Case Study: Subway Wraps Up Its Region

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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.”

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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.”

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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.

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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.”

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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

 

 

 

Case Study: Toyota Turns Itself Around

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A new car, they say, is the second-largest purchase you’ll make in your lifetime. ‘They’ (the experts) also say that what you look for is quality, dependability and reliability, or ‘QDR’.

You want an attractive, safe, comfortable vehicle that won’t require much maintenance and will rarely break down. And unless you’re concerned about status and aren’t concerned with cash flow, you will look for a vehicle which offers a high QDR rating at the lowest possible price.

Until two years ago, Toyota was at a disadvantage on the latter point. While its QDR ratings have always been high and while, in BC, Toyota has always been the number-one selling import, Toyota vehicles were a little too pricey for many people.

Then, according to Garth Gilson, Toyota’s Manager of Vehicle Sales for BC, a number of things happened.

“Corporately, the company went through a transition. We re-engineered our way of thinking and we looked at our production and distribution systems to find efficiencies which we could translate into better pricing. We re-designed the Corolla and Camry, we introduced the RAV4 into the sport utility market and we re-introduced the Sienna into the van market. We’ve been able to put added value into our vehicles and offer new, high-value vehicles without an increase in price. That has made us more competitive with the domestics.”

Meanwhile, as Toyota became more efficient and improved quality while holding the line on pricing, the price of domestic vehicles went up. Now, the price spread between the high-quality Toyota imports and the comparable domestics is vastly reduced. As a result, for the first time, Toyota has the number-one selling intermediate car in North America (the Camry has displaced the Ford Taurus). In Canada, Toyota’s 1997 sales rose by 18%. In industry terms, that’s huge—anything over 10% is impressive. But in BC, the 1997 Toyota sales increase was a whopping 23%. This is due, in large part, to effective media communications.

“I’d like to think that the BC sales increase can be credited to communication and strategy,” says George Cruickshank, Account Director for Toyota BC Dealers at Glennie Stamnes Strategy, which has been the dealer association’s AOR for the past eight years. “With all of these developments taking place, we completely re-worked the advertising strategy. We said ‘we’ve now got a quite a horn to blow, so let’s really blow it. We’ve got a great new story for the consumer, terrific new vehicles, all these market advantages…we decided to let the vehicles do the talking and let the advantages dictate. We changed the way we looked at the business.”

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There are 33 Toyota dealers in BC and, when compared with other Toyota zones, the BC zone holds the largest market share within its zone. Toyota’s advertising operates at three levels—corporate, dealer and dealer association. The latter is a voluntary association, overseen by eight director/dealers who approve the association’s annual $4 million advertising expenditure. Gilson says that, while individual dealers are free to advertise whatever and however they like, they have found that the association campaigns are strong enough that it’s in their best interest to stay with the group.

“It makes more sense. It gives them a bigger voice and much more impact. All the players can tell the same story. It’s not an exact science—dealers have different opinions, approaches, budgets. But it’s a lot more effective when dealers work within the association campaigns.”

Dealer communication and participation is essential to the success of Toyota’s marketing efforts. You may think that this is an obvious point, but Gilson says that not all car companies are as conscientious as they could be in this area. At Toyota, paying attention to those who actually sell the vehicles makes good business sense. It makes for happier dealers, more profitable dealerships, and a stronger flow of information from customers.

“We need to know what consumers are saying. This market is very fluid and, as a manufacturer, we have to embrace change. And change is brought about by shifts in consumer tastes. Over the course of a year, consumer tastes in everything from vehicle styles to colours can change significantly. Equipment goes in and out of fashion very quickly. We conduct a lot of market research, but we depend on our dealers to keep us abreast of trends.”

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While Toyota stays in touch with its dealers, Cruickshank says that Glennie Stamnes focuses on the sales managers. “We’ve worked hard at building relationships with the sales managers. They’re at the front line of the business and have to be involved. We need to know what they’re hearing from customers. What consumers compare our vehicles against, what it is about our vehicles that stands out. So we meet with the managers regularly, hold focus groups with them and present creative to them before it goes out. We go to the dealerships to make sure that p.o.p. materials are placed properly—which is unusual because many dealer associations regularly put out campaigns with no dealership execution. This interaction makes a big difference. It also helps that this is the best dealer group I’ve worked with. They respect each other, they agree to a program, they get behind it, they execute it.”

