For the Love of Lager: Loyalty to an Old Law & Savvy Marketing Make Okanagan Spring Brewery #1

 ok2

For natives of Germany, a country where open land and big sky are at a premium, western Canada is the Land of Opportunity. In the early ‘80s, pub owner Jakob Tobler, and real estate developer Buko von Krosigk immigrated to Canada and settled in BC’s Okanagan Valley, specifically Vernon.

Their goal was to address one glaring problem with their new home: the beer was no good. The offerings of Canada’s major breweries fell short of the quality to which they were accustomed. Meanwhile, Jakob’s son Stefan had earned a degree in beer-making at a German university, and that made him one of only two certified brew-masters in western Canada. It was logical to establish a brewery and sell true German beer—but just within the valley, they thought. The partners bought a 10,000 square-foot fruit-packing house, invested in the finest equipment available, put the neighbourhood name together with that of a brewery that had operated in Vernon in the 1800s (the Vernon Spring Brewery), and Okanagan Spring Brewery was born.

There are three types of breweries. A ‘microbrewery’ produces less than 15,000 hectolitres per year (a hectolitre is 1000 litres). Okanagan Spring Brewery (OSB) is an example of a ‘regional brewery’. Then there are the mainstream, or commercial, breweries such as Labatt and Molson.

Almost all microbreweries and regional breweries are ‘craft’ breweries. Craft-brewed beer is made in accordance with the Bavarian Purity Law of 1516. This law, which is still followed by all German breweries and is the core of OSB’s operations, states that there can only be four natural ingredients in beer: hops, malted barley, yeast and purified water. (A non-craft brewery may add adjuncts or preservatives; things like rice, cornmeal, corn syrup and chemicals.)

OSB brings barley from the Canadian prairies and has it malted in the Okanagan. Hops are imported from Germany (the hop is a plant and there are two types: aromatic and bitter). The X Factor is the yeast, which is prepared to OSB’s secret recipe by an outside supplier. The already high-quality Okanagan water is purified, and that’s it.

ok7

There are two processes which craft breweries do not use. In ‘high-gravity brewing’, water is added back to a sort of beer concentrate. It’s more efficient, and more profitable, but it makes beer taste diluted (as in American beer). The other process is pasteurization, which is when beer is heated or boiled to kill germs. Pasteurization extends shelf life, but it makes for common ‘Wonder Bread’ beer. In craft brewing, everything is ‘sterile-brewed’, so pasteurization isn’t necessary, although the shelf life of craft beer is reduced to about three months. After that, the beer is still drinkable, but may have the ‘skunky’ smell that German imports often acquire by the time they reach us.

It should be noted, however, that it is a misconception that a small brewery produces a higher-quality product. The opposite is true. A regional or mainstream brewery has employees devoted to quality control. And if a batch falls short of its standards, it’s thrown out. A microbrewery can’t afford to toss imperfect inventory.

While there are many beer brands, beer (‘baere’ is German for ‘barley’) is broken down into two categories: lager and ale. The beer-drinking population is split in half—half prefers lager, half ale. The English are the ale masters; Germans are best known for lager. So Buko and Jakob started with lager. On December 31, 1985, the first pint of Okanagan Spring Premium Lager was poured.

While Jakob and Stefan managed operations, Buko started traveling through the Okanagan Valley, selling draft beer to pubs and restaurants. Sales took off and, after a little lobbying, he was able to get the lager onto liquor store shelves. Then Expo ’86 came up and the BC government extended sales licenses to smaller provincial beverage manufacturers. Demand surged. Buko moved to Vancouver and started selling on the Lower Mainland and Vancouver Island. Today, Okanagan Spring Brewery is BC’s #1 craft brewery.

 ok5 ok4

“There are a couple of reasons why Buko did so well,” says Steve Pelkey, OSB’s Director of Marketing. “He promised, and delivered, consistently fantastic products, and he service customers better than the major breweries did. The key to this was having his own distribution network. The beer has always been brewed in the Okanagan, shipped to Vancouver and delivered to customers—all by OSB employees. That allows them to provide great service, including next-day delivery, rush delivery, Saturday delivery—OSB drivers even rotate kegs. Large breweries won’t do any of that.”

And how do you convince a publican to make room for your beer? “We sell premium beer,” continues Pelkey. “So licensees can charge more for it. Also, you say to the owner ‘You have all the mainstream brands. Why not give your patrons a chance to try something different?’”

Pelkey notes that, by the time Buko started selling his lager, astute pub owners already were already seeing the need for an alternative. “In the last 15 years, there has been a dramatic shift in consumer buying behaviour. As people get older, they drink less, but they drink better. Then there’s the fact that British Columbians—Vancouverites in particular, are the most knowledgeable, educated and discerning alcohol consumers in North America. The market was there. Look at Victoria—30% of beer sold there is craft beer.”

Once customers had tried OSB lager, they asked for porter. Stefan responded by creating Okanagan Spring Old English Porter, which quickly earned a loyal following. Also in response to demand, in 1988, Stefan created Extra Special Pale Ale. Now it’s winning gold medals at international beer competitions and is the most successful craft-brewed brand in BC.

Breweries are secretive—they don’t discuss sales or profits. We know that British Columbians buy 25 million cases of beer annually, and that that translates to $425 million. The government takes 60% of that in taxes. A 12-pack of an OSB product is $17.45. Pelkey estimates that the industry average profit on a 12-pack is $1.70. He will also say that, in 1986, OSB sold 3,700 hectolitres, or 20,000 cases. In 1990, it was 25,000 hectolitres and, in 1995, 75,000.

In its first years, Jakob and Buko put all OSB profits back into the company. In 1988, the brewery was revamped to increase production. A few sales people were hired. The brewery was expanded to 50,000 square feet. The focus remained on the three brands, while production increased and the company grew (it now has 150 employees, including a sales force of five retail reps and 11 licensee reps).

ok8

The trade continued to ask for products. In 1995, to meet demand for an easy-to-drink dark ale, OSB released Cottage Nut Brown Ale. In 1997, in response to the success of the ‘honey’ category, which is lighter and more thirst-quenching, Honey Blonde Ale was launched. (There’s a direct correlation between colour, bitterness, weight and low sales, with lighter beers garnering higher sales.) In 1999, after market research showed that there was room for a different style of lager, there came Traditional Pilsner, modeled after the classic Czech Pilsen recipe. There has been just one failure—Autumn Red Ale.

Not surprisingly, after years of increased success, a suitor came calling in the form of Ontario’s Sleeman Brewing & Malting Company. Although you’ll find no mention of it on either company’s website, Sleeman now owns OSB. Buko has retired; Jakob’s two sons still work at the brewery. With that change came a marketing person—Pelkey was hired in 1997. The first thing he did was conduct an agency review and appoint Grey Advertising (Vancouver) as OSB’s Agency of Record. Ipsos-Reid handles market research; point-of-sale and packaging is managed by dossiercreative.

Last year, OSB’s packaging was up-graded, to the tune of $1.5 million, but it’s still notable for its conservative look. Just as the product names are plain and direct, there is a distinctly elegant tone to the packaging. You won’t find any zany graphics or wild colours—its labels are metallic, but that’s it for flash.

(OSB was, however, the first beverage company to use the stamped MettleTab. Now, when anyone opens an OSB can, they are reminded of the Bavarian Purity Law of 1516, and the purity of OSB beers.)

“Our customers are age 25-44,” explains Pelkey. “We’re not going after the teen crowd. So our branding is more refined and traditional.”

The same is true for all OSB point-of-sale materials, which is just as well, given Liquor Control Board restrictions. There are three sales channels for a BC brewery: trade (pubs, bars, restaurants), consumer-direct through LRS (Liquor Retailer Sales; the pub-attached cold beer and wine stores), and the LDB (the government’s Liquor Distribution Branch). A brewery cannot conduct any marketing programs in the LRS trade channel unless the programs have been approved in the LDB channel. At the moment, in-store draws, contests or promotions are verboten. Danglers and shelf-talkers have to fit within strict size restrictions, and the largest allowed size was just reduced to 18” x 24”. OSB reps conduct hundreds of trade promotions every year—mostly instant gratification things like getting to keep your mug. All other promotions have to be in-case.

With in-case promotions, you open your case of beer and find a card offering a chance to win ski passes, a fishing trip, golfing trip etc. OSB consumers are off-the-couch types, so promotions are related to outdoor activities. OSB works with Golf BC and its courses, with the Oak Bay Marine Group and its fishing resorts, and with ski resorts and tour groups. But LDB regulations make for amusing situations. A brewery isn’t allowed to connect any physical activity with beer consumption. So in a recent white-water rafting promotion, the brewery was allowed to show the river, but not a raft, or anyone in a raft.

There’s another wrinkle with the LDB that may surprise some. Since all LDB stores are government stores, you would think that, once an alcohol producer has a license to sell its products in BC, its products would automatically go onto liquor store shelves. ‘Not so. When a new product is launched, it has to be approved by the LDB’s Listing Policy Committee. After that, there’s still no guaranteed distribution. Every liquor store in the province has to be sold individually. OSB’s reps have to sell and service each government liquor store manager, just as if he were a hotelier or restaurateur. And there’s hot competition for that shelf and floor space.

Fortunately, there is ‘beer category management’, which is the same sort of process used by grocery retailers. Liquor stores put premium products in the best locations, mainstream products in the intermediate locations, value products at the back.

“It’s trading people up, which is a good thing for retailers,” says Pelkey. “Putting premium products at the front lets them make more money. Our products sell very well. You multiply the margin by the volume and you get a good profit. That’s what it’s all about, particularly for the cold beer and wine stores, which don’t have to stay with the stated price—they can charge whatever they want, as can the trade establishments.”

And what accounts for high-volume sales? A combination of reputation and marketing.

“Our strategy is always to stay with the core attributes of the brand,” continues Pelkey. “The purity, the quality, the freshness, the BC-ness. The secret is to know your consumer. It sounds simple, but if you offer your consumer a great quality product, communicate the quality and don’t disappoint, that consumer will keep coming back.”

