Not Worried, Being Happy: Happy Planet Foods Makes a Splash in the Beverage Business

hp6Blitz Magazine, November 2000

“Wouldn’t it be nice if we could produce and sell the world’s best juice while promoting sustainable farming and environmental responsibility?”

“Actually, we can.”

This, one imagines, is the conversation that took place in 1994, between Randal Ius and Gregor Robertson. The two shared a deep concern for the environment, a passion for food and a knack for sales. And Robertson owned an organic farm. Happy Planet Foods was born; Ius and Robertson started selling carrot juice.

‘Sounds a little out there, but first-year sales hit $400,000. Today, Happy Planet is the fastest-growing company in BC, with 50% annual growth and 1999 sales of $3.5 million. It produces 18 beverages, introduces new flavours each year and is known as the innovator in the super-premium juice and smoothie category. Its products are sold at 550 locations, including Starbucks, Safeway and Save-On Foods, plus just about any store serving the ‘alternative’ market in Vancouver, Victoria, Whistler, Calgary, Edmonton, Toronto, Seattle and San Francisco.

The organic food movement has grown steadily since the ‘60s, fueled by an ever-increasing horror of chemicals and a more health-conscious society. It used to be, though, that organic foods weren’t very appealing. And they commanded no respect. Happy Planet (HP) has changed that, at least in the beverage category.

Most of HP’s products fall under the category of New Age beverages knows as ‘functionals’ or ‘nutraceuticals’, a segment which is growing faster than any food category in North America, and which accounted for $350 million in sales in the US last year.

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Functionals have something useful and/or beneficial added to them—minerals, vitamins, herbs etc. Happy Planet has five such beverages: Extreme Green (passion fruit, green micro-nutrients), Abundant C (strawberry, guava, Vitamin C), Spirulina Soul Food (pineapple, coconut, spirulina), Thinkgo (raspberry, mango, ginkgo biloba) and Dot.calm (papaya, pear, St. John’s Wort).

It then has ‘Organics’, which are beverages certified to contain at least 95% organic ingredients, and which may or may not be functionals. In Happy Planet’s case, they are. There is Green One (mango, plum, green micro-nutrients), Essential Echinacea (guava, strawberry, Echinacea), Power Plant (banana, strawberry, soy protein). These are just general descriptions—if you look at the full ingredient list of Radical Response, it says Apple, Plum, Apricot, Guava, Banana, Grape Seed, BetaCarotine, Citrus Bioflavinoids, Milk Thistle, Chlorophyll, Zinc, Manganese and Selenium.

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Then there are the ‘Naturals’, which are strictly thirst-quenchers and include Lost Lagoon Mango, Sunset Beach Strawberry, Righteous Raspberry, Lemon Made and O Cranada. These are the lowest-priced Happy Planet products; organics are the highest-priced.

“Naturals are the entry-level products,” explains George Noroian, HP’s President & CEO. “But people want organic and they’re prepared to pay for it. And there has been an explosion of interest in functional beverages, so our more expensive products are our biggest sellers. People don’t mind paying more if they’re getting more. Not only do we have functional ingredients but, unlike SoBe or V-8, which have 10% juice and 90% water, we offer the actual fruit—we don’t add any water. Each 16 oz. bottle contains five whole fruits, so one bottle meets Health Canada’s recommended daily intake of fruit and vegetables. Our beverages are heartier and healthier than anything else available.”

What Happy Planet adds to its juice is closely regulated by the Canadian Food Inspection Agency and Health Canada, which set guidelines for what additives are allowable, and at what levels. (Americans are more lax—Odwalla adds far more vitamin C to its products than Health Canada would allow.) As we now know, too much of a good thing can be dangerous, so Happy Planet has to constantly consult with Health Canada, as well as herbalists and naturopaths, and it has a microbiologist on staff. For in-depth information, consumers can find product literature wherever HP juices are sold, and 10,000 people consult HP’s cheerfully uncomplicated web site (www.happyplanet.com) each month.

Happy Planet uses no concentrates, preservatives, additives or genetically-modified organisms. Two-thirds of ingredients come from Canadian farms and all ingredients come from sources known to use fair trade practices. The company claims to not use any paper from old-growth forests and says it gives 10% of its net profits to environmental and humanitarian causes.

But staying with the organic thing proved to be harder than at first thought. “All-organic is not possible due to availability and price,” says  Noroian. “Organic farming is much more expensive. Pesticides cost far less than natural controls and, where in conventional farming you pick a field twice, in organic you have to pick it four or five times. That means more labour and a substantial price differential—organic bananas cost twice as much as conventionally-grown bananas. If all of our products were 100% organic, they’d be out of the acceptable price range.