A change in execution was a large part of the strategic shift made over the last two years. The traditional media mix of TV, radio and newspaper has been heavily augmented by outdoor buys—mainly exterior bus kings, which are now a key element of Toyota’s sales events.

Those sales events also last longer. “Traditionally, automobile advertising was done through one-month promotions,” says Cruickshank. “Last year, we drew our promotions to two and three months. With one-month promotions, by the time consumers heard about them, and then arrived to take advantage of them, the promotions were over. Consumers were getting fed up. Now, the media has time to kick in and consumers have time to get to the offer. From the acceptance stand-point, it’s better for the dealer and the consumer. There are also no breaks between sales events any more—Toyota doesn’t want to take a break from selling cars, why should there be time between financing and leasing offers?”

Two other consumer annoyances were dispensed with. Toyota buyers can now get 60-month financing on new vehicles—48 months used to be the limit. And Toyota BC Dealers now advertise only what they have on the ground, as opposed to advertising vehicles which are scheduled to come in.

“There are two reasons for this,” continues Cruickshank. “We have to help dealers move what they have on their lots. But it often happens that a car company launches a new car, it promotes it, customers come in to buy and the cars aren’t there yet. That makes people angry. There is no point in spending advertising dollars if you haven’t got the goods to sell and you’re going to tick off your customers.”

Glennie Stamnes also did away with another auto industry practice—the adherence to seasonality. “Traditionally, the belief was that no one bought cars in January, February or March, what with Christmas bills and tax time coming up. In fact, business may be slower during these months, but people are still buying cars. So we’ve advertising aggressively during those months, and that’s where we saw growth last year.”

Creatively, dealer testimonials were replaced by light humour mixed with an increase in the provision of factual information about pricing, quality and financing. And, for the first time, notes Cruickshank, all creative was adapted for the Asian community.

“BC has a large Asian population which is incredibly important to Toyota, which is the number-one name plate in that ethnic group. So all of our creative is reflected in the Asian community. We’ve become involved with the Chinese New Year celebrations and the International Dragon Boat Festival. We buy Asian media and tailor the creative for it. We also tailor the offers. The Asian community tends to buy cars—they’re less likely to lease. So where we’ll offer the general public a leasing program, we’ll offer the Asian community a purchase program.

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“The goal of all advertising over the last two years has been to build on QDR and wrap it up with value and affordability. Price has always been the biggest hurdle for us. But now we can find a better balance. Instead of trying to get people to buy an expensive product, we can now come out and say that, in addition to their excellent QDR ratings, Toyota vehicles are more affordable than ever. We’ve had a lot of information to communicate, but we’ve done it. And our sales increases are strong and our dealers are happy.”

And Toyota’s happy. In BC, its market share is 8%. Nationally, its share is 7% (as compared to Ford’s, which is 21.6%). But The Big Three is now The Big Five—General Motors, Ford, Toyota, Honda, Chrysler. In 1997, for the first time, Toyota sold over 100,000 cars in a calendar year (106,000, including Lexus). Demand is up. The company has taken an aggressive attitude, setting the goal of a 10% market share by the year 2000.

“Toyota already had a lot of loyal, satisfied customers,” concludes Cruickshank. “But with the new price points and new vehicles, it has opened itself to a whole new consumer segment. It has never been in a stronger position to make a serious impact on its marketplace.”

Gilson is a little more cautious. “The industry itself can only grow so big. In our effort to reach our 10% market share, we realize that we have to retain our existing customers, while looking at ‘conquest customers’—those who are driving something else. We’re dealing with educated consumers in a highly-competitive market and we can’t afford to get lost.

“But our advertising has been very effective. The strategy has worked, and I think our sales show that you can’t under-estimate the value of strong advertising.”

Blitz Magazine, March 1998

Mad for Silk, In Love With Lace: The Quest for the Best Makes Christine Morton #1

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Great things happen in basements. You’ve heard about many businesses that began in the founders’ basement and grew to be mighty successes. The difference with Christine Morton is the commodity—her big thing was, of all things, antique lace.

Although she’d had one year of design training, Morton had no intention of becoming a fashion designer—she just loved lace. She had a huge collection of it because, when she was growing up, people didn’t realize the value of it and sold it at rummage sales. She decided to put her collection to work. She’d been working in fabric stores and knew her way around the business. So she quit her job and started making garments.