Compared to other craft breweries, OSB conducts a lot of focus-group research. There’s an annual tracking study to gauge what’s going on in the beer industry and new advertising is tested. Pelkey says there’s a lot of emphasis on brand perception.

 ok1 ok3

“The market’s always changing; consumers’ tastes and perceptions are always changing. We also need bench-marks to see how we’re doing over the long term. And research indicates how tastes will change in the future.”

In BC, 65% of liquor purchases are in the beer category. Beer, wine and spirits, however, do not compete. “We all have share of mouth,” continues Pelkey. “In the premium category, consumers leave the store with a bottle of wine and a case of our beer. At home, they’ll have spirits, wine and beer. The only real competition is with the spirit-based coolers. We haven’t addressed that, as a company or as an industry—we stay focused on communicating our attributes and keeping consumers happy.”

Grey Advertising doesn’t have a huge annual budget to work with—about $700,000. But it has used that money effectively. Most of OSB’s advertising spend is in radio, with print ads running in the summer months (there was some outdoor last year). Although some specific ads are produced for OSB’s two biggest brands—pale ale and lager, the budget doesn’t allow for each beer to be advertised separately, so the focus is always on the core brand attributes.

“We never walk away from the core values of the brand,” says Grey Creative Director Jeff Lewis. “We keep the message consistent. Okanagan Spring Beer is from the Okanagan—a region known for its purity. It’s all-natural, premium beer. More than anything else, when it comes to branding beer, consistency is key. Plus, what we say is true. And that’s one of the big reasons why OSB is so solid. When a consumer pops open a bottle, the quality is there. There’s a lot of crappy beer on the market, but consumers now know that. They’re no longer impressed by image.

“The beer business is a tough business. ‘Very competitive. And you see a lot of breweries whose advertising is extrinsic, rather than intrinsic. Mainstream breweries promote their image outside the bottle. There’s not a lot of talk about the actual liquid—because it’s not that special. Other craft breweries focus on a goofy name, or the brewery’s size. But people want to hear about the liquid—about what they’re drinking. They want to know that it’s a quality product. Okanagan Spring always talks about what’s in the bottle.”

Lewis notes that the OSB strategy has lately become a little more fun. One recent ad (which received angry calls from ex-Torontonians) was ‘Still Not Available in Toronto’, which pointed out that Toronto enjoys black flies and one tower, while BC has towering mountains and bald eagles. Another ad noted that OSB beer is what Okanagan wine-makers drink after work. Lewis used the term for the Bavarian Purity Law—Reinheitsgebot, as an attention-getter in print ads. In radio ads, it is admitted that OSB does, in fact, use a preservative—the cap.

ok6“It is not easy to advertise beer,” continues Lewis. “You have to do work that cuts through all the other beer ads. For a brand with a more conservative stance, the ads with attitude accomplished that.

“One challenge we did have was that, as OSB became increasingly successful, people started to think that it had sold out—that the beer had somehow changed. So the marketing has always made it clear that OSB is the same company it always was. For ’98 and ’99, we used people from the brewery—truck drivers, people who work on the line, Stefan. We need to show that, even though it sells a lot more beer than it used to, Okanagan Spring Brewery is still the same group of people who are passionate about making premium beer. The Still Not Available in Toronto campaign was an interesting way of saying “We Are Not A Mega-Brewery.’

“That part of the strategy remains, along with the core values. It’s pure premium beer from a natural setting. Everything emanates from that. And when people walk into a liquor stores or see the taps at a bar, they see the different brands but they know that every beer is made to the same high standard. Okanagan Spring Brewery has a solid foundation and a very good name. That’s a great thing to work with.”

Blitz Magazine, January 2002

Advertisements

Case Study: Subway Wraps Up Its Region

subway1

A lot of British Columbians think that Subway is a BC company. They see Subway outlets while vacationing in other countries and just assume that Subway is another BC firm that has done well.

But Subway is not a BC company. It was founded in Connecticut, in 1962. Today, there are 13,000 Subway restaurants in 68 countries—1,300 in Canada. It is the second-largest franchise in the world, next to McDonald’s, in front of 7-11 and Century 21; and it is the largest franchise in BC.

In 1987, Gerry Lev, then a Calgary franchise consultant, discovered the Subway concept at a trade show. There were 1,000 Subways worldwide, none in Western Canada. In 1988, Lev founded Subway Developments of BC, and the division celebrates its 10th anniversary with 218 stores. And, out of all Subway divisions, and in terms of sales, the BC division is at the top, leading by up to 25%. If that lead is narrowing, it’s because BC has become the model for divisions which are following its lead and catching up.

How can this be? There are only 3.9 million British Columbians. But they eat a lot of Subway sandwiches—400,000 a week, putting annual sales at $90 million.

The answer lies in a potent combination of organizational ease, corporate savvy and media communications, all boosted by the intrinsic qualities of the BC lifestyle.

In the first place, as Lev explains, Subway restaurants are easy to own. “When you buy a franchise, you buy an operating system which has been perfected over time. One of the hallmarks of our system, and our success, is KISS—Keep it Simple, Stupid. The recipes are simple, procedures and operations are simple. There’s no cooking involved, so we don’t need thousands of dollars worth of equipment. The cost to open a Subway franchise is $140,000—a McDonald’s franchise can run from $700,000 to $1 million.

Secondly, Subway has benefited from a lack of competition. “In 1988, there were no sandwich chains in BC,” continues Lev. “There were sandwich stores, in office buildings, closed in the evenings and on week-ends. There was no alternative to burgers, and Subway sandwiches quickly became the perfect alternative, but with the convenience and economy offered by fast food.”

 subway2

The price of a Subway sandwich begins at around a dollar and, although the corporation’s research shows that portability is not a major factor overall, it’s probably a bigger factor with BC consumers, who appreciate the fact that they can buy their lunch on their way to work or school, or stow one in a knapsack to eat at the beach or on the mountain.

 “Freshness is our biggest selling point, value is number two,” continues Lev. “But what brought Subway to the forefront is the fact that our sandwiches are not pre-made. People watch their meal being made—precisely to their instructions. The Subway bread is baked in front of customers, which is another selling point; and there’s our traditional ‘U-Gouge’, which is a way of cutting the bread so the contents of the sandwich won’t fall out.

“Variety is another selling point. We have something for everyone—meat, vegetarian, low-fat—and one of the best breakfast sandwiches in the industry. But, getting back to the KISS formula, we’re in the business of appealing to the masses. Some Subway stores offer soup and salads, and we have items like potato chips. But our business is selling sandwiches.”

The Subway benefits are not difficult to communicate to a receptive public—everybody loves a sandwich. The big challenge has always been budget. Subway collects advertising funds from franchisers, and that money is spent on ‘national’ (North American) advertising, care of Chicago agency Hal Riney & Partners. That agency works with a corporate board, and a franchise board, while keeping everyone moving in the same direction—no mean feat, considering the company’s growth: from 10 restaurants to 1,000 in the first 20 years, to 11,000 a decade later, to 13,000 six years after that.

In addition, each division has its own advertising agency. The marketing plan comes from head office in Connecticut, Riney develops is nationally, and the local agencies worth with their own franchisee boards to develop the plan locally. In BC, the agency that is i2i Advertising & Marketing, and its annual budget is $4.5 million. That’s not much for the ultra-aggressive fast food industry, but it’s way more than the franchise had in 1991, when i2i partners Stuart Ince and Cam Iverson began with Subway.

“Back then, Subway BC was 14 stores and the franchisees had just pooled enough money to hire professional help,” recalls Iverson. “That amount was below $100,000, so the account didn’t interest many agencies. But we knew the chain would take off here. It fit the west coast lifestyle, and it fit well in terms of competing against other fast food chains.”

The BC division took off in 1993, when the franchisees decided to go beyond the 2.5% of sales which they were contracted to put into advertising and begin an Additional Funds Program, becoming the first Subway division to do so.

The extra budget immediately shot up our presence—and sales,” says Iverson. “The sub sandwich is part of the eastern deli mentality. With the extra money, we were able to make the Subway sandwich a BC thing.”

Therein lies the key to Subway BC’s success. “We made ourselves a BC company, and part of the BC community,” Iverson continues. “This wasn’t strategy—our franchisees are BC people and they want to be part of their communities and do things they can be proud of. So, aside from spending advertising dollars wisely, we get involved in events and promotions at a very local level—and it’s that community involvement which explains why so many people think that Subway’s head office is here.”

 subway3 subway5

Subway BC is big on philanthropy. It raised $35,000 for Canuck Place (at the beginning, before the band-wagon effect kicked in). Ditto with AIDS Vancouver. Its Heroes for Hunger program gave a free sandwich to anyone who delivered a Food Bank donation. Every day, Subway feeds supporters of something: the Terry Fox Run, the Children’s Festival, the March of Dimes, Boy Scouts, the BC Boys Choir, Minor League hockey and Little League baseball. It supports scholarships, and it bought the ‘Shout No!” program, working with police and schools on child safety.

 subway6

These are, of course, promotions. But community involvement is Subway BC policy, and philanthropic promotions stretch advertising budgets. “We don’t do many things in a huge way, and we never pick causes for profile,” says Lev. “Most international companies don’t get involved with local figure skating clubs, and we don’t get the publicity that others get, but we reach thousands of people by doing a lot of little things.”

Subway has also been smart about advertising. This has not always been easy, considering the fact that half of its radio spots and all of its television ads are created in Chicago. It took a while for US creative teams to realize that Canadian and American sensibilities aren’t the same.

“It used to be a horrendous problem,” recalls Lev. “I spent a lot of time saying ‘No, not in Canada.’ I don’t have to do that anymore. Now, they know Canada well and we get Canadian versions of everything.”

Once i2i has the marketing plan, it can do what it likes—another success ingredient.

“The BC franchisees are left alone in terms of advertising and promotions,” says Iverson. “And they’ve been aggressive at putting together deals which build Subway’s presence far beyond the dollars they have to spend. We have to work harder to push media dollars into creating image, so we’ve become involved in loads of cross-promotions and have forged strong relationships with media partners. Those promotions have been a large factor in putting us ahead of other Subway divisions.”

