Ocean Spray's Ingredient Technology Group is to hold online auctions for its cranberry concentrate, which it claims will help customers ensure supply and protect against commodity fluctuations.
The cranberry company said that the web-based process enables concentrate buyers to easily track and observe its concentrate pricing and availability.
The auction itself is described as quick and low-cost, avoiding the need for lengthy price negotiations.
It is said to offer a transparent way of establishing the clearing price and making the concentrate available worldwide on a consistent basis.
Customers can also “control their own exposure to commodity price risk” by securing supplies for a full year or on a short-term, spot basis.
Michael Stamatakos, Ocean Spray's vice president, agricultural supply and development said: “By securing a specified volume of concentrate at an agreed price, our customers can be assured that market fluctuations will not affect them for a set period in these turbulent times.”
Currently Ocean Spray sells its concentrates through spot sales and longer-term contracts have been negotiated and awarded on a customer-by-customer basis.
It said that it introduced the auction scheme because customers wanted improved efficiency in concentrate sales with better information on concentrate pricing and availability.
The company expects the process to boost demand for cranberry concentrate among existing and prospective customers claiming that it offers them a “level playing field”.
At least two sales will take place annually and during the first year, Ocean Spray expects to sell about 600,000 gallons (US) of 50-brix cranberry juice concentrate via its website, cranberryauction.info.
Qualified buyers worldwide can register online and the first auction is scheduled for July.
The trading session is said to take about two hours and there is a reserve price.
How it works
The auction process was developed with the Boston-based, independent auction manager CRA International.
To qualify as a bidder, customers must register as a user and provide relevant customer data. All bidders need to have credit pre-approval 30 days prior to each auction
The CRA independent trading manager confirms the starting price five calendar days bfore bidding begins.
At the start of bidding, each bidder enters the volumes desired at the starting prices. The minimum volume is 1,900 US gallons.
The trading manager closes the first bidding round after a pre-specified period of time.
For each successive bidding round, the manager raises the prices in response to excess demand (if any) and bidders re-submit volumes at the new prices.
This continues for successive rounds until the total bid volume falls to the level of volume available for purchase.
Shortly after the close of the auction, the trading manager confirms the volumes the bidders have won and the corresponding price.
All winning bidders pay the same base price for the same contract period.
There are two types of contract, each for six months. Successful bidders can take delivery of their product at any times during the six month contract, beginning the month after the auction.
The auction starting price range will be announced late June on the cranberryauction.info website. Interested buyers can register at this website now.