First, it was camisoles and blouses. Then dresses, then wedding gowns. She soon had a large and loyal following of people who know, and can pay, the value of custom work.

That was 25 years ago. Today, Morton is the top lingerie designer in North America; her pieces are among the most sought-after in the world.

If you’re thinking: ‘What about Victoria’s Secret?’, you’re thinking of the wrong league. Whether they’re made of cotton, linen or the fabulous silks she’s known for, Morton’s pieces are luxurious works of art. Women (and men) who appreciate the finer things in life walk into Holt Renfrew, Nieman Marcus, Saks 5th Avenue or the 130-odd boutiques that carry her line, and by-pass the racks of polyester dainties. Morton’s collection is found hanging alone, with the stores’ private collections or with those competitors she does have—like English designer Daniel Hanson, who produces a cashmere and linen line.

“People come to us for very high-end lingerie,” says Morton. “There are a lot of people already in the synthetic market and in the last few years, every major designer has launched a lingerie line—Ralph Lauren, Donna Karan. They all see that it’s an area of growth. But we’re still above them.

silk1“I’ve actually tried to go the other way, but every time I’ve gone from trying to create something of beauty to creating something synthetic, or something that’s cheaper, I’ve lost it. I put the best into each piece, so every piece is something of beauty and comfort and luxury and makes the woman who wears it feel wonderful. There’s a quality about our product that’s unique, and maintaining that is what’s important to me. People recognize what is Christine, so everything has to have the same look and feeling.

“This is an extremely competitive business and it says something that I’m still here, and that what started as a home business is now an international company. Through the 80s especially, a lot of companies came and went. In the last five years, I’ve seen this company really emerge to a place where we’re seeing major growth.”

Morton no longer does custom work, nor does she do bridal. She’s strictly wholesale, and she develops private label lines for Nieman Marcus, Saks and Holt Renfrew. From her West Vancouver studio, Morton also produces four collections a year. Each collection is 100 pieces: panties, thongs, tap pants, pyjamas, penoir sets, loungewear, robes and sarongs. Her camisoles start at $75, pyjamas $250. Robes run from $350—Saks Christmas catalogue this year featured one for $800 (US); others sell for up to $1500 (US). And people have no problem spending that—her sales are sitting at around $2 million.

One of the keys to Morton’s success is her unique fabrics. For inspiration, she travels to Paris, where she scours the flea markets looking for old fabrics, old laces. She develops her own prints and fabrics from there (today, about 1/3 of her items carry lace). She used to have a ‘lace man’ whose job was to scour North America for quality lace; now she designs her own and has it made in France and Switzerland. Her ribbons come from Japan, her prints are made and dyed in Korea and China, and everything is made in Vancouver.

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“If the fabrics weren’t unique, I wouldn’t be here,” she explains. “That’s what people want—silk sewn over with pieces of chiffon, or heavy brocade, or layers of iridescent silk. It doesn’t matter what it costs; each piece has to be fresh and new but remain true to itself. That’s why development is so important, and I think one of the big keys to my success is being fashion-forward—the development of new colours, new silk textures, new styles.”

There are practical reasons for this development. There are many women out there with closets full of Morton’s pieces—they own everything she’s made, her stuff doesn’t wear out and she has to give them something new. She also has to stay ahead of the competition, which constantly copies her.

“I can’t keep people from imitating me. The important thing is that I did it first and the competition can’t get it out until next season. You make the most of it when it’s new and it has your name on it. Because you know that someone like Victoria’s Secret will have it out next season, only in polyester, made in Hong Kong and retailing for $45. It’s unavoidable. I’ve learned to see it as flattery.”

Another key to success in the fashion business is knowing one’s customer. Morton’s demographic is broad—women age 25-75. The difference is not who they are but what they want. These people want the best of everything. They’re often wealthy, but there are secretaries out there wearing Morton’s lingerie under their suits. They don’t earn a lot of money, but they’d rather pay $250 for a Christine camisole and some tap pants than get a new winter coat. The lingerie always wins.