Subway runs ten major promotions a year. Its biggest is the annual ‘Survive in Style Sweepstakes’. The concept was a small part of the national marketing plan, but i2i worked with Global Television to make it fit the BC culture, and it took off.

“The national promotion was about fast food survival tips,” says Iverson. “We made it about what you need to survive in BC. We have a true partnership with Global in that we plan it together and tie it in with Global’s Sports Page. Then we give away vehicles, scooters, mountain bikes, cellular phones, vacations–$100,000 worth of prizes. It’s now bigger than most of Subway’s national promotions.”

Another major promotion is the chance to win a trip to the Stanley Cup Finals—essential, of course, for the all-important 18-34 male demographic. “Sports are very important to us and we don’t have the money to participate in the TSN buy,” continues Iverson. “The Stanley Cup promotion lets us tie ourselves to hockey without becoming involved with a team. We’re perceived as being sports-related, even though, at the professional level, McDonald’s is much more invested. We’ve done a little guerrilla marketing…I guess we’ve stolen some thunder.”

(In that vein, one famous tactic is the use of the Subway plane. If Subway can’t afford to sponsor an event, it rents a plane, attaches a banner and repeated flies over the event. After seven years, this remains one of Subway BC’s most successful marketing tools.)

Another smart move was looking at the competition and going in the opposite direction.

“Corporately, our market is 18-49, and that is what our media buys target, but we stay very aware of the 12-17 customer,” says Iverson. “McDonald’s targets families. Teens don’t want to be where families are. So we’ve presented Subway as the cool place to go. We aligned ourselves with the younger radio stations; the Z95—Subway sticker prize campaign was extremely successful. And we created the Sub Dude and got involved with snowboarding at the beginning of snowboarding—there was a time when no self-respecting snowboarder would be caught without a Subway sticker on his board. Teens love us—not only is a Subway sandwich a cool food to eat, but their parents don’t mind. Now, it’s kind of a cult food.”

As far as Lev is concerned, the Subway market is anyone with teeth. “It’s anyone who can eat a sandwich. BC has the largest senior population in Canada and seniors are concerned about blood sugar, fat and cholesterol. And children are the grown-ups of tomorrow. But we don’t have the funds to go after individual markets.”

So individual markets are targeted quietly. “A child’s choice is the determining factor of where parents go, but kids want toys,” explains Lev. “If Dairy Queen advertises a toy promotion, it’ll get the families. We can’t advertise that way, so we have a Kids Pack program—a school lunch with a sandwich, drink, cookie and toy. As a result, we feed more BC elementary students than anyone else.”

 subway4

In BC, more than any another Subway region, women are a larger market: 50%. “Between 7:00 p.m. and 11:00 p.m., we get men; that’s when we sell the foot-longs with double meat and cheese,” says Iverson. “But at lunch, 60% of sales are to women. At the beginning, we had to focus on the 18-34s, then we built in the 12-17s, then we spread out to the 12-49s. Now, half of our customers are women. So we’ve broadened the net further. We run ads on female stations like KISS and QMFM, focusing on four-inch sandwiches, the lighter lunch, the sandwiches with six grams of fat or less.”

Subway heavily promotes the latter, but the low-fat aspect adds irony to any discussion involving the fast-food industry. “North Americans are fatter than ever, fries and chocolate are the top-selling foods, steakhouses are North America’s fastest-growing restaurant category and Wendy’s salads are gone,” says Lev. “So while it’s great that people see Subway sandwiches as an alternative to foods that they deem to be fattening, I’m not sure that they care about fat. People may think more about nutrition, but whether they act on it is a different matter. It’s just that the sandwich connotation is more positive.”

Connotation is another important point. “We’re careful to position ourselves in the sandwich category because of the submarine connotation,” says Iverson. “The submarine is rooted in the Northeastern US Italian-American community, where it’s a mainstay. In BC, before Subway came here, submarines were seen as something that fat men ate while they watched TV. Nobody had heard of a meatball sandwich. Or a foot-long steak-and-cheese with Marinara sauce. We communicated a different connotation for BC. Now, we sell a lot of those sandwiches.”

“Kentucky Fried Chicken is now KFC and McDonald’s calls its burgers ‘sandwiches’,” adds Lev. “Subway has never used the word ‘submarine’. As we’ve built our brand in BC, the focus has been on sandwiches, and the fast, inexpensive made-to-order meal. We’ve always promoted our 6” sandwiches—never our foot-longs. The 6” sandwiches fit with BC eating habits, and we won and R&D award when we devised 4” deli rounds, because we created a food that was appropriate for our market.”

All Subway restaurants sell 16 sandwiches—12 corporate, four local. The latter are created by franchisees, and this allowance is yet another reason for Subway’s success.

“The franchisees can choose what they sell, as long as it’s on Subway bread,” explains Lev. “And there’s no test kitchen, anywhere. We try things. If they work, great. If sandwiches don’t move, they come off the menu.”

i2i has used this flexibility for the highly-successful Sub of the Month promotion. “The freedom to create menu deviations has been a real bonus—and franchisees’ input is listened to,” says Iverson. “If head office were to introduce a sandwich which the franchisees knew no one in BC would eat, they could opt out. And we can push sandwiches which fit the BC culture. For example, we knew that chicken would work here, and that a Caesar salad would work here, so we helped develop the Kickin’ Chicken Savoury Caesar. It took off and became a national campaign. And the Sub of the Month program allows us to regularly present a different reason to come to Subway. It’s not rocket science, but it gives us product news and drives traffic.”

The two other Subway divisions which are catching up to BC are Alberta and Minnesota. They too have followed the formula of becoming part of their communities’ fabric, while staying with the national plan.

“A lot of other markets ran their own programs and, in the process, created too many Subway faces,” continues Iverson. “National ads would say one thing, local ads would say another, promotions would say something else. We create our own advertising and promotions, but we stay close to the national campaigns. So the advertising is different, but there’s always something that ties it together.”

Iverson says that the real credit goes, of course, to Gerry Lev and the Subway franchisees.

“Gerry’s progressive—he knew he needed to do more than just sell franchises. He’s a great communicator, he keeps everyone informed, brings in educational speakers. His franchisee support system has really helped the growth of this division. And the franchisees put a lot of energy into staying ahead of the pack. They’ve been willing to take risks and increase their spending. So we have BC people who have worked hard to put a BC face on an American corporation. And sales are way higher than in any other division. It’s an impressive accomplishment.”

Blitz Magazine, May 1998

 

 

 

Keeping Up With the Jonesers

jones1

Two North American CEOs have their logos tattooed on their bodies: Nike’s Phil Knight and Urban Juice & Soda’s Peter van Stolk.

The van Stolk story is more fun.

van Stolk began his sales career in elementary school–he bought bubble gum in the USA and sold it, at a profit, to his Edmonton classmates.

He began his adult career as a professional ski instructor and team coach. But ski-industry employees have three months paid vacation each year, and van Stolk is not the kind of guy to just hang around. In 1986, it occurred to him that, if people bought ice cream from street vendors, they might buy fresh fruit from street vendors. So, with a church basement as Head Office, van Stolk started Fruit for Thought, which sold fresh fruit kebabs and fruit salads from sidewalk carts. It was a great idea, van Stolk got lots of press and the business did well.

Then someone suggested that he look at Just Pick’d Juices, a Florida company which was producing flash-frozen orange juice. van Stolk did some research and found that 51% of the $356 million Canadian juice market lay in orange juice. He sold his car, lived on orange juice for a year and made a whopping $12,600. (He does not remember that year fondly.)

But he’d found his métier. He moved to Vancouver and, before long, BC boasted the highest per-capita consumption of orange juice in North America, Western Canada represented 10% of Just Pick’d’s sales and van Stolk’s sales hit $1 million. By 1990, though, he was starting to sour on orange juice.

“I’d come from the ski industry, which is all about fashion and sex. Clearly Canadian was starting to go through the roof, Koala and New York Seltzer were still big. They had sex appeal. I was selling orange juice, which has no sex appeal. And I was a one-product company.”

van Stolk founded The Urban Juice & Soda Company and negotiated the right to import, bottle and distribute Washington State’s Thomas Kemper micro-brewed sodas. He bought two BC distribution companies and proceeded to obtain his degree in beverage distribution, learning about importing concentrate, buying glass, manufacturing, bottling. By 1993, he was the Western Canadian distributor for Arizona Iced Tea, West End Soda, Odwalla and Snapple and his sales had risen to $6.4 million. But he was tired of distributing other companies’ products.

“When you’re a Canadian distributor of American products, you’re treated like the poor cousin. Arizona was competing against Snapple, which is manufactured in Vancouver. Arizona felt that its Toronto facility was enough for Canada. The Americans said: ‘Why can’t you do things the way we do them in New York?’ I said: ‘There are eight million people in New York. There are maybe eight million people in all of Western Canada, which constitutes two-thirds of the territorial space of the USA. Hello? There’s a bit of a shipping issue here!’”

With distribution becoming an increasingly frustrating, not-for-profit venture, van Stolk decided to start producing his own soda. In the cut-throat, $115 billion North American beverage industry, launching a brand is an extremely risky venture. So van Stolk looked at what everyone else was doing and did everything differently.

“When most companies create a brand, they first look at the consumer, then production, then distribution. We put the distributor at the top of the equation. The greatest beverage in the world is useless if distributors don’t want it and consumers can’t find it. Back then, everyone was selling non-carbonated drinks. We knew that if we went to distributors and said ‘Please sell our iced tea’, they’d say ‘Why?’. Distributors needed a different type of beverage–a carbonated beverage which would capture people’s attention.

“Our next step was to look at production. And this is the most important aspect of the success of Jones Soda. Instead of creating a proprietary package, we took a stock package and made it proprietary–this is very very important. We chose the Corona bottle. It’s a stock bottle and you can get it anywhere, which means you can negotiate your price. Clearly Canadian, for example, had to invest in design, the creation of the mold and manufacturing. They use pressure-sensitive labels which are applied at the manufacturing stage, so each product has a different package. So if they have a run on peach soda, they can’t just make more and put it in cherry bottles–they have to make more peach packages. My labels are applied by the bottler, and my orange soda is in the same bottle as my grape soda, which is in the same bottle as my green apple soda. If I have a run on grape, I just change the labels. The labels are the lowest-cost item in the whole process. Aside from the fact that I didn’t have to make that huge up-front investment, when you’re talking operations, this simplicity is critical. It is crucial to the company’s growth and profitability.”

