.1 percent to 25.9 percent.

Even while it was ascending to the top spot, Tropicana continued to be beset by management turnover. Robert L. Soran, who had headed the company at the time of its acquisition by Seagram and continued as president afterward, was forced to resign in September 1991 following his failure to report to Seagram $20 million in cost overruns on construction projects in Florida, New Jersey, and California, according to Alix M. Freedman of the Wall Street Journal. In February 1992 William Pietersen, president of the Seagram Beverage Group, was named president of Tropicana as well. He resigned in January 1993 for “family considerations,” with Myron A. Roeder taking over.

From the late 1980s through the mid-1990s, Tropicana expanded aggressively, both outside of its core orange juice products and outside of the United States. In 1988 the company introduced the Twister line of bottled and frozen juice blends; the “flavors Mother Nature never intended” were eventually to include apple-berry-pear, orange-peach, cranberry-raspberry-strawberry, and orange-strawberry-guava. Three years later, a low-calorie Twister Light line made its debut. By 1991 annual sales of the Twister lines reached $170 million. That year Tropicana Pure Premium was launched in Canada, the United Kingdom, Ireland, and France; Germany, Argentina, and Panama were added to Pure Premium’s market area in 1994. Also in 1991 a joint venture between Tropicana and Kirin Brewery Company, Limited of Japan began importing and marketing orange juice in that country. In 1993 Tropicana introduced Grovestand orange juice, a ready-to-serve product that was touted to have the consistency and taste of fresh-squeezed juice. The company acquired Hitchcock, the number one premium fruit juice brand in Germany, from Deinhard & Company in 1994. By that time, about 12 percent of Tropicana’s overall sales (which were about $1.3 billion in fiscal 1994) were generated from overseas markets, compared to just five percent in 1992. The company gained further overseas power through the May 1995 $276 million purchase of the global juice business of Dole Food Company, which had a strong presence in western Europe. Brands gained thereby were Dole juices in North America and Dole, Fruvita, Looza, and Juice Bowl juices and nectars in Europe. Tropicana then became known as Tropicana Dole Beverages, with Ellen Marram heading up the unit and Gary M. Rodkin serving as president of Tropicana Dole Beverages North America.

As the 1990s continued, Tropicana expanded further internationally, entering several more Latin American countries as well as Hong Kong and China. The company also scored a promotional coup in 1996 when the stadium for the Tampa Bay Devil Rays major league baseball team was named Tropicana Field. In 1997, in addition to celebrating its 50th anniversary, Tropicana began construction of a $17 million research and development center in Bradenton; opened its Midwest Distribution Center in Cincinnati, Ohio; launched Tropicana Pure Premium juice products into Portugal; introduced Tropicana Fruitwise Smoothies and Tropicana Fruitwise Healthy Fruit Shakes; and acquired Copella Fruit Juices Ltd., the leading producer and marketer of chilled apple juice in the United Kingdom.

Sold to PepsiCo in 1998

While Tropicana was expanding rapidly into a company with 1997 worldwide sales of $1.93 billion, Seagram was increasing its involvement in the entertainment industry. In May 1998 Seagram announced it would acquire PolyGram N.V., the world’s largest music company, for $10.4 billion. To help fund the purchase, Seagram said it would divest Tropicana. Originally, Seagram planned to sell the unit to the public through an initial public offering. But with the IPO market not as attractive as it was earlier in the decade, Seagram struck a deal with PepsiCo, Inc., consummated in August 1998, whereby the juice business was sold to the beverage giant for $3.3 billion in cash. Tropicana became a division of PepsiCo, once again adopting the name Tropicana Products, Inc. Marram elected to pursue opportunities elsewhere, so Rodkin was named president and CEO of the company. One sign that Tropicana was poised for a bright future was an August 1998 Tropicana press release announcing that for the first time in U.S. history, sales of not-from-concentrate chilled orange juice had surpassed those of from-concentrate juice. In November 1998 the company announced that it had agreed to license the Tropicana brand name to Greene River Marketing, Inc. of Vero Beach, Florida, for use on ruby red fresh grapefruit. This marked the first time that the Tropicana name would appear in the produce section of supermarkets.