“Our customer is the woman who loves beautiful things,” explains Morton. “Many women wear our camisoles as outer garments, under suit jackets. Our loungewear is worn on cruise ships, around pools, on beaches—we do sarongs and drawstring linen pants. Women also wear our things at home, while entertaining—we do a lot of silk velvet lounge pieces.

silk2“I think the explosion in lingerie sales has got to do with people spending more time at home, having fewer large parties and more casual dinner parties, and with the desire to not flaunt their wealth. Also, as the baby boomers age, they want to look good, feel good and be comfortable, but they still want the best. Also, there’s a certain obsession about lingerie. And we have a large male following—men want to see their women in fabulous things.”

In the last five years, Morton’s company has experienced 20% growth annually. This is because, in the mid-’90s, she made a strong commitment to advertising, public relations and promotions.

“Because I’d always been making unusual things, I’ve always had a strong press following—members of the fashion media just go crazy when they see my things, so I’ve never had trouble getting editorial. I decided to take that a step further. I like working with my stores so I didn’t want an agent per se, but I needed a full-time presence in New York.”

Morton retained New York press agent Randall Rutledge. The arrangement has made a huge difference to her business.

“I have my collection there, I can send buyers to him, stylists from magazines, films and TV shows go in there, members of the media go there. He has the right connections, he stays on top of things and takes care of my press releases and media kits. He gives me guidance with marketing and when I’m in New York, I use his show room and do some of my business there. And he organizes events for me, such as a recent fashion show at the Canadian Consulate. I’ve been very pleased with the arrangement. I’m being seen a lot more in the media, and people call from everywhere to find out where they can buy.”

Morton’s relationship with her press agent has brought vastly increased media attention: in the last year, her pieces have appeared on Winona Ryder in the film Autumn in New York, in the hit movie Traffic, on Buffy the Vampire Slayer and, for photo shoots, on the bodies of Gwyneth Paltrow, Madonna, Jodie Foster, Sharon Stone, Courtney Cox and Lauren Bacall. She’s also had spreads in Cosmopolitan, Glamour, Mademoiselle, Flare, Style and Victoria. (The magazine—not the Victoria’s Secret catalogue, although Morton notes: “I had several pages in there—I just didn’t make any of the pieces.”)

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“That kind of publicity grows a company. The film and TV work is great and we have stylists coming in all the time but, from the marketing perspective, the big thing is media attention. We do four shows a year in New York, but the media attention draws the buyers. And it helps our agents—we have one in Canada and one in California. The appeal for the media is that it’s lingerie, it’s beautiful, it’s unique and it’s fashion.”

Morton travels to New York four times a year, to launch each line, so she organizes shows around those launches and advertises the shows in trade magazines. The rest of her exposure comes from co-op ads—she does about 20 a year, including participation in the Holt Renfrew, Saks and Nieman Marcus catalogues. Co-op advertising works well for her—it’s always booked against an order, and her 3% contribution is simply deducted from her sales at that store.

In addition, since 1997, she has been given grants from the Matinee Fashion Foundation. The foundation offers funds for specific projects—Morton recently up-graded her logo, for example, and changed the label name from ‘Christine & Company’, to ‘Christine Vancouver’. The foundation focuses on its chosen designers, hosts an annual fashion show, and features its designers’ photographs on billboards and in advertising spreads in major magazines.

There was a website, and there will be one again this year. In the mid-’90s, she posted an award-winning site which got thousands of hits from all over the world, but it was ahead of its time and the e-commerce thing didn’t work. The new site is under construction; it will carry items not sold by her stores—they will be priced for younger people and will be meant to make men of all ages comfortable with shopping on-line.

silk9Morton has no plans to go directly into retail. In the past, she has successfully competed in Europe, against the high-end European lines, but says that it became financially unfeasible. Her market is strictly Canada, the U.S. and Saudi Arabia (it’s her clothing that Saudi princesses wear under their black abayah, and they buy a lot of it).

So there appears to be no reason for Morton to expect that her 20% annual growth with drop off. People will always insist on the best, the wealthy are increasingly discreet about how they spend their money, women will always want to feel beautiful, and men will always want to buy lingerie for the women in their lives.  Because, as Morton puts it: “Lingerie is much more than underwear.”

Blitz Magazine, March 2001

Keeping Up With the Jonesers

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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.

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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.

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“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.

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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.”

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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.