(Urban Juice & Soda is also the only beverage company in history to win top honours for package design in two categories in the same year: its Wazu Natural Spring Water bottle won six International Bottled Water Association awards, knocking Perrier out of the top spot. The Jones bottle edged Coors’ to win the Glass Packaging Institute’s 1998 Carbonated Beverage Clear Choice Award, the glass container industry’s highest honour. van Stolk also notes that the total pre-market cost of Jones Soda was $41,000. and the total pre-market cost of Wazu was $20,000.–an unheard-of feat in the beverage industry.)

Once he had his production and distribution parameters in place, van Stolk looked at the consumer. He was playing in the New Age beverage market (fruit beverages, bottled waters and iced teas). This segment, which grew wildly through the late ‘80s and early ‘90s, now averages US $6 billion in annual sales. But van Stolk felt that beverage marketing lacked creativity and that his competitors were not looking properly at their consumers.

jones2

The target market for the New Age beverage business is the 14-24 age group–that’s 25 million fashion-conscious North Americans. It is growing twice as fast as any other population segment, it spends US $90 billion annually and influences the expenditure of twice that amount. But van Stolk identified an additional market: the 14-24 year-old wannabes–the 10-13 year-olds who want to be 14, and the 25-28 year-olds trying to hang on to their 24 year-old identities. van Stolk’s thinking, therefore, expanded his market from 10-28. When you factor in that increased current and future disposable income potential, more opportunities present themselves.

These consumers are the trend-setters, not the trend followers. van Stolk saw large corporations spending millions on market research when they should have been out on the streets–not only watching what members of their market were currently doing, but trying to figure out what they were going to be doing in the future.

Looking for emerging trends, van Stolk scoured magazines like GQ, Details, Esquire–even House & Garden. He hung out on the streets of Vancouver (Yaletown) and New York (Soho). He saw the re-emergence of Day-Glo colours, three-button suits, Hush Puppies, lava lamps. This was 1995 and the old was newly new, the square newly hip. Hence the Jones brand.

What elements does it have that attracts these people? Bright, bright, jewel-like colours seen through the clear glass of slim, casually-elegant bottles. And a playful, uncomplicated name: Jones–retro-hip, Cold War conventional with a dash of heroin chic.

(These consumers also had to like the taste of Jones, of course.  Consequently, some of its flavours are much sweeter than other beverages. While Canadians choose sweet-ish beverages, Americans–especially in the 10-28 group–like their sugar.)

“The ingredients are the most expensive element and your product has to look good and deliver on taste and refreshment, otherwise you don’t have a brand,” says van Stolk. “With taste, you have to strike a delicate balance between science and guess-work. When we launched Jones in 1996, we had a quality issue; our flavour company supplied us with a product which was not up to par. My flavours didn’t maintain their shelf life over a long enough period–they tasted great off the line, awful 90 days later. But we fought our way through that and it was part of the learning curve.”

Jones now has a reliable, quality flavour supplier (in a secret US location), and five North American facilities producing three Slim Jones flavours, 3 Natural Jones flavours and 12 Jones Soda flavours (the New York Times rated Jones grape and cream soda as the best on the market). In Canada, it sells for up to $1.49; in the US, the average is $1.29 (although the bar at the Four Seasons in New York sells it for $5.00).

So there’s the Jones brand. Now you just set a marketing budget and bombard consumers with clever advertising, right?

Wrong. van Stolk has never undertaken paid advertising.

“We don’t play the Big-League game,” says van Stolk. “The Big League players give consumers what they think they want and ram it down their throats with advertising. When people are bombarded with messages, their instinct is to turn away. So we said, ‘Instead of marketing this product to people, how can we ground it with them? How can we let the brand grow naturally among the core audience, as opposed to force-feeding it to them?’

It’s the natural versus the artificial approach–it’s difficult, challenging and time-consuming, but it’s better than blowing oodles of money on telling people you’re something.

jones3 jones4

“Jones is about discovery. It’s fun and exciting to discover something. We said, ‘Here are our customers. What can we do for them? And when we’ve done it for them, let’s make it available to them in places where they love to be and let them discover it.’

“When you go into a convenience store, you stay for 3.5 minutes and you have 690 beverage brands to choose from. Jones can’t be in that environment. We have to take the confusion out of the game and make the Jones choice automatic. So Jones goes where no soda has gone before– bowling halls, record stores, piercing parlours, shoe stores, used clothing stores, sex shops, tattoo parlours, beauty salons, raves, CD-listening bars–anywhere where no one else sells soda. People go into these places and there it is. They’ve discovered it.”

Discovery is helped along by the Jones Blitz Team, a group of very high-energy guys from California (because Canadians are too reserved). These are the Jones Street Fighters–full-time employees who drive around the streets of selected markets in a 34’ RV, painted orange with black flames and topped with a surf board. Dressed in neon orange Jones jumpsuits, they burst out of the vehicle, often on skateboards and carrying musical instruments, passing out CDs, bottles of Jones, bits of Jones Stuff. Depending on your viewpoint, they’re obnoxious or hilarious. Either way, Jones gets the desired attention.

Perhaps the greatest Jones innovation lies in how it communicates with its customers–its customers being Internet fiends with short spans of attention and no patience with Big Business.

“My consumers want to care about the companies they deal with, and they want to feel involved,” says van Stolk. “They’re not going to pay attention to something if they don’t care about it and are not involved. And we only had the label to work with.”

If you look at the back of a Jones bottle, you’ll read this: ‘Ya gotta make a living somehow; we chose the beverage world. Good old soda with a twist. No hidden meanings, no billion dollar ad campaigns. At Jones we want you to buy a lot of soda and recycle the bottles.’

Corny and patronizing, sure. But, to young adults, it presents van Stolk as the underdog. Customers want him to succeed. (van Stolk is also generous in donating to causes which matter to his customers.)

But how do you involve your customers? You make your product inter-active. For starters, by getting your customers to supply your product’s graphics.

jones7

From the out-set, Jones asked customers to send in their own photos for use on the Jones labels. Photographs flooded in–in 1998, 22,000 photos were received. The photos–colour, sepia-tone, black and white–are scanned and reproduced in four-colour process. Jones produces 50,000 cases of soda a day; each of the 36 bottles in each case has a different label. Each label is numbered and carries the name of the photographer and the name of his or her home town. In the last two years, countless North American community newspapers have run feature articles on locals who have had their photos Jonesed.

van Stolk won’t say how much this extra effort costs, only that he spends about 30% more on labeling than does his competition. And it is a coordination nightmare. But it’s worth it–no amount of money could buy the kind of brand loyalty that this inter-activity inspires.

The labels themselves receive a lot of attention. One nut-bar lambasted Jones for running a photo of salt and pepper shakers, claiming that Jones was encouraging inter-racial commingling. A label bearing a photo of the ‘Walk’ traffic sign received complaints about encouraging violence (because it looks like the outline of a body.) Kids like to make adults mad so, for them, this kind of reaction is terrific. And, for kids and teens, Jones is not a beverage–it’s a lifestyle. Their parents now order custom-labeled cases of Jones for birthday parties and bar mitzvahs. Children lug bottles of Jones to school–not to drink it, but to trade the bottles, with the goal of having as many consecutively-numbered labels as possible (it would not be Jones-worthy to steam the labels off the bottles).

Jones was also one of the first beverage companies to have its own web site, a site which made the 1997 Top 10 lists of both Netscape and Yahoo. “Our goal is to have the best site in North America,” says van Stolk. “We constantly work to improve it. It’s what allows me to communicate with my customers and listen to what they have to say. I don’t care what they’re drinking. I want to know what music they’re listening to, what shoes they’re wearing, what they’re eating, what they’re thinking.”

jones5

The Jones site (www.jonessoda.com), receives 1,000 hits and 400 visits daily. For every two people who visit the site, one leaves a name, address and comment. Site visitors can ask questions, look for labels, talk about a Jones experience or ask ‘Soda Slut’ for life advice. There’s a recipe page, a music page, a place to suggest new flavours or flavour names. Visitors can download free web rings and screen savers or order Jones caps, T-shirts, posters and stickers. In addition, van Stolk’s employees (the company has grown to 28) respond to 1,800 e-mail messages a week.

Jones Soda also has its own lexicon. To buy is ‘To Jones’. To drink is to be a ‘Joneser’. The official ‘AdrenoJones’ sports are rollerblading, surfing, wakeboarding, snowboarding, net-surfing and cross-dressing. Today, Jones is taste-tested by California high school students, and it is the exclusive soda in 45 Ontario high schools. The Jones vocabulary is so entrenched in North American schools that a Spokane principal, evidently forgetting that she was alive in the 60s but that her students were not, called van Stolk to complain that his revival of the ‘60s heroin-addict’s phrase for craving a Jones–‘I’m Jonesing’–encouraged drug use. (van Stolk asked her if her school sold Coke and she hung up on him.)

van Stolk enjoys poking fun at his competition. Although, when he declared that ‘Image Is Nothing, Cash & Sex Are Everything’, he did hear from lawyers representing Coca Cola (which uses a similar, but opposite-meaning, phrase). He didn’t fight back, he just stopped using the phrase. But that only turned the posters and T-shirts bearing the offending phrase into collectors’ items now eagerly sought by members of the dozens of Jones fan clubs.

