From: "Aeon Skoble" Date: Fri, 22 Nov 1996 08:29:43 +0000 I thought I understood capitalism pretty well, but I'm totally baffled by something I heard on the radio this morning. How could it be profitable to grow cranberries in Massachusetts, make them into concentrate, ship the concentrate to Nevada, and then make the concentrate back into juice there? I don't get it. ===================================================================== Date: Fri, 22 Nov 1996 17:29:52 +0100 From: Kurt Wickman Aeon Skoble wrote: > > I thought I understood capitalism pretty well, but I'm totally > baffled by something I heard on the radio this morning. How could it > be profitable to grow cranberries in Massachusetts, make them into > concentrate, ship the concentrate to Nevada, and then make the > concentrate back into juice there? I don't get it. Aeon, It is impossible to know without concrete details on the operation. Speculating: the difference in transport costs for concentrate vs "juice" between Massachusetts and Nevada might go a long way to explain - different technologies (the add-ons for taste or something like that might be in Nevada) might explain the rest. Anyway, be sure that they would not do it, if it were not profitable. One thing that you should look into, if you study the case, is differences in health or environmental regulations between Massachusetts and Nevada. Quite often, what seems irrational behavior among business people is explained by political regulations. All the best Kurt Wickman ===================================================================== From: "Aeon Skoble" Date: Fri, 22 Nov 1996 10:36:59 +0000 > Anyway, be sure that they would not do it, if it were not profitable. Oh, I assume that, as an article of faith so to speak, but I prefer logic to faith, so I'd be happier if I understood _why_ this is more profitable. It doesn't seem to make sense that if I can make juice and sell juice in Massachusetts, that I have any reason at all to concentrate the juice, ship it somewhere to be made back into juice which is shipped _back_ to Massachusetts. > what seems irrational behavior among business > people is explained by political regulations. Of course, that may explain it also - that certainly wouldn't surprise me. Does anyone know more specifics? ===================================================================== Date: Sun, 24 Nov 1996 11:55:18 -0800 (PST) From: Robert Higgs Aeon, The answer is that it rarely pays to ship large volumes of water very far, because water is available almost everywhere in large volumes at a low price. The case of the cranberry juice exemplifies a large class of cases known in location theory as weight-losing or weight-gaining commodities. Bob Higgs ===================================================================== Date: Mon, 25 Nov 1996 00:37:20 -0800 From: ddfr@best.com (david friedman) At 2:36 AM 11/22/96, Aeon Skoble wrote: >> Anyway, be sure that they would not do it, if it were not profitable. > >Oh, I assume that, as an article of faith so to speak, but I prefer >logic to faith, so I'd be happier if I understood _why_ this is more >profitable. It doesn't seem to make sense that if I can make juice >and sell juice in Massachusetts, that I have any reason at all to >concentrate the juice, ship it somewhere to be made back into juice >which is shipped _back_ to Massachusetts. Your original post said nothing about the juice being shipped back to Massachusetts. David Friedman ===================================================================== Date: 25 Nov 1996 09:29:14 -0500 From: "Robert Sade" OK, so, as the story has evolved, the cranberries are grown in Massachusetts (Cape Cod, I recall, is the major place cranberries are grown in the U.S.), the juice is squeezed in Massachusetts, concentrated (i.e., excess water thrown way), sent to Nevada, reconstituted with Nevada water, and distributed to the nation and the world. The answer to Aeon's question seems evident: water, labor, and shipping costs must be cheaper in Nevada than in Massachusetts, and economies of scale probably make it cheaper to can or bottle, box, label, and ship all the cranberry juice from one location. Concentrating and reconstituting (exchanging water) is most likely an inexpensive part of the entire process (from growing cranberries to enjoying a 'sea-breeze' at Malibu), but shipping a lot of excess water to Nevada is relatively expensive; ergo, the biggest profit comes from the process Aeon described. The answer might be different if Massachusetts were the only final destination, but Ocean Spray sells all over the world. Are there any libprofs in the cranberry industry (or juice industry) who can confirm any of this? Best regards. --Bob Sade ===================================================================== Date: Mon, 25 Nov 1996 09:11:47 -0700 From: Barry or Michele Fagin Subject: Cranberry Juice Part of the cranberry puzzle is that cranberries are grown in more than just Massachusetts. (I grew up in Southern NJ and there were huge cranberry bogs there.) Obviously, Ocean Spray grows cranberries or buys cranberry crops from many locations (mostly near the ocean apparently) so economies of scale call for the final processing and distribution to be in one location. Still I have to admit that there is a puzzle in the fact that water seems to be cheap in Nevada. -Michele Fagin Member of Families Against Internet Censorship: rainbow.rmi.net/~fagin/faic, email faic@rmii.com ===================================================================== Date: Mon, 25 Nov 1996 08:32:39 -0800 (PST) From: Fred Foldvary On Mon, 25 Nov 1996, Barry or Michele Fagin wrote: > one location. Still I have to admit that there is a puzzle in the fact > that water seems to be cheap in Nevada. Where in Nevada is that cranberry processing done? In southern Nevada, e.g. Las Vegas, the nearby Colorado River at Hoover Dam may be supplying cheap water, subsidized by the government. In northern Nevada, e.g. Reno, there may be plenty of water from the nearby Sierra Nevada mountains; though the wet side is in California, there are forest areas around Lake Tahoe. Water is available in Nevada cities. What hogs up the water in the western states is subsidized agriculture, which soaks up much of the water coming into southern California from the Colorado River and Sierra Nevada, at highly subsidized