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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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Off the Rocks: Studio B Productions Defrosts Yvon of the Yukon

yvonBlitz Magazine, September 2000

It is an average day in the Yukon Territory town of Upyermukluk. A bored 14 year-old is driving around on his snowmobile with his dog. The dog jumps off to pee. When he relieves himself on a mound of snow, it’s discovered that the mound is a block of ice encasing a 300 year-old man named Yvon. Yvon is a smelly, crude boob of a French explorer. An underpants-clad egotist who still plans to conquer the town in the name of the French king, and who is let loose on the town and its oddball citizenry.

This is the story of Yvon of the Yukon, a cartoon series created and produced by Vancouver’s Studio B Productions and premiering on YTV this month. This is also the story of how and why an animation studio makes the transition from service bureau to producer, and how an animated series gets sold.

Studio B was founded 12 years ago by Chris Bartleman and Blair Peters. The studio has worked for, and continues to work for, Nelvana, Walt Disney Television, Nickelodeon and CBS, as well as companies in the UK, Germany, France and China. Its roster now boasts 150 animators and it’s successful, but Bartleman says that the transition from service provider to producer was necessary.

“The business has changed. Animation is more popular than ever, but there’s not that much service work going on. Not that long ago, there was too much work and not enough people to do it. Then a couple of people demonstrated that they could look to Asia, and get good ratings for next to nothing. That somehow became the rule. Now the US market is dry, there have been lots of lay-offs in LA, and studios are struggling to keep their people busy.

“In order to survive, animators have to get into their own productions. But they have to go the co-production route because they can’t afford to make shows on their own. Five years ago, the network would pay 50% of your budget in a US sale. How it’s 10% max. If you want to make a show to sell to a US network for the Saturday morning market, you have to come up with that 90%, and that’s a lot of money. Plus, everybody knows that US sales are the key to worldwide sales. So things are going to turn around completely. I would say that in five years or less we’ll be paying the US broadcasters to air our programs.”

Bartleman believes that the Internet is still not a viable alternative for animation firms.

“There’s no model for making money in animation on the Internet, and people are still throwing things at the wall to see what sticks. There’s no money in it unless you’re a dot-com company listed on the stock exchange—people aren’t going to pay to download a cartoon. Some people are looking at corporate sponsorship of entire shows, the way it was at the beginning of television. But we decided to build on the reputation we’d acquired through doing service work and pitch our own shows to broadcasters.”

The idea for Yvon of the Yukon came up three years ago when its writers, Terry Klassen and Ian Corlett, brought the project to Peters and Bartleman. Everyone felt that it would be a sure-fire hit, the characters were designed, the series developed. In January, Studio B signed with YTV, then Alliance Atlantis Communications division AAC Kids. ‘Sounds easy enough. But it has been a time-consuming process involving lots of money and effort.

“It takes a long time to take a show from idea to on-air,” says Bartleman. “It took us longer because we had to build relationships with broadcasters, funding agencies and distribution companies. We had to start from square one, the way we’d started with service work.

“When you’re an animation studio doing service work, you get to know the production managers, then you grow from there until you eventually get to the top of the heap. So you’d think we’d have a head start and that we’d already know the decision-makers. In fact, you could do endless series work and the broadcasters won’t know that you’re the ones doing the work for the shows airing on their stations.”

Peters and Bartleman started building relationships by attending festivals and trade shows in Los Angeles, New York, Toronto and Banff. Meanwhile, three series were in development—Yvon, plus What About Mimi? which airs on Teletoon this fall, and The Myna Leagues, which has been picked up by CTV.

Bartleman and Peters also had an idea that made it possible to reduce the amount of funding they needed. They entered into a co-production deal with one of their suppliers—Shanghai’s Hong Ying Universal Animation.

“Hong Ying is a 34% partner in Yvon through doing 34% of the work as an investment,” explains Bartleman. “In television animation, all the in-betweening and colouring gets done in Asia anyway. We do the key drawings, but there are 20,000 drawings per every half-hour show and it’s too expensive to do it here. We’d hire Hong Ying to do the work anyway, so we said ‘you invest your time in the show, you become a partner, you share the back end and have your territories’. We made the co-production deal an extension of our regular business.”

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Studio B spent $40,000 on developing the show, then the cost of producing the 13-show series of half-hour episodes came to $5.2 million. Financing came via distribution advances against pre-sales, the co-production deal, Canadian and US sales, and grants from BC Film, Telefilm Canada and the Canadian Cable Production Fund. Alliance is responsible for international sales; Studio B kept control of Canada and the US and has played a large role in the marketing of Yvon, spending about $15,000. In the animation business, this is unusual.