It should be noted that van Stolk actually believes that image is everything. “Quality is obviously very important, but beverages are all about image. There are four areas which create image–music, fashion, sport and entertainment. If you understand how image is created, you can work within those four areas to keep your brand successful.”

van Stolk has contracted arrangements with the top guys in the snowboarding and skateboarding worlds (there will soon be a new line of labels featuring them) and he has forged an alliance with North America’s third-largest music company, BMG. You’ll find Jones all over BMG’s heavily-visited web site, and Jones was the only soda served at BMG’s Grammy Awards party at Barney’s New York last year.

jones8

For older teens and 20-somethings, Jones is less a beverage than a fashion accessory. So, when Armani launched its younger line–Armani Exchange–for 1998, it took the images from its print campaign, put them on Jones labels and distributed 200,000 bottles around Manhattan. Jones has been involved in promotions with Tommy Hilfiger and Jean Paul Gaultier, and the window-dresser for Macy’s used Jones as the basis of an eight-window fashion display. Jones Soda is also a television regular, appearing on Donny & Marie, Friends, Mad About You, Ally McBeal, Spin City–even Law & Order.

It’s important to note, however, that van Stolk has never approached anyone regarding a promotion. “Entertainment is Corporate America. I can’t play with Corporate America, so I let them play with me. I’ll put Jones in a cool hair salon in LA, some producer will see it and call me. A music industry guy sees Jones in a used book store in New York, he thinks it’s cool and calls. You identify your image zones and make sure you’re there. You’ll get discovered.”

Obviously, although van Stolk looks and sounds like your stereotypical ski bum, the guy is sharp. He knows his industry inside out–where the pit-falls are, how to avoid them.

“In the North American beverage industry, 100 new brands are introduced each year; the failure rate is 99.9%. In 1994, Snapple Iced Tea was on top of the world; in 1995, 438 new iced tea brands were introduced in the US. The flood of me-toos backed up the distribution channels, backed up retail sales, confused consumers and diluted the market. In 1995, Snapple’s sales went from $750 million to $500 million, while its costs stayed the same. So I did what most companies don’t bother to do: I spent the money to copyright my brand and my products. Now, no one can copy me and I won’t get whacked.”

To date, van Stolk has spent $1.5 million on legal fees, all to protect the Jones trademark. No one else can put photographs on soft drink bottles. No one else can rotate their labels. No one can use the name ‘Jones’ or the Jones ‘J’. No one can use any part of the Jones lexicon. Patents have been obtained, or are pending, for a host of other Jones-related items.

1998 was the Jones breakthrough year–sales went from $2.7 million in 1997 to $7 million (which translates to 13 million bottles). Among the reasons for the increase is that van Stolk doggedly worked North America, market by market, increasing the number of distributors selling his product. In 1998, he went from 98 to 105. As of this writing, 125 distributors carry Jones. When Jones has 200 distributors, it will be considered a National Brand.

“In the beverage industry, this distribution increase is considered to be a huge growth curve because distributors don’t have to choose us–they’re inundated by product. But, last year, the image started to kick in and perform. It’s a combination of business planning, timing, hard work and luck but the real key is the constant inter-action with customers–communicating with them, listening to them, responding to what they say. That’s what drives sales.”

van Stolk knows that Jones is not going to be around forever. “Rule Number One is that you never name your company after your brand–look at New York Seltzer. Rule Number Two is that you never fall in love with your brand. A brand has a seven- to ten-year life cycle. When Jones was launched, the Big 5 in the New Age category were Sundance, New York Seltzer, Koala Springs, Clearly Canadian and Snapple. As a category becomes saturated, the lead brand falls. Today’s big seller will one day be forgotten.

“Where companies run into trouble is when they see a product’s sales sliding and start throwing marketing dollars at it. But that’s just forestalling the inevitable. When you see that a product’s time has passed, you have to let it go and be ready with the next one. So Rule Number Three is that you use the power of one brand to launch a new one.” (van Stolk is launching something new in May. It’s absolutely top-secret, but he says that its like has not been seen before.)

Why launch something new when you’re riding high? Because you have to hit the wave before it starts to crest–not once it’s crested. (Wherefore Fruitopia?) van Stolk is right not to care what his customers are drinking–when he says he wants to know what they’re wearing and thinking, it’s market research. If he can see where they’re going and predict what they’re going to want, he can have their product out there, waiting for them to realize that they want it.

Urban Juice & Soda is a publicly-traded company on the Vancouver Stock Exchange, about which van Stolk says: “It has its pros and cons. If I had to do it again, I wouldn’t–I’d go the venture capital route.” On the other hand, Urban Juice & Soda was the first VSE-listed company to make the cover of Inc. Magazine.

van Stolk has received an inordinate amount of press. From CBS News, CNN, CTV, the Wall Street Journal, the New York Times, the Los Angeles Times, the Houston Chronicle and magazines such as Warp, Entrepreneurial Edge, Entrepreneur, Brandweek, Periscope and People. Maclean’s Magazine named him one of the Top 100 Canadians To Watch, NBC’s News Today placed him on its list of ‘Who & What Will be Hot in 1998’. In May, he is the Keynote Speaker at The Beverage Forum, a prestigious, invitation-only conference hosted by Beverage World Magazine where, with his shaved head and in his neon orange jumpsuit, he will tell the CEOs of Coca Cola, Pepsi and Budweiser all about Life with the Jonesers– perhaps, at the same time, holding up one of his ‘Kick Your Coke Habit’ posters.

This kind of attention is obviously much more effective than straight advertising would be. Still, van Stolk does have plans to go the orthodox route–one day.

“We will not be good clients–we’re difficult, spontaneous. A PR or advertising agency would go crazy trying to get us to do things in the traditional way. Our whole strategy has been to make people aware of us in a positive light–but letting them discover us. Because if we did the traditional PR or advertising thing and told people about ourselves, they’d get skeptical and cynical and the game would change. But, as the brand matures, we’re going to need advertising. In two years, we’ll have the grounding process complete and will be ready for traditional marketing.

“Meanwhile, I know that Jones has been successful. I know it because I know that people love my soda–because they tell us they do and because we sell more every day than we did the day before. And we’ve managed to stick to the Jones Mission Statement, which is: Sell Soda, Make Money, Make a Difference, Have Fun.”

Blitz Magazine, March 1999

 

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.

hp2

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.

hp4

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.”

hp5 hp3

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.”

hp1

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.”

 

Getting to Know Grappa

Firewater… paint remover… anesthetic… *(@%^+)&!!!

grappa3

It has been called a lot of names over the years. And, sometimes, justifiably. But in recent years, it has quietly experienced its own small revolution and, in some circles, it is now usurping the place of cognac as ‘the’ after-dinner drink of choice. It is grappa.

Vancouver’s resident grappa expert is Giorgio Castiglioni, Area Manager of Focus Wines & Spirits, who agrees that grappa drinking was once only for those with iron-clad taste buds.

“Up until about twenty years ago, drinking grappa was often a bad experience. Fifteen years ago, you would never see an elegant woman leaving a liquor store with a bottle of grappa–a certain class of people simply wouldn’t touch it. But since then, distillers have been experimenting and improving their methods. Now, grappa is a much more rounded, pleasurable drink. It is a first-class alternative to cognac and its international popularity has seen incredible growth.”

Grappa is a spirit distilled from the skin and the grasp of the grape. And while the grappa-making process is quick and easy, creating a top-quality grappa takes great care.

The process begins when newly-harvested grapes are placed in a de-grasper, which separates the fruit from the grasp. The fruit is pressed, either with a horizontal (or soft) press, which removes only the best juice; or with a vertical press, which removes all of the juice. After pressing, the remaining solids–the ‘vinacce’–go on to become grappa.

 The distinction between best-quality grappa and lesser grappa lies with the vinacce. While the less discriminating grappa producer will use all post-pressing materials (including twigs), those distillers most concerned with quality will seek out the best grapes, then use only the very wet skin from soft-pressed grapes.

After pressing, the grappa-maker has two styles from which to choose: continuous-cycle distilling, or discontinuous (artigiano) cycle. And both involve a grappa-making machine, or ‘alambiccho’, a complex, custom-made copper contraption of ancient origin.

grappa5

The continuous-cycle process uses the conveyor-belt system, wherein the solids automatically roll into the alambiccho and the grappa comes out the other end. With this method, up to 300,000 kg of vinacce may be processed daily. With the discontinuous-cycle method, small amounts of vinacce are placed manually in the alambiccho, the vinacce is distilled, the receptacles are emptied and cleaned and the alambiccho is filled again.

With either method, the solids are processed via direct flame, boiling or steaming. But the discontinuous-cycle method is more selective, only 10,000 kg of vinacce is processed in one day, and the product is a much better grappa.

The grappa-distilling process begins with the moist, spongy vinacce. As it is heated, the steam rises into a plated column, then into a filter, into a cooling system, and into another series of filters before being expelled as a liquid. The liquid then passes through a valve to remove the ‘head and tail’ deposits. As the alcohol is released at 78C, the resulting fresh grappa appears at 70% alcohol, so it is cut with distilled water to achieve the 40-43% drinking level. After that, nothing is added. The grappa is bottled and corked.

grappa grappa1

As mentioned, the big difference between ‘industrial’ grappa and best-quality grappa is that the industrial-style distillers use any kind of vinacce–they don’t care where the grapes come from or how many grape varietals are involved. But in making best-quality grappa, distillers are very particular. They look for specific varietals of a specific quality.

“The more particular distillers, such as Poli, pay more for best quality vinacce,” explains Castiglioni. “Best-quality grappa is made from no more than two varietals. Monovitigno Grappa is made from one type of grape, Grappa Aromatica is made from aromatic grapes such as Muscato and Traminer, and Sarpa is a blend of Cabernet and Merlot grapes.”

The best grappa is that which is bottled early. Young grappa, or Grappa Giovane (Pinot, Sarpa and Vespaiolo), is white and offers the strong primary aroma and flavour of the vinacce. Grappa Affinata is aged for six to twelve months in wooden barrels and has a slightly woody flavour. The grappa Invecchiata, Stravecchia and Riserva are aged for a minimum of one year in barrels of different types of wood. These have more substance and a stronger,  woody flavour and, after having absorbed the wood’s colour, turn yellow. They’re still good quality, but real grappa fans tend to go for the Grappa Giovane.