“So we take a pragmatic approach. As much as possible, we deal directly with farmers to guarantee quality at the most reasonable price. And as our purchasing power and the demand for organic ingredients increases, we transition ingredients to organic—now, all of our plums and mangoes are organic, as are most of our oranges. Between 40% and 60% of our ingredients are organically grown and as the economics work more in our favour, we’re able to make an even better product at an acceptable price.”

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Happy Planet’s production takes place in 13,000 square feet of space on Vancouver’s east side. Bottles are of high-density polyethylene (which is more environmentally-responsible than glass). All apples are BC-grown and processed in Vancouver; other fruits arrive in the form of purees from trusted sources in places like Fiji, Ecuador and Hawaii. As Noroian explains, the logistics can be nightmarish.

“When you’re dealing with organic fruit, the quality changes from year to year. So there’s a much bigger effort involved in sourcing ingredients, and we have to do a lot of taste-testing and keep buffer stocks on hand. We try to maintain consistency, but sometimes we have to change recipes to accommodate changes in ingredients. Consumers notice if there’s a change in quality. They want their juice a certain way and demand consistency. Our on-going challenge is to keep our ingredients within an acceptable specification, to minimize variation in the final product, and to reflect the reality of variability of organic ingredients.”

Distribution is also a challenge. Because these juices have to be kept cold.

“Our products are fast-pasteurized. The process kills the worst bacteria but it doesn’t totally degrade the enzymes and the goodness in the fruit,” says Noroian. “So the juice is still a live product. If it’s allowed to warm up it will begin to ferment after one day.”

The HP juice has a shelf life of 21 days, and much effort goes into making sure it’s kept cold. There are refrigerated Happy Trucks and, if need be, HP will provide retailers with refrigerators. Noroian says it’s worth the cost. “We sell a unique product and no one benefits if it’s not kept cold. Besides, the fridges, because of their size, get prominent store placement. They’re great billboards.”

The Starbucks approach to selling Happy Planet is even better—Starbucks keeps the bottles in ice-filled baskets beside the cash register. On the other hand, the freshness aspect has backfired. Some grocery stores stock it, not with beverages—where people looking for something to drink will gobut in the produce department, alongside the bags of salad.

Noroian notes that the freshness aspect has also retarded expansion somewhat.

“Our current focus is to expand our geographic reach, to where we’re well-established in the 15 main Canadian markets, and more established in California. But because our products have to be kept at a certain temperature and have to be rotated, we have to take a more hands-on approach to distribution. We have people in New York who want to carry our juice, but we aren’t there yet.

“Our growth it also closely tied to demographics. These juices are expensive to make, expensive to buy and are not considered staples. They appeal to a specific type of consumer. So we look carefully at the demographic and psychographic profiles of every location we’re in. It would be problematic to engage a chain like 7-11 when our product is only suitable for certain of its locations. Our experience with Safeway has been very positive because Safeway knows its customers, understands our product and knows where it will and will not sell.”

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Noroian says that HP’s placement in Starbucks two years ago was an important turning point.

“Starbucks is a credible company and its seal of approval gave us credibility. It was excellent from the marketing perspective as well—people saw us in Safeway, then in Starbucks. We already had the neo-hippy, alternative affiliation; Starbucks gave us the mainstream cross-over. Now, our customer base is broader—it’s people with more disposable income, people who are physically-active and health-conscious, families, and everyone who insists on exceptional quality.”

Unfortunately, squeezing out a marketing budget has always been a problem for Happy Planet. “Our products are expensive to make and deliver,” explains Noroian. “There’s not a lot of money left for traditional marketing. So there’s always been an emphasis on the guerrilla element, just to get the juice in people’s faces. We build awareness and maintain our retailer relationships by doing a lot of store sampling, couponing and specials. We run print ads in holistic lifestyle magazines like Shared Vision and trade magazines such as Grocer Today. Will we ever buy billboards? That would be a stretch. For us, the most potent way to market is to spread the word and get other people to spread the word.”

Happy Planet spends about $40,000 a year on advertising. But, believe it or not, the company has eliminated its marketing director position. Instead, it has taken the PR route.

“Our PR firm helps with strategizing and program implementation, developing stories about the company when we do product launches and reaching people who may want to do articles on the juice or health food industry,” explains Noroian. “PR is a relatively inexpensive way of getting exposure. There’s no guarantee that you’re going to get ink, and you have no control over it, but we think you still get more bang for your buck.”

When he joined the company two years ago, HP’s former marketing director, Steve Everitt, found that his first order of business was to revamp the company’s visuals. 

“We had our juices sitting at the Starbucks tills,” he recalls. “If you asked 100 people if they’d seen the juice, they’d say yes. If you asked them what the name of the juice was, few would be able to tell you. The globe logo wasn’t working. So we brought the name off the logo and created a new wordmark. And we simplified the image by choosing popular colour schemes and a clean font as our headline. Also, previously, the materials carried images of all kinds of fruit, and leaves. We changed that to feature individual pieces of fruit. And we saw a great increase in name recognition. The wordmark is much more powerful because of its simplicity, cleanliness and legibility.”