“A lot of animators just do their thing and let the distributor handle marketing and promotions—they’re animators, not marketers,” explains Bartleman. “But Blair and I have done a lot of advertising work and we have a good sense of marketing, of what makes things interesting, of how to put on a good dog-and-pony show.

“If we’d produced a Hans Christian Andersen fairy tale, it would be different. But we created Yvon. It’s important to us that the show’s a hit and part of ensuring that is getting involved in marketing and promotion. We had to make the buzz go.”

They had a lot to work with. Yvon has 10 main characters, all unusual individuals with distinct personalities. Locations include the bingo hall, the town’s greasy spoon cafe, the jail, ‘The Tundra’. The town has a con man, a sexpot cop, an incompetent outdoorsman and a nerdy bureaucrat from the Ministry of National Malfeasance. Episodes have titles like ‘Call of the Mild’, ‘License to Smell’, ‘Fromage to Eternity’ and ‘An Affair to Dismember’.

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Yvon also has a double market category. It’s written so that 6-9 year-olds will think it’s hilarious, but parents will also get a kick out of it. So it will air in prime time. Although the two-tier appeal will undoubtedly help sales, that wasn’t the intention.

“Our priority was to make a funny, entertaining show which we liked and believed in,” continues Bartleman. “It was after the show was finished that we started thinking about outside influences. You have to love your product before you can focus on marketing.”

Yvon’s marketing began with the creation of an exhaustively comprehensive, leather-bound information package including a four-colour booklet with character outlines and interactions, episode synopses, colour scene plates, bios, press clippings etc. It was expensive, but it was worth the cost.

“They put together a fabulous, solid pitch on Yvon,” recalls Suzanne French, the former manager of co-production at YTV who is now VP of AAC Kids. “That tipped the scale with both YTV and Alliance. It showed how they approach execution and it gave them credibility. Few companies do demos, but B Plus provided an animated title sequence and recorded a song for it.

“Sometimes we get pitched on an animated property without being provided with visuals—just a written description. Some producers don’t know what their target market is, who the appropriate broadcasters are, who their international partners would be. This is their one chance to make a good impression and they just hope you’ll see through their bad presentation. But a bad presentation is not going to get the project to the right desk—past the gatekeepers who review submissions before they arrive at the decision-makers. Studio B’s presentation gave us confidence—it showed that they were good producers who would deliver on their promises.”

Studio B’s publicist, Ruth Atherley, feels that her clients’ attention to marketing and media relations is key to their success.

“They realize that animators have to promote themselves and their products. You can make the best cartoon ever, but it won’t matter if you don’t get the word out and get people to watch it.”

Atherley says that, until very recently, there wasn’t a lot of external marketing done by Studio B. Internally, Bartleman and Peters made sure that their staff stayed hyped about the show. Everyone was kept in the loop, there were parties for the crew, t-shirts were distributed. It wasn’t until the show was picked up by YTV and Alliance that external efforts began.

“We knew that YTV and AAC Kids have other projects to promote and we wanted to help them get the word out about Yvon,” continues Atherley. “So we created an e-mail campaign with three quick-time video clips taken from the show, as well as notices to tell people to watch a sneak preview that was airing on YTV in June. We had each Studio B employee commit to e-mailing these messages to 20 people, then I sent out another 400. And we had Yvon post cards printed and distributed all over Vancouver—in places like coffee shops. The idea was to get a grassroots movement going; to get people talking about Yvon.”

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One of the bigger Yvon events was a media and industry party that Studio B hosted at a bar in Banff, during this year’s Banff Television Festival. It happened that YTV aired the sneak preview of Yvon in the middle of the festival. For the party, Yvon was frozen into a block of ice, banners and balloons were made, more post cards went out.

Atherley notes that the partners are also committed to, and keenly aware of the power of, media relations.

“Since the beginning of the development of Yvon, Blair and Chris have been talking to the Vancouver Sun and The Province, and they were included in a V.TV show on animation careers. They’re not expecting to be on the cover of Time, but they were as thrilled to have the North Shore News do an item on them as they were when the Wall Street Journal called [for comment on its article on the state of the animation industry]. And they went ahead with production on the show before their contracts were signed. They wanted to have something in hand—you can’t go to the media and say ‘We have a great animated show but we can’t show it to you’.

