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Paramount Citrus And Sun Pacific Imbroglio Over Cuties Sheds Light On How Branding Works In The Produce Industry

When The Wall Street Journal ran a piece this past summer, titled The Big War Over a Small Fruit. It was that rare event — a produce story that broke through to the mainstream media:

From a hillock in the San Joaquin Valley, Berne Evans III recently surveyed a citrus grove that stretches as far as the eye can see. ‘It’s the largest clementine planting in the world,’ he said, smiling.

The groves make Mr. Evans the king of the Cuties, a brand of seedless, sweet and easy-to-peel mandarin that is storming the nation’s fruit aisles and changing eating habits that span generations. The navel orange, after reigning supreme for decades, has a challenger.

The rise of Cuties heralds the arrival of big-money marketing in a tradition-steeped corner of American industry. Techniques once reserved for promoting consumer products have now made their way into the produce section. Just as people have long asked for a ‘Kleenex’ instead of a tissue, they are starting to ask for ‘Cuties’ when they mean mandarins.

‘I can’t think of any other produce that has done this,’ says John Ball of San Diego branding firm MiresBall. It’s ‘a name that is the thing.’

Cuties reflect a defining reality of the American consumer experience: Convenience sells. It’s a simple idea, applied in an unexpected place in the case of Cuties. Few people may have looked at the traditional orange and considered it a candidate for the classic American ‘new and improved’ treatment.

But part of the Cuties marketing message trumpets the fact that children find it easier to peel. ‘We are a very impatient nation,’ says Jerry Della Femina, of Della Femina Advertising in New York. ‘We have always led the way on, ‘Isn’t this the easiest way to do it?”

Cuties fit the long-standing pattern of transformative marketing insights that have shaped the U.S. consumer-product landscape. The automatic washing machine changed the nature of the American household. The remote control upended TV advertising. The advent of pre-peeled baby carrots in a bag redefined cubicle snacking at office parks coast to coast.

It’s too early, of course, to elevate the seedless mandarin to a place in this pantheon. But in the meantime, the small, glossy, deep-orange fruit is, acre for acre, the most profitable citrus in America. Across California’s citrus belt, farmers are ripping out orange, lemon and grapefruit trees to switch to mandarins.

Mr. Evans, 67 years old, built his empire with Stewart and Lynda Resnick, the Beverly Hills billionaire marketers of Fiji Water and Pom Wonderful pomegranate juice. Eight years ago they launched the Cuties brand.

Mr. Evans and his group spent considerable sums to try to capture shoppers’ attention. That strategy is spawning a marketing battle as rivals trumpet their own seedless, easy-to-peel brands: Darling Clementines, Delite, Clem’NTina’s, Bee Sweet.

Now, the Cuties brain trust is showing some cracks. To fend off the new competition and keep their tangerines on top, the group is pouring money into marketing at the Resnicks’ behest. In the latest season it spent $20 million on a national campaign to promote Cuties.

The rising costs are a wedge issue. ‘We’re having an argument,’ Mr. Evans says. ‘Are Cuties well-known just because of advertising? My personal view is it’s a damn good piece of fruit.’

Meantime, Mr. Evans irked the Resnicks by selling a smaller version of the fruit that his company registered under the trademark ‘Baby Cuties.’ The Resnicks believe it undermined the Cuties brand’s premium image, according to Mr. Evans and other growers.

Shortly after, Paramount Citrus, the Resnicks’ company and a unit of their closely held Roll Global LLC, sued Mr. Evans in Los Angeles federal court over use of the Cuties name on a new juice line. The issue is now in private arbitration.

The Resnicks declined to be interviewed. A Roll Global spokesman said the company wouldn’t discuss the business relationship and issues in ‘ongoing arbitration.’

Cuties have their origin in a 1990 freeze that badly damaged California’s citrus harvest. Mr. Evans, a stockbroker-turned-farmer and already into tomatoes, oranges and kiwi at the time, caught wind of the fact that Spanish clementines were selling well on the East Coast. ‘Supermarket chains told me, ‘If you can grow ’em, they’ll sell,” he recalls.

He hired experts to confirm that the fruit could endure the San Joaquin Valley’s weather extremes. He dispatched his oldest son to research clementine groves abroad. ‘Put my inheritance in clementines,’ Mr. Evans recalls his son, Barney, telling him over the phone.

Ready to bet big, Mr. Evans signed a deal with a nursery in 1996 to multiply clementine trees and sell them exclusively to him, locking in a head start over rivals. Still, Mr. Evans was worried about a certain set of neighbors — the Resnicks, who ran one of the country’s largest fruit and nut operations.

The Resnicks made a fortune marketing coins and collectibles before turning California pomegranate groves into the Pom Wonderful juice brand.

‘I thought, ‘If Stew [Resnick] hears I’m growing clementines, he’s going to compete. He’s a big-money guy who can overdo everything,” says Mr. Evans, who already jointly owned with the Resnicks a corrugated-box plant for packing fruit. In 1997, Mr. Evans approached the Resnicks about cooperating. The Resnicks’ Paramount Citrus and Mr. Evans’ Sun Pacific agreed to grow and commercialize equal quantities of the fruit under one brand. A smaller grower, Fowler Packing Co., joined them later.

The Cuties moniker was born at a meeting in the Resnick business offices. At the meeting, Mrs. Resnick picked up a clementine, studied it and deemed it ‘so cute,’ according to two people who were present. The name ‘Cuties’ was trademarked in 2001.