Everitt joined Happy Planet just as Starbucks started carrying the HP line. This began a year of significant growth, when HP juices increasingly turned up in locations more concerned with branding and style. There was no direct competition; sales were increasing weekly. Then, in 1999, SoBe and Snapple’s ‘natural’ brand extensions appeared.

“All of a sudden, we had direct competitors,” says Everitt. “None of them were 100% juice with herbal ingredients—they were vaguely similar, but thinner and cheaper. SoBe, for example, has herbal ingredients but only 10% pure juice. It won on price—it was SoBe’s 20 oz bottle for $2.19 vs. our 12-oz bottle at $2.99. Our sales went up, our retailer numbers rose, but our growth leveled out. Without lots of cash, it’s hard to combat that competition. We had to just stay the course.”

Where Odwalla would spend between 4%-7% on marketing, Happy Planet allocates 1.8%-2.2% of gross revenue. Everitt stretched this budget by gang-printing vast quantities of p.o.p. materials (posters, brochures, shelf talkers, stickers). Product launches were creative and inexpensive—when O Cranada was launched, 150 media members received buckets filled with ice, cranberries, juice and the relevant literature. Dot.calm was launched with images on CD-Rom, literature printed to fit the CD case and juice packed in ice-filled Tupperware containers. The kits looked expensive, but cost only $5 each.

Everitt also maximized exposure by managing an exhaustive contra program. “You always have to make more juice than you could sell; every week, I would end up with anywhere from 500 to 2,000 bottles of juice to work with. So I would give juice to Greenpeace, the David Suzuki Foundation, the Evergreen Foundation. They’d serve the juice at their events and meetings; we’d get space in their publications. In two years, I negotiated 400 contra arrangements with 200,000 bottles of juice given out in exchange for ad and advertorial space. Vancouver’s a prime market for this type of approach. And when you don’t have lots of cash, it’s a great way to get the product into people’s hands.”

While Happy Planet gives generously to food banks, Everitt also worked, or was involved in, 75 events a year—the Children’s Festival, the Folk Festival, the Carnival of Souls etc. “We used any relevant occasion to reach consumers. We’d see a slight increase in sales following these events but the impact of events is hard to measure. People would see us everywhere but whether or not that translated into increased sales is unknown.”

Everitt was able to conduct some focus groups. “The focus groups were very useful—and produced surprising results. It reinforced what we knew; that our primary market was the health-conscious female age 25-39. What was surprising was that we thought our secondary audience was the age group of 40-55. In fact, our second strongest following is males 17-25.”

That became particularly apparent when Happy Planet was confronted by a large adversary in the form of Coca Cola. For obvious reasons, Whistler is one of HP’s biggest markets. Every store carries it and HP sponsors many sporting events there. But last winter, Coca Cola had Happy Planet bounced off the mountain.

“Coca Cola takes a very wide view when considering its competition,” says Everitt. “Some of its executives were up from Atlanta during the snowboard championships, they’d put a lot of money into Intrawest, they saw our fridges on the hill—next day, we were gone. Then they tried to have us removed from the University of British Columbia campus. The students found out, put pressure on the administration and we prevailed.

“That’s one occasion where the philosophy of the company came into play. For the most part, people don’t care about a company. They care about the product. The only time the philosophy comes into play is when consumers are faced with competing products. If the taste and price are equal, they’ll look down the line for reasons to choose and they’ll choose the company that’s committed to positive things. Happy Planet has that in spades. It will hopefully be a long time before the corporate philosophy has to win out again. In the meantime, Happy Planet has to focus on the fact that it’s not selling a company or an idea, it’s selling juice.

“We’d run into trouble trying to sell the fact that HP juice is the best in Canada and part of a healthy lifestyle—while also telling people about the company message of sustainability and commitment to the earth. That company message clouds the marketing message—the consumer wants to know that the product tastes good and is good and is worth the price. We had three or four totally unique types of users. Some were attracted by the health aspect, some by the organic aspect, some by the meal replacement aspect, some by the corporate ethic. It was always difficult to hammer home all the real benefits to everyone.

“I felt that we had the largest growth potential in the mainstream grocery business, considering that the natural food business is 10% of the market in Canada. And if you want to go mainstream, you have to do consumer advertising. And Happy Planet is still a small company with a small marketing budget and distribution covering a large geographic area.”

For his part, Noroian is undaunted. “So far, we’ve been experimenting and developing the brand. Now we’ll focus on more robust growth, availability and new markets. In the more distant future, we’ll expand into products like baby food, nutritional bars, soup. For now, we’re committed to being the best at what we’re doing.”

 

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