On Studio B’s web site (www.studiobproductions.com) there is, of course, a comprehensive section on Yvon—which also includes information on, and links to the sites of, YTV, Telefilm Canada, AAC Kids and Hong Ying. Trade print ads have been placed, and marketing-related gimmicks are in the works—things like compasses and glycerin soaps encasing Yvon. More parties are planned and, as a result of requests from people who saw the preview, an Yvon fan club has been created.

So the buzz is going and the network is thrilled (the results of the preview were such that YTV is talking about a second season). What remains is international sales, the job of Gail Rivett, VP Marketing at Alliance Atlantis Television.

“The international marketing is generally done by presenting the products at major television trade shows—the big one is Mipcom/Mipcom Junior at Cannes next month. Yvon is one of the premier products for AAC Kids, so the marketing budget assigned to it is top-tier. We’ll have a very large booth complete with meeting rooms, and our team of salespeople who will meet one-on-one with the buyers.

“We’ll also have sales materials—a four-colour, four-panel pocketed brochure. We’ll give away things that people will want to keep and use, like the soaps. The materials required to market these shows have to be very high-end, representative and fun.

“This is a fast-paced business, the international kids market is very competitive and the buyers are being pitched by dozens of shows a day. These meetings are not 30 minutes long, and we need to make the best impression possible in the fastest way. So we’ll also have a high-end sales trailer that will tell them everything they need to know—but not too much. Once they’ve seen that, they’ll make the decision as to whether or not to go to the next step of viewing the episodes, then purchasing the series.

Rivett’s main markets are the UK, Spain, Italy, France and Germany, to which she’ll sell dubbed shows at prices set by audience numbers in each country.

“The great thing about animation is that it travels well. And we’re hoping that Yvon is creative enough, interesting enough and different enough that it sells itself. We need those marketing materials, and we’ll have the media relations accomplished prior to Mipcom, but we don’t have to do much spin on this show. The one-liner is enough—‘An adventurer gets peed on by a husky and gets set free’. That’s funny.”

Once the show is sold, Rivett has the required confidence that Studio B can deliver. “The party at Banff on the night of the YTV premier was very innovative—something we don’t often see. And when I saw the promotional package that Studio B produced, and saw that all the elements were there in terms of story line and character development, we felt that the studio could deliver what we need to pass on to broadcasters. Anybody who comes to us with a creative, well-organized approach like that is more impressive. We’re only as good as the materials and images the producers provide, so it makes for a better strategy if animators also think of the marketing aspect.

“The studio has provided us with what we need for a marketing campaign,” continues Rivett. “After we sell it, we can provide broadcasters with the same products so they can create market-by-market promotions on their own channels. So it’s important for us to have some indication of what we’re going to get out of the studio. Because if you deliver bad master tapes or images to broadcasters, you’re sunk. They’ll remember that more than your great trailer.

“AAC Kids was launched a year ago, and Yvon is one of the true examples of what’s come out of its development cycle. Development cycles, especially in animation, are very long. Many shows look great at first but often, by the time they’re ready, something else has come out that blows them out of the water. Or the genre has gone out of fashion—like sci-fi. Sometimes, in the interim, the stations have started producing their own shows so your clients become your competition. But Yvon of the Yukon is fresh and funny; it has great animation and story lines. We’re pretty pleased about launching it.”

The BC Film Commission: Location, Location, Location

Blitz Magazine, May 2000

In the ‘50s and ‘60s, it was rare for a Hollywood producer to consider British Columbia when choosing locations. If they wanted a mountain, a bear, a Mountie, a Mountie on a bear on a mountain, only then BC was the obvious choice. A few well-known films were made here—McCabe & Mrs. Miller, Carnal Knowledge. The skill was here; Canadian broadcasting and film talent has always had an excellent reputation. But, by 1975, although there was a lot of television production going on, BC had gone five years without seeing a complete Hollywood feature shot here and the province’s craftsmen were leaving to work elsewhere. Finally, in 1978, the Social Credit government stepped in and created the British Columbia Film Commission.

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With that came people who were actively marketing BC as a location. By the end of that year, BC went from having no business to enjoying production spending of $38 million. In 1979, it was $55 million. Producers, directors and production designers started to talk to their peers about BC, and there were people here following up. This meant cold-calling producers who, often, had to consult a map to find Vancouver. It was sometimes a tough sell, but the commission staff concentrated on building relationships and providing ever-better service.