Paramount Citrus and Sun Pacific jointly own the trademark, a shared arrangement that is ‘extremely unusual,’ according to R. Polk Wagner, a professor of trademark law at the University of Pennsylvania.

The agreement stipulated the Resnicks would develop advertising and marketing. Mr. Evans’ team would pack, sell and distribute to retailers. Mr. Evans says he spent $65 million to build a state-of-the art facility to sort, clean and pack most of the group’s fruit.

…Mr. Evans argues against the Resnicks’ marketing strategy. It drove up advertising expenses to 26 cents per box of Cuties in the latest season, up from 8 cents a few years ago, he says.

In response, Mr. Evans in February hired a high-powered consulting firm to help evaluate the group’s advertising costs. The consultants concluded that the group was actually losing money on the campaign. Mr. Evans says that a complaint to Paramount that the ad budget was ‘excessive’ fell on deaf ears. The dispute is now in private arbitration. Mr. Evans declined to disclose how much compensation he is seeking. A Roll Global official declined to comment.

Adding to the tension is an idea Mr. Evans hatched after a freeze forced some of the fruit to mature smaller. Mr. Evans devised ‘Baby Cuties,’ as a trademark with a logo that mimics the original Cuties (a smiling tangerine with an open zipper on the peel) wearing a bonnet and with a pacifier in its mouth. Selling the fruit exclusively at Wal-Mart Stores, the group made an ‘extra $2 or $3 million,’ Mr. Evans says, a better profit than turning them into juice. The Resnicks didn’t approve of the Baby Cuties, according to Mr. Evans and other citrus growers, out of concern it would undercut the main brand.

The article contains both more discussion of the dispute and tries to place the product in a long line of American innovation in search of convenience. It ends with Berne Evans III imagining the discovery of a seedless cherry.

The clementine is an amazing story. The Pundit’s family was the first U.S. receiver of Maroc brand clementines, sharing boats that came into New Bedford, Massachusetts, and mostly went to Fisher up in Canada. There is not the slightest doubt that the easy-peeling, seedless nature of the fruit has led to a boom in consumption. Although the market seems to be moving from 5 lb. crates to 3 lb. bags, the bulk sale method has awakened the industry to new possibilities.

Most of The Wall Street Journal story, though, revolved around confidential contractual terms and so its implication for the broader industry was unclear. Then, come mid-September, Sun Pacific sent out a note to its customers:

September 10, 2012

To our valued customers,

The Arbitration Award in the Sun Pack /Paramount arbitration was issued by the Arbitration Panel late last Friday afternoon, September 7, 2012. The Arbitration Panel ruled in favor of Sun Pacific on the crucial issue of who has the exclusive right to sell Cuties, and the Panel ruled in Sun Pacific’s favor on most of the other issues. The Panel ordered that “Paramount shall forthwith cease all sales-related activities,” with respect to Cuties, Clementine’s and Murcotts.’

You are a valued customer. We are pleased to be able to continue to supply your needs for Cuties.

To avoid any confusion in the market place, please contact us if you are approached about the sales of Cuties by a Paramount and/or a Roll representative or marketer.

Again, thank you for your continued support of Sun Pacific.


Sun Pacific Companies
Berne Evans

Inadvertently, this whole contretemps may lead to a reexamination of the way branding works in the produce industry.

In the short term, it is quite possible that Berne Evans’ position is correct —that the advertising expenditure being made was not producing an immediate positive return. Of course, the Resnecks have a long-term brand-building perspective and the ultimate effect of their expenditures on marketing might well be positive.

Sunkist hasn’t done any major consumer advertising in memory, yet it is still a powerful brand. Why? In the 1920s, when the great mass media was magazines, Sunkist was a big advertisers in the Ladies Home Journal and similar magazines. It is because of those expenditures in the 1920s that, today, there is a market for Sunkist soda, vitamins, etc.

We doubt very much that any “high powered consulting firm” would be able to convincingly prove that a brand-building campaign would or would not result in such powerful long term opportunities.

Though the Resnicks may well have been correct about the efficacy of brand-building expenditure, the irony is that this dispute may wind up showing that in produce, the brand itself can’t hold the value that it can elsewhere.

Normally, we would say that the brand, say Oreo cookies, is more valuable than the factories that produce the cookies or the trucks that bring it to market. We say that because it is the brand that has a call on shelf space in every supermarket in America and many abroad. If you own the brand, you thus own the business and you build or buy new factories and trucks. The factories and trucks would mostly sit idle without the brand.

In this case, although we don’t know the details, if Sun Pacific is the only company that can sell Cuties, but Paramount still can control who markets its production, the value of the brand will be attenuated.

Even if consumers and retailers alike would prefer to buy Cuties, there is simply no way that Sun Pacific would have enough product to meet demand. It also would take too long to plant new trees, and there probably isn’t enough available land to increase production on the scale that is needed.

So having the brand — but not having enough fruit — means that the value of the brand is going to be limited.

Of course, if the bad blood isn’t too much, having invested so much in building the Cuties brand, one logical course would be for the Resnicks to buy 100% ownership and perhaps the Cuties acreage they don’t own to back it up. Or they could buy all of Sun Pacific.

If that is not possible, the Resnicks have a Plan B. Since they have built the POM Wonderful brand from scratch, they have an interest in building the WONDERFUL Trademark as well, and they have trademarked, you guessed it, WONDERFUL CLEMENTINES.

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