Nantucket Nectars Co-Founder Predicts 'Significant' Growth
in Multi-Serve. More Ties to Ocean Spray?

Nantucket Nectars (NN) co-founder Tom First envisions growth potential in future consumption channels/packages; sees NN as "major player" in "multi-serve" packages. Also hints NN in future enters some form of distribution arrangement with Ocean Spray. NN recently names CFO Mark Hellendrung president. Co-founders First and Tom Scott will spend more time on strategy and development, says First. Company. Founded in 1989; sold majority stake in late 1997 to Ocean Spray which now owns about 80% (BD 12/12/97). NN's 1999 volume 11.2 mil eight-ounce cases, up +23%. Revenues $70+ mil. Distribution is via multiple small distributors plus several major bottlers including Polar in Massachusetts, Southeast-Atlantic in Florida and Honickman in mid-Atlantic. Brooklyn-based Big Geyser handles NYC. Production by Ocean Spray, Honickman, Southeast-Atlantic and Beverage Express in Colorado. Ocean Spray. Now uses Pepsi system for single-serve distribution. Arrangement set to terminate at end 2000; Pepsi plans new "Dole" juice drink line.

View. Polar CEO Ralph Crowley re NN: "Their marketing is first class." Adds brands attracts "tremendous consumer loyalty and interest." Notes in Polar's territory "which is a mature market, the growth is more than +30%."

Interview. BD talks to First. Relationship with Ocean Spray? "Because of Ocean Spray's (single-serve tie-in) with Pepsi, we've had no common distribution. And, since we’re not a multi-serve chain (store) product, there is no overlap there. So, there is no (common) distribution, but that could change. We do some customer service, accounting and legal with them. We’ve done a lot of new product (development) together. We’re producing in some of their plants. The production aspect has been the biggest overlap."

How NN distributed? "It’s made up of a patchwork quilt of distributors across the country (including) major independent bottlers, beer distributors, new age distributors, snack distributors, milk distributors, produce distributors ... Usually we go into a market and find the best possible (distributor) we can. Sometimes we face the problem that (a distributor) just doesn’t want another product, so we have to build with a small guy for as long they can handle the product."

Sources of 1999 volume growth? "About 90% came from core markets and existing products. ... Most of the growth came from the mid-Atlantic, New York, Boston and the Midwest and Chicago ... The branding, marketing and advertising (that we've done) for a couple of years is finally kicking in ... We like to take our good strong markets and get them real strong before we invest a ton of money in new markets." Top NN flavors? "Traditionally, some of our best-selling flavors have been our tropical cocktails. Orange-mango and kiwi-berry have always sold extremely well. Recently, our lemonades and iced teas have started to explode." NN outside US? "In the Caribbean, Canada and England. There is a little bit shipped over to the Far East (and) some that drifts into the rest of Europe."

NN's target consumer? "We say 18-to-34 year olds. It’s probably a little bit skewed toward men. But it's changing. We definitely target that demographic, but we’ve noticed as we hit that demographic, it broadens out quickly and we get people older and even younger drinking it. But that is the core we focus on."

Future trends? "Non-carbs are going to continue to grow. (At many) chains and chain C-stores and a lot of independent stores, most buyers will tell you they are under-spaced in chilled areas for these types of products ... It's not a mistake for (them) to expand their cold space, because there are a lot more products that should be on the shelf and the ones that are doing well should have more space ... You’re going to see that continue to expand. Grocery stores are going to become a bigger percentage of non-carb (sales) in the future." Growth in take-home/future consumption? "I see significant growth for us in that area. The health perception and reality of these products with a lot of people (presents) a big opportunity. Companies that are presently selling in certain parts of the supermarket are going to be selling in other parts of the supermarkets."

Functional beverages? "There is a significant future for functional beverages. I think (trend) is actually a recreation of things from the past. I look at coffee as an example of the power of functional beverages. There are probably some people who drink coffee for the taste of it, but there’s a huge percent who drink it for the effect. I think SoBe has done a good job at (understanding) how that works. There are a bunch of different ways to do that, and they’ve done a decent job. There’s going to be a clearing out ... Quality always wins in the end. I don’t think flash and pizzazz win."

Distinguish NN from Snapple? "Our tag line says, 'We’re Juice Guys.' We've really focused on juice. Juice brings to it a different demographic, a different consumer. Sometimes it drives us crazy when we go into a C-store (and) see a guy who buys three bottles of Snapple iced tea and chugs them. But he'll buy just one (NN) orange-mango, because (someone is) not going to chug three bottles of that. We've taken a slow and steady build-the-juice-category (approach). Down the road, we hope we're more diverse in terms of serving (sizes) and flavors and offerings, so that we can (present) a significant multi-serve opportunity. That’s our largest future (opportunity), that we will be a major player in multi-serve juices ... We've been making chilled, freshly blended juice (in 16-oz plastic) mostly for the Boston market in the last year. That's a big opportunity for us in the future for multi-serve."