The word ‘grappa’ comes from the Latin ‘grappolus’, meaning ‘bunch of grapes’, and the beverage is distinctly Italian. All Italian regions produce grappa, but those best-known for their quality grappa are Veneto, Friuli, Piemonte, Emilia Romagna and Sicily. Grappa may not be a household term here but, in Italy, it has its own town and its own museum–the Museo Della Grappa in the Vicenza (Veneto) town of Bassano Del Grappa.

grappa4

Grappa came into existence in Medieval times, when the lords owned all of the land and, after the harvest, took the wine and left the peasants with the otherwise-wasted mush. It occurred to someone that the mush could be distilled. The alambiccho was invented, and enterprising grappa-makers began traveling from village to village with the portable alambiccho, distilling each family’s vinacce. More than a few people died in alambiccho explosions and the result was indeed fire water–almost 80% alcohol with, probably, a horrible flavour. ‘Course in those days, its main use was as a cure for stomach problems, as a disinfectant for cuts, and as dental anesthetic.

Gradually, the quality of grappa improved with advances in technology but, up until the late 1960s, it was still a cheap local drink. Then grappa-makers started to experiment with new methods. They discovered, for example, that the vinacce must be fresh and wet–that you can’t just leave it to dry out in a barn until you get around to distilling it. Grappa is best when made on the day of the pressing, or the vinacce has to be refrigerated until the grappa can be made.

“This is one of the reasons for the higher cost of grappa,” says Castiglioni. “To keep the vinacce fresh, it must be transported and stored in refrigerated compartments. Also, the quality distillers spend a lot of time in the fields during the harvest, carefully scrutinizing the quality of their vinacce to make sure that it is moist and wet. Then there’s the alambiccho–the modern alambiccho is an expensive custom-made piece of equipment with a very high hygiene factor.

“That is why Grappa can be very expensive,” continues Castiglioni. “Today, the aficionado could spend up to $500.00 for a bottle, and many people happily spend that. But if someone is just starting to try grappa, I tell them to look for something in the $30.00 to $60.00 range.”

Pricing is one area where grappa is in the same category as other fine distilled beverages. The other area, says Castiglioni, is in its evolution. “Scotch, cognac and aquavit have roughly the same history. They’ve undergone the same process of experimentation–it’s just taken grappa longer to catch up.”

But one doesn’t consume grappa the way one would drink other spirits. Because of its strength and weight, grappa is usually consumed in the winter months. It is served at room temperature, or slightly chilled, and is appreciated as a digestive–often with coffee, always after a full meal.

“Grappa cleans out the mouth and washes away the fats,” says Castiglioni, who also notes that the effects of grappa remain true to their reputation. “You have to be careful with it. It is a very strong alcoholic beverage and, usually, one is enough. The amount you should drink depends on how much you’ve eaten, how much wine you had with dinner and how much alcohol you can handle. And if you’re serving it at a dinner party, you should know that, once your guests have had grappa, you can’t give them any more alcohol. Grappa fills the senses completely.”

grappa2

Grappa is also used liberally in Italian kitchens, as a spirited addition to roast lamb, veal scaloppini, pork tenderloin and sautéed prawns. It can be used in pasta sauces, in fish sauces, and to flambé fruit. And while it experiences its renaissance, it follows that the best Italian kitchens would be in on the grappa revolution.

With a selection of 40 brands of grappa, Vancouver’s top Italian restaurant, Quattro on Fourth, has by far the city’s largest grappa selection. Quattro’s sommelier, Patrick Corsi, is enjoying the changing perception, and the ever-increasing popularity, of grappa.

“Italian restaurants here traditionally don’t encourage their customers to try grappa and, until recently, the BC Liquor Distribution Branch only offered a selection of three. There was also the perception that customers weren’t interested in grappa–and it’s true that it had a bad reputation. Grappa is an acquired taste. But fine dining is all about education.”

At Quattro, and at other fine Italian restaurants, grappa sales are way up.  Many grappa brands are now privately imported and, due to growing demand, the BCLDB now offers 13 brands.

“It’s becoming a very popular after-dinner drink, especially among sophisticated wine drinkers,” continues Corsi. “At the moment, about 90% of our grappa enthusiasts are men, but more women are trying it and, once they’ve tried it and experimented a little, they order it again and again. So we’ll keep encouraging it. If a restaurant wants to present the whole Italian culinary experience, it can’t exclude grappa–it’s a big part of the Italian culture.”

Promotional, 1994

Salad Days & Juicy Secrets: BC Hot House Foods

hothouse6Blitz Magazine, December 1997

Sodya hear the one about the Canadian farmers who go up to the California grocer and say “Lettuce sell you some vegetables?”

You may groan. And we might assume that, five years ago, skeptics scoffed at the idea that Canadians could successfully market produce to the salad bowl of North America. But BC Hot House has done it, in spades. And, along the way, it has become of one Canada’s great success stories.

The story began in 1973, when a number of BC tomato and cucumber greenhouse growers realized that they needed economies of scale for grading and packing; and that they’d be better served by a single marketing and sales entity. They formed the Western Greenhouse Growers Cooperative. The cooperative worked well until the early ’90s, when it faced increasing pressure from imports. This competition had driven some growers to the financial brink; others wanted to expand. All knew that they could not compete on price, since the cost of greenhouse growing is about 20 times that of field growing. And all knew that, if they were going to survive, they had to do something different. So, in 1993, the Western Greenhouse Growers Cooperative became BC Hot House Foods Inc. (BCHH). The company hired a PR firm—the Barkley Gazeley Group; and an advertising—Lanyon Phillips & Partners.

“We had to change the way we were doing business,” says Jim Lightbody, the BCHH VP Sales & Marketing. “We had to get away from the usual approach to selling commodities. In the produce industry, there are very few brands, but there are many labels and many producers selling on price alone. We can’t compete on price. We compete on quality.”

hothouse1 hothouse2 hothouse5

Initial feedback from focus groups, however, was less than encouraging. “The results of that research scared the daylights out of us,” says Lightbody. “Our vegetables look the way they do because they’re healthy. They’re healthy because we don’t use pesticides. Well, consumers believed that our produce looked as good as it does because we use lots of pesticides. So BC Hot House products were not their first choice and we had to change that.”

Lanyon Phillips CEO Chuck Phillips recalls that it wasn’t all bad. “We found that the name ‘BC Hot House’ carried a lot of positive equity and was associated with better vegetables. We had 95% of the sweet bell pepper market and 100% of the long English cucumber market. The combat area is tomatoes and, of the three BCHH products, tomatoes had the highest degree of awareness. People were buying them, but there was no real brand identity. So we wanted to brand the company, brand its values and tell this great story about hot house produce.

Designer Bill Downie created the new, less industrial-style logo. And ‘vegetable boutiques’ were installed in grocery stores. “Normally, tomatoes, peppers and cucumbers are stocked separately,” continues Phillips. “But we created mini-greenhouses, stocked with recipe cards, and all three BC Hot House products. So the tomatoes, which had the most competition, benefited from the halo of the cucumbers and peppers, which had no competition. And that strengthened the brand.”

At the same time, BCHH launched an aggressive PR campaign. “We didn’t have a lot of money, so we had to get our message out through the media,” says Lightbody. “We addressed misconceptions by conveying the message that we do things differently. And we made the campaign fun—to get people excited enough to want to read about vegetables.”

The mandate for BCHH’s two agencies was to tell the inside story and the ‘Juicy Secrets’ campaign was launched. This consisted of transit, newspaper and television teasers which implied a racy sexuality, did not reveal the sponsor and instructed the public to check newspapers for details. Colourful, tomato-shaped inserts were then dropped into the major papers in Victoria and Vancouver. When recipients opened them, they read that BCHH tomatoes were more flavouful because they’re left to fully ripen on the vine. That hothouse vegetables have more Vitamin C and A than field-grown produce. That, because greenhouse are climate-controlled, pesticides are unnecessary. That any bad bugs which do get to the plants are controlled by lady bugs, bees and birds. The campaign was a huge success. Response was tremendous, awareness and attitude improvement figures soared and BC Hot House was the BCAMA Marketer of the Year for 1993.

“The Juicy Secrets campaign went a long way, but we still had work to do, especially in the sweet bell pepper market where we were starting to see more competition,” recalls Lightbody. “The thing with peppers is that most people think they’re hot or bitter. They’re not. Green peppers are unripe peppers, much like green tomatoes, which is why they can be bitter. When they’re grown in the field, they can’t be left to ripen fully because they’ll be ravaged by the bugs and the elements. With greenhouse growing, those green peppers mature to their full ripeness and true colour—orange, yellow or red. And they’re sweet, not tart. So we communicated that to the public with the Eat Your Sweets transit and television campaign, which displayed peppers placed in ice cream cones.”

??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

Things proceeded nicely. Tomato awareness was at 92%. Cucumbers and peppers were doing well. But by 1995, competitors were riding the BCHH coattails by representing their produce as BC Hot House product. It was time to strengthen the brand through another campaign.

“Our focus groups had always shown that there was very high awareness of the BC Hot House stickers,” says Phillips. “They’re hard to get off and that was a minor irritant for everybody. So we decided to use it.”

The ‘Stuck on for Good’ campaign was two television commercials—one of a hand chasing a jumping sticker around a yellow pepper; the other of a jumping sticker trying to avoid being chewed off a cucumber.

The campaign was a huge success and the competition was stymied. But 1996 saw a different challenge. The BCHH growers who, four years earlier, had to be convinced that an advertising agency and PR firm could be at all useful, now wanted growth. They wanted to build more greenhouses to satisfy demand in BC. And they wanted to be able to satisfy demand in the US—in California.

“California may be the salad bowl of North America, but it had become our second-largest market,” says Lightbody. “And demand was growing in Washington State and Oregon.

“We’d always been marketing to Americans. We attended industry trade shows, advertised in trade publications. Mostly, we were down their knocking on doors. They were impressed. The two main reasons for a consumer’s choice of a supermarket are location and the quality of the produce department. Those retailers wanted top-notch quality. So they were already buying but, to support growth, we had to advertise.”

The strategy was to start with Seattle. “Seattle has the right demographics for our product and, since it’s so close to BC, it made the most sense,” continues Lightbody. “We used the Juicy Secrets campaign again. And we added the Pennies from Heaven campaign.”