rates. Taxes are relatively low in Nevada, due to much state revenue from gaming (gambling). Land is also inexpensive. Maybe the processing plant takes up a lot of land. Fred Foldvary ===================================================================== Date: Mon, 25 Nov 1996 09:46:53 -0800 (PST) From: Robert Higgs The southwestern coast of Washington is also a major cranberry-growing site. Do we really know, however, that once reconstituted in Nevada the juice is shipped to all final consumer markets? The normal way to produce such products as sodas is to ship the syrup around the country and mix it with water at dispersed bottling plants, thereby avoiding the costs of shipping a lot of heavy, bulky water, which is cheaply available nearly everywhere--even in this country in the desert. Bob Higgs ===================================================================== Date: Mon, 25 Nov 1996 17:05:52 -0400 (EDT) From: Jack Sanders Subject: Ocean Spray On the theory that the best way to answer the cranberry question might be to make an inquiry with cranberry experts, I've found a web site with some not entirely unhelpful information. The web site is: http://micro.magnet.fsu.edu/micro/gallery/ocnspry/ocnspry.html One fact that might help to explain the Nevada question is that "Almost all of the world's cranberrys are cultivated on about 25,000 acres in five states--Massachusetts, New Jersey, Wisconsin, Oregon, and Washington." So Nevada is not quite so far out after all, if some key parts of the process are best centralized. The most important information to be gleaned from that site is probably the e-mail address of someone who appears to be a cranberry industry researcher at Florida State University named Michael W. Davidson. He appears to be the author of the material in the website named above. His e-mail address is davidson@magnet.fsu.edu Interested persons might wish to contact him for other data that might help test theory. Cheers, Jack * * * John T. Sanders e-mail: jtsgsh@rit.edu Department of Philosophy College of Liberal Arts phone: (716)475-2465 Rochester Institute of Technology FAX: (716)475-7120 92 Lomb Memorial Drive Rochester, NY 14623-5604 ===================================================================== Date: Sun, 26 Nov 1995 12:36:21 +0000 From: "Svein Olav G. Nyberg" The market does not guarantee that all solutions will be optimal at all times, only that the best of the competing solutions at any time will have the edge in competition. If this concentrate-deconcentrate cycle is unprofitable, as compared to direct shipping, you might have discovered an opening in the market for making a profit. Svein Olav Nyberg ===================================================================== Date: Tue, 26 Nov 1996 10:06:14 -0400 (EDT) From: Bill Woolsey Robert Higgs writes: >The southwestern coast of Washington is also a major cranberry-growing >site. Do we really know, however, that once reconstituted in Nevada the >juice is shipped to all final consumer markets? The normal way to >produce such products as sodas is to ship the syrup around the country >and mix it with water at dispersed bottling plants, thereby avoiding the >costs of shipping a lot of heavy, bulky water, which is cheaply available >nearly everywhere--even in this country in the desert. Perhaps not, but the suggestion was that the concentrate is made near the growing sites in New England, shipped to Nevada, and made into juice there. Aeon later added that it was shipped back to Boston. Is fresh cranberry juice available in Washington and/or New England? Has anyone considered the issue of refrigeration? Perhaps shipping cranberries, uncanned juice, and concentrate requires refrigeration. Shipping already bottled juice requires no refrigeration. Isn't the undercurrent of this discussion the question of why cranberry juice sold in New England isn't processed there creating needed jobs in the community? Perhaps Aeon could add a little context to the NPR report. How about this for a wild theory. Maybe Ocean Spray cranberry juice is a blend of the best Washington state and New England juices. Bill Woolsey Email: Bill.Woolsey@Citadel.edu Dept. of Business Administration Home: (803) 795-5062 The Citadel Office: (803) 953-5161 Charleston, South Carolina 29409 Fax: (803) 953-7084 U.S.A. ===================================================================== Date: Mon, 27 Nov 1995 09:46:11 +0000 From: "Svein Olav G. Nyberg" Subject: The premises of the debate I'm not quite sure I buy the premises for this debate, that we shall be able to sit down and figure out a priorily what the most efficient method of Cranberry juice production and distribution is. As I see it, the beauty of the Market is that a bunch of central planners like we almost have become now, *cannot* in general make such aprioristic judgements. Svein Olav ===================================================================== From: "Aeon Skoble" Date: Wed, 27 Nov 1996 08:05:56 +0000 Subject: Re: The premises of the debate > I'm not quite sure I buy the premises for this debate, > that we shall be able to sit down and figure out a priorily > what the most efficient method of Cranberry juice production > and distribution is. Whoa, hold on, there is no debate! I wasn't suggesting that central planners can figure out production schemes better than the market, I was simply looking for an explanation of something which struck me as strange. Since some on this list are economists and business profs, I posted my query to the list in an effort to get some information, which I did. I already knew that it was most likely profitable for Ocean Spray to do what they do, because they otherwise wouldn't do it, but that doesn't explain _why_ it's profitable in circumstances which _seemed_ silly. No one was questioning the logic of markets. I was merely curious about the cranberry industry. ===================================================================== Date: Wed, 27 Nov 1996 15:13:29 +0100 From: Kurt Wickman Subject: Re: The premises of the debate Svein Olav, "Speculating" on what may be the reasons for a specific way of producing a good is not planning - it is what is at the core of all science, trying to understand. But I agree that the most efficient way to solve the problem would be to ask someone that is in cranberry production in Massachusetts. All the best Kurt Wickman