The ‘Pennies from Heaven’ campaign built on the fact that, in the US, the use of pesticides, and consumption of their residue, is a huge issue with consumers—80% of Settle residents were shown to be concerned about it. Obviously, there was a story to tell. So Lanyon Phillips created television spots showing a field of tomatoes. While the song ‘Pennies from Heaven’ played, a spray plane appeared and sprayed the field. The accompanying caption was ‘You can pick from the great outdoors or the great indoors,’ and that was followed by a shot of a tomato in a greenhouse. The spots ran for two weeks, the ‘Juicy Secrets’ inserts went into the papers, and awareness shot to 25%.

“No other tomato, cucumber or pepper brand even comes close to registering on that scale,” says Lightbody. “In this business, if you take away Dole and Chiquita, the average awareness level for a branded product is 2%. The retailers were thrilled that we were building awareness of a premium product. It allows them to give consumers what they want, differentiate themselves from their competition and build customer loyalty. And it helps their profits. As a result of this campaign, our distribution in Seattle went up 20%.”

hothouse

By now, the BCHH grower expansion was well under way. One grower, while remaining in the co-op, had moved to Oxnard, CA and built a 20-acre, state-of-the-art greenhouse. Not only does this new facility allow BC Hot House to supply the American market but, because greenhouses need sun, and sunshine is mostly absent in BC from November to January, it can supply the BC market in winter. So the growers were ready for California, and San Francisco was the target.

“We had made strong inroads with retailers in 1996 but, going into 1997, we knew that if we wanted to double our business, we had to do something major,” continues Lightbody. “We had our success in Seattle, and we had the same demographics in Northern California, so we went after the Bay Area. But going after that market is a whole different ball game.”

The first step was to hire a San Francisco PR company, Porter Novelli. Local celebrity chefs were recruited. A media kit—complete with a snow cone containing a spray plane—was produced, and media members were treated to tours of the Oxnard greenhouse. The result was massive coverage about this new way of growing vegetables. Then, last April, the two-week ‘Pennies from Heaven’ campaign ran again, followed by the ‘Juicy Secrets’ insert drop. Lightbody says that, once again, the success was spectacular.

“Prior to the campaign, our research showed that Bay Area awareness was 3%. After the campaign, it was 22%. Monthly hits on our website went from 5,600 to 60,000. It was amazing.”

Not everyone was thrilled. The California Tomato Commission was a little miffed. “We were prepared for some controversy,” continues Lightbody. “But all we were doing was telling the truth and allowing people to understand what we do. It’s no big secret that farmers use pesticides. We just told our side of the story.”

“It was a delicate situation,” adds Phillips. “Pesticides are a hot issue in Northern California and we were using an image which triggers a lot of controversy in the US—the spray plane. We did not want to imply that unsafe produce was being sold in California’s grocery stores. So the commercials made no claims—they just showed the great outdoors verses the great indoors and let consumers take their pick.

“We had a receptive media and an interested, safety-conscious market. And we had some unhappy farmers. But the point was to create foreplay for the Juicy Secrets newspaper inserts, which tell the BC Hot House story. All we want to do is make people curious and interested in vegetables.”

So the American were in. It was back to Seattle for the next stage of the strategy, which was branding the BC Hot House name in the consumer mind while introducing new products. The ‘Stuck on for Good’ campaign ran in Seattle for five weeks. Again, it was a hit.

“After the initial boost from the 1996 Seattle campaign, awareness went from 25% to 18%, but that was expected,” says Lightbody. “After the 1997 campaign, it went form 18% to 46%. That’s simply unheard of. Our researcher, Roger Barnes, who has twenty years of experience in researching advertising results, had never seen a post-campaign jump in awareness like this.”

Vancouver and Victoria were hit again last summer, this time with a new transit campaign focusing on two under-developed products—peppers, and the latest product, tomatoes which are sold still attached to the vine.

The transit campaign consisted of four posters, two of which bear ‘borrowed’ creative. One shows a bunch of peppers and is tagged ‘Do You Eat the Red Ones Last?’; the other shows a row of peppers and the line ‘United Colours of BC Hot House’. (Benetton and Nestle happily consented.) Now, all markets are seeing heavy in-store presence—including POP materials, demonstrations and displays—with the goal of making consumers seek out the hot house-grown produce, while knowing that it will cost more.

“Consumers now understand that those vegetables cost more because greenhouse growing is expensive,” says Phillips. “And we have to maintain the profit margin for our clients—the growers. So the current focus is to make the product look great in the stores, and to make sure that retailers are happy.”

Retailers are extremely happy. Where they were previously selling tomatoes at .50-$1.00/lb. to make a profit of .25-.50/lb., they’re now selling tomatoes at $2.00-3.00/lb. for a per-pound profit of $1.00-$1.50. It is safe to assume that the 52 BC Hot House growers were also pleased. In 1993, sales were $36 million. In 1996, sales were $67 million. Projected sales for 1997 are $110 million.

There has been more expansion—a new $18 million,230-employee facility in Surrey opened in February. The company is looking at new markets—New England, Quebec, Ontario, Texas—and new retailer networks and distribution centres are being established.

hothouse4

So it’s blue, spray plane-free skies for BC Hot House.

“I can’t say enough about how important the interaction of public relations, consumer advertising and retailer communications has been to our success,” says Lightbody. Our quality comes from the expertise of the growers, but our marketing strategy has done the rest. We don’t have a lot of money to spend, so if it all doesn’t work together, and if we’re not being smart, strategic and focused with our limited budget, we can wash it all down the drain.”

And what about that budget? Lightbody will say only that it has increased dramatically in the last year, but that it is much smaller than we would think. Phillips says that, fiver years ago, the account was $250,000.00 and now it’s his second-largest. And the most enjoyable.

“Of everything I’ve done, this has been the most fun—and the most satisfying. We had to prove ourselves to growers, but I can state with certainty that the advertising and marketing programs have driven this client’s growth. BC Hot House is a great client. They’re smart, they’re one-on-one, and we have an excellent relationship. This is the most fulfilling and gratifying account of my career, and it’s the best work we’ve done. And definitely, from the agency perspective, the lesson is that if you focus on what you have and nurture it, instead of constantly going after new business, the agency and its clients benefit.

“And what a great story,” Phillips concludes. “This was a little band of vegetable growers who got together to share a packing facility. Now they’ve passed $100,000,000 in sales. In terms of where they started from, and the time-line, it’s the most exciting thing ever done by a Canadian company. And it’s the first time that a BC private-sector company created a campaign for the American markets, and met with huge success.

“Come on! Canadians selling tomatoes to Californians? The vegetable patch of the United States? And succeeding? Think about it!”

 

Popcork Report: Sumac Ridge Estate Winery is Canada’s #1

Blitz Magazine, January 2000

You may recall the days when everyone drank wine. Not just with meals—at many ’80s cocktail parties, water was the only alternative. The wine was invariably French or Italian. Then the Californians started to catch on, then the Australians. Then the BC wines…

BC wines? There was also a time when the idea of serving of a BC wine was unthinkable. Today, BC wines rank among the finest in the world. Leading this charge to the fore has been the Sumac Ridge Estate Winery and its president, Harry McWatters.

sumac1 sumac2

McWatters began making wine, as a hobby, when he was 16. Eventually, he became head of sales and marketing at Penticton-based Casabello Wines then, in 1979, teamed up with a partner to start a winery. They purchased Summerland’s Sumac Ridge Golf & Country Club, continued to operate the course (for cash flow) and planted grapes on 13 of its 41 acres.

“Opening a winery is a huge undertaking,” says McWatters. “We mortgaged our homes, coerced friends into putting up capital, and our families worked their butts off. We hired a consulting wine-maker, but we felt we knew what we were doing. We had great passion for wine, we knew we could produce exquisite wines and we had an excellent understanding of the marketplace. On the other hand, we also learned a lot of hard lessons.”

The creation of Sumac was made possible in 1977 when, in response to lobbying initiated by BC’s grape-growers, the provincial government passed an Order in Council allowing the establishment of cottage wineries. Wineries had to have a minimum of 20 acres of producing vineyard land, use 100% BC-grown grapes, source 50% of grapes from their own land and not exceed 20,000 produced gallons. McWatters lobbied a little further and had that increased to 30,000 gallons, or 15,000 cases.

Thus, Sumac became BC’s first ‘estate’ winery. Now, BC has 15 estate wineries, 4 commercial (large) wineries and 41 farm gate (cottage) wineries.

Sumac produced its first vintage in 1980. It has sold the golf course, but the Summerland winery remains with 15 acres producing Chardonnay, Gewurztraminer, Pinot Noir and Riesling grapes. In nearby Oliver, the company owns the 100-acre Black Sage vineyard, which produces Pinot Noir, Cabernet Sauvignon, Merlot, Cabernet Franc and Sauvignon Blanc. Sumac purchases grapes from other respected vineyards in the region and produces 25 wines in quantities of 125 to 10,000 cases, depending on the product. Annual sales are now $9.25 million.

In 1998, Sumac was voted Winery of the Year by Wine Access magazine’s annual review of Canadian wineries. That year, Sumac was the most internationally awarded winery, receiving 21 Gold medals, 25 Silver medals, 33 Bronze medals and 6 Prestigious Trophies. Last year, the Globe & Mail named it Canada’s top winery. Its Pinot Blanc Ice Wine was awarded Grand Gold at the Concours Mondial de Bruxelles, it was BC’s first producer of methode champenoise sparkling wine, and it was the first BC winery to produce a Meritage wine (Meritage is a special, exclusive blend of traditional Bordeaux grape varieties.) McWatters also became the second Canadian in 77 years to win the prestigious Marketer of the Year award from the North American Agri-Food Marketing Association.

The reason for this honour was two-fold. First, it was in recognition of the aggressive marketing activities with which McWatters established his winery’s identity. It was also in recognition of the fact that he has done so much for his industry. He was the founding chairman of the Okanagan Wine Festival, which attracts 73,000 visitors and is in its 19th year. He was the driving force in the creation of the Penticton Wine Information Centre. He is the chairman of VQA Canada, which oversees standards and deals with international trade issues; and he is Vice-Chairman of his industry’s national lobbying arm, the Canadian Wine Institute. Perhaps most significantly, he was the founding chairman of the BC Wine Institute, a trade association representing all BC wineries and its 200 grape growers. More specifically, McWatters was instrumental in introducing the institute’s VQA (Vintners Quality Alliance) program.

“We had to have a VQA program—it was for the benefit of everyone in this industry,” explains McWatters. “We knew that we could not flourish if we did not have a strong industry within which we could do business. Our competition isn’t in Peachland—it’s in other countries. International wine producers can afford to work on smaller margins in BC and they’re always going to beat us on price. We have to beat them on quality and value.”

The VQA program, which came into effect in 1990, was the largest single thing that changed the direction of the BC wine industry. That year, all hybrid grapes—those that were a cross between North American and European varieties—were removed from the region. That eliminated the ‘foxy’ grape juice-style wines and left the Okanagan/Similkameen with a foundation of 1,000 acres of premium vinifera (true European) grapes. In 1993, winery owners planted 100,000 plants from France—the best varieties, the best root stalks for BC’s growing conditions. Today, the region has 4,000 planted acres, with less than 400 bearing non-vinifera plants.

The VQA program requires that grapes have a certain threshold of quality before winemaking begins, and that wines be made according to strict guidelines. For example, if the label says ‘Chardonnay’, the fruit used must be at least 85% grown in the region identified on the bottle and it must taste like Chardonnay. If a vintner blended that wine with 15% Muscat, it would change the character of the Chardonnay and the tasting panel would reject it. 

The VQA panels meet monthly; one panel consists of three winemakers and three people with no connection to any winery. While 150 samples may be tasted in one month, no panel ever tastes more than 50. All tasters have been tested for their ability to recognize qualities and faults. They’ve also been trained to score the wines in standard descriptors, or common terms. Panelists can’t, for example, reject a wine because it ‘smells like soap’. They have to use specific descriptors to say what’s wrong with the wine so that the vintner can fix it. (Wineries submit barrel samples. If the samples are approved, they bottle the wine. If the wine is rejected, the error is rectified and a second sample is tested.)

As it takes a clear majority to approve a wine and every wine that comes out of BC is tested before getting the VQA designation, it should be impossible to have a VQA wine from BC with a fault, and everything on the label—the vintage, variety, region and characteristics should make a quality statement.

“We’ve come a long way,” says McWatters. “The whole industry has undergone tremendous evolution. In the early ‘80s, BC wine did not have a good reputation—we used to say that there were two types of consumers: those that took it out of the paper bag and those that didn’t. There have always been very respectable table wines produced here, but buying them was like playing roulette—you didn’t know if you were getting high-alcohol grape juice or a serious table wine. It was difficult to get people to recognize that some estate wineries were producing quality wines, and serious wine consumers didn’t support us.”

North Americans have always had a strange relationship with wine. For the average North American in the 50s and 60s, wine was for special occasions and the Smart Cocktail was the beverage of choice. Meanwhile, however, Baby Boomers were drinking soda pop. In the mid-70s, when they started drinking alcohol, they still wanted cold, sweet and bubbly–hence the success of products like Baby Duck.

Then people’s tastes became more sophisticated, possibly due to greater interaction between Europe and North America and the influence of the Mediterranean diet. North Americans became more concerned with diet, nutrition and consumption levels. They began to demand better food and wines—and they could afford to pay for it. At home, improvements in BC’s wine quality grew to the point where, in 1980, over 50% of wine consumed in BC was produced in BC. Today it’s 60%. In the 60s, respectable women wouldn’t go into a liquor store; today, 60% of wine purchases are made by women.

Women are a key focus for wine marketers. “We think of the wine market as being dominated by men,” says McWatters. “In fact, while men get more into wine knowledge and analysis; women more readily identify wines and decide whether or not they like them—they actually have more taste buds and are more sensitive to flavours. Also, an increasing number of wine-makers are women. Still, restaurants servers always ask the man for the wine order, then present the wine to him. He may order, but the female at that table has more to do with the choice.”

The Sumac target market is the wine-knowledgeable consumer, with the prime focus being white-cloth restaurant patrons. (At liquor stores, Sumac’s wines are priced at $10 to $25.) The Sumac customer is aged 30-55 years, but McWatters has been trying to broaden that. He knows, for example, that people in their early 20s do not drink wine as often as the industry would like them to. He’s now looking at university students.

“They’re not yet at our price point. But the mass-producers of the world are spending more energy and money on them and that will help us. The industry tends to intimidate customers with pomp and ceremony—it’s much easier to twist the cap off a bottle of beer than it is to extract a cork, smell, swirl and spit.”

On a per-capita basis, Vancouver consumes more wine than any other North American market (with the exception of Washington, DC—it consumes a lot more wine, but relatively few people actually live there). And one of the largest purchasing motivators in BC is the growing pride in buying Canadian—more and more consumers seek it out. This pride is one of the reasons why McWatters enters his wines in so many competitions.

“Awards get the attention of consumers, and we need to reinforce the pride of buying Canadian. Third-party endorsements are so important. When consumers hear recommendations from people they trust or perceive to be experts, they try the wine then buy it again and again.”

As McWatters explains, a key factor in marketing quality wine is, obviously, working with restaurant owners and staff.

“When it comes to selling to licensees, sales calls are crucial—you’re often chosen for listing on the basis of the rapport you have with the restaurant owner. Our first sales call to a restaurant is an introduction and a discussion of the restaurant. This is an area where you accomplish more through listening—you find out about purchasing volumes, wine sales relative to food sales and the restaurant’s customers.

“We don’t just drop off bottles and go away. We work with the servers. Whether they’re professional waiters or students working their way through university, we need servers to try the product and have enough information so they can feel comfortable talking to the customer about it. Then they can sell it and get more tips in their pockets.

“To make that time and product commitment, we have to be on that restaurant’s wine list. We win the restaurateur’s confidence and often help him with his list—good restaurateurs know that they should learn from their suppliers.”

Sales are aided by two types of brochures: one providing basic information about the vineyard, its philosophy, its range of wines; the other is an elaborate booklet which includes photographs of wine, discusses them in more detail and adds a corporate statement. McWatters has four sales reps working from the winery, handling Alberta and most of BC. The BC Lower Mainland is covered by International Cellars, which has three reps handling Sumac. Five other agencies cover the rest of Canada; two American importers represent Sumac through their own distribution channels.

Sumac participates in countless shows, often in cooperation with distributors and agents (they provide the manpower, share the participation fee and Sumac provides the product).

“The wine shows and competitions are a very important part of our business,” continues McWatters. “We do a lot of food and wine-pairing shows, with the Beef Information Board, for example. The Okanagan has 150 events. We do on-site promotions such as winemakers’ dinners, pig roasts, a lobster festival. And we do a huge number of trade tastings—things like Canada a la Carte, which is for restaurateurs, retailers and media. Then there are the charity events…our promotional and marketing budget is $1.5 million.

“But it’s money well spent. All promotions are interdependent. If you just did the shows and nothing else, the shows would be less valuable. The shows are valuable because you get people’s attention, measure their responses, introduce new products and take orders.

“The competitions can get pricey—the least expensive cost three bottles of wine at $25 each, then you go to something like the International Wine & Spirit Competition in London and it’s six bottles at 100 British Pounds each. But if you win, you have that extra prestige and the extra PR advantage.

To reach consumers who are already interested in wine and the culinary arts, McWatters spends $20,000 a year on print advertising—on ads, advertorial and inserts into magazines like BC Wine Trails, Wine Access and Wine Tidings. A small, though no less valuable, advertising expenditure is the $2,500 he spends on radio advertising in the Okanagan region. The purpose of that is to get people to visit the winery.

The wineries of the Okanagan Similkameen are now the region’s number one tourist draw. Not that long ago, beaches were the number one draw—now beaches are number five, behind golf, skiing and camping. And the income generated by winery visits is nothing to sneeze at: last year, Sumac’s visitors generated $450,000, including $50,000 in sales of things like glasses, cork screws, garments and books.

Today, the Summerland winery consists of the Cellar Door Bistro, a wine deck, a picnic site, a tasting room and the wine shop. Tours run all day, with 200 visitors daily during the May-October season. Guests usually stay an hour. While they wait for their tour, they have a glass of wine or browse in the wine shop. The 30-minute guided tour is designed to educate, remove the mystique and make guests feel comfortable. They taste four wines, including the champagne; they understand how the wine is made—and why it costs more. Then, hopefully, they buy more wine before they leave.

“The winery visits are a key component of marketing this business,” explains McWatters. “My profit margin is much higher if I can make a sale at the winery. Also, the longer they stay, the more we broaden their experience. Which means that they may only buy one or two bottles here, but they’ll buy the wine again when they get home.”

Perhaps over the Internet. Sumac was also the first BC winery to establish a web site (www.sumacridge.com). It is an extremely thorough site which includes a complete vineyard tour, information on the BC Wine Institute, maps, product listings, recipes, a guide to food and wine combining and a sales page with special Internet prices in US and Canadian dollars. There are tips on how to pronounce wine names and terminology, plus press releases and events and awards up-dates.

“We don’t use the site as effectively as other wineries use theirs, but we do recognize the power of it,” McWatters continues. “When we went on-line four years ago, it was the most comprehensive winery site in the world. Now, it produces less revenue than it costs to maintain it–we continue with it because retailers and restaurateurs use it.

“We believed we’d sell more wine from the web site—unfortunately, we have to turn down as many sales as we accept because we get so many orders from American states where we can’t ship to. There’s open free trade only between Canada and 13 states—we can’t ship to Florida, for example. But we believe that those market channels will open up as restrictions are tested in the courts. Still, we remind people about the site—it’s another tool.

“Marketing wine is a complex business. You have to do many things. We aren’t selling to the mass market, so just spending an advertising budget would be a complete waste of money. We’ve developed a niche for ourselves and, within that niche, we have to communicate the message to consumers that the wines of Sumac Ridge—and of this region—are best quality, food-friendly wines made to the highest standards. You can buy merlot anywhere in the world, but our wines are of a unique quality which you can’t find anywhere else.”

sumac3 sumac4