While the cost of shooting in Los Angeles continued to escalate, BC was enjoying watershed moments. There was Year of Rambo (1979). 21 Jump Street showed producers that you could happily shoot an episodic series here. Then came MacGyver, and Wise Guy. In 1987, after the provincial government made a substantial investment to up-grade the Bridge Studios, Stephen J. Cannell and Paul Bronfman teamed up to build Lions Gate Studios (now North Shore Studios). The list of hit features continued to grow. The Canadian dollar stayed low, the tax advantages piled up.

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So has the work. In 1998, 28 features, 26 TV series, 15 animation projects, 59 documentaries and 43 MOWs, mini-series and pilots were produced in BC, for a total value of $808 million (CAD). In 1999, there were 54 features, 30 TV series, 6 animated projects, 48 documentaries and 60 MOWs, mini-series and pilots, for a total value of $1.7 billion. That doesn’t include the $500 million non-theatrical ‘broadcaster bucks’ and television commercial expenditures. And conservative estimates place the spin-off economic impact at $3 billion.

The BC Film Commission (BCFC) is a branch of the Ministry of Small Business, Tourism & Culture and relies on the government for all of its funds. It employs just 10 people and has seen its budget regularly slashed in recent years, to the point where it currently operates on a stunningly low annual budget of $875,000. (This, while Montreal just received a $300,000. injection to its promotional budget alone.)

The BCFC mandate is to market, promote and facilitate film and television production in BC, and to market the services of BC production, post-product and ancillary service companies to the international film and television industry. It has four tasks: international marketing, location scouting, location services and community relations.

These days, the marketing function is restricted, to say the least. “Seven years ago, I had a $250,000 print advertising budget,” says marketing manager Alice To. “It’s now $50,000, including creative. We’ve gone from placing 45 ads a year to placing five. Those five are saved for when there’s a BC production that needs to be congratulated in the trade press. Now, we don’t have campaigns, we have reminders. We stand out by using illustrations—other film commissions run location shots. We used to advertise to the European and Asian markets, we used to publish a newsletter for schools and libraries, and we used to do a lot of media relations. But we don’t have the resources for that any more.”

The commission used to have an advertising agency (Campaign Communications, now Saatchi & Saatchi). It also used to host the extremely successful Friends of BC reception in Los Angeles—a party to thank people for filming in BC. The commission still goes to Cannes and is hosting a Business in BC conference in London this year, but the once all-important trade shows are now also a thing of the past.

“We used to do Location EXPO,” continues To. “You’d have all the film commissions under one roof and everyone competed to attract people to their jurisdictions—we’d pass out BC apples, water, salmon. And we used to exhibit at Sundance and the Toronto Film Festival. Now we don’t do that, not so much because of budget cuts, but because people aren’t interested in trade shows any more. They know about the commissions and they can get the information they need off the Internet.”

For the past two years, the BCFC has had a very effective web site (www.bcfilmcommission.com). It’s strictly for information dissemination and doesn’t carry advertising, but it is well-visited to the point of the occasional crash. On it, visitors find film lists, statistics, quick facts, news items, maps and information on customs, taxes, unions, equipment rental, studios and services.

To, who compares her job to doing the limbo under an ever-lower budget bar, maintains a large photo library and has managed to produce excellent location brochures showing various BC locations—not just deer in the woods, but alleyways, warehouses, docks, residential areas. There’s the occasional marketing project with BC Film (the non-profit society responsible for marketing completed made-in-BC projects) and, twice a year, the commission’s director, location and production services managers go down to Los Angeles to meet with film industry executives and engage in some good, old-fashioned product touting.

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The product is a region which has evolved from being a location to being a production centre. BC’s craftspeople are as good as, if not better, than those anywhere else in the world. We have 67 state-of-the-art sound stages, the best post-production facilities in the business, and we’re capable of having 35 A-list crews working simultaneously. All facilities and amenities are here; producers don’t have to bring anything with them. BC has architectural diversity, ethnic diversity and geographic diversity (it has nine of the globe’s 12 climates, lacking only arctic, tropic and sub-tropic).

“We used to just market locations, now we market Vancouver as a production centre,” says acting BCFC director Mark DesRochers. “We have the complete package now—the pitch to the popcorn. People have put a lot of money back into the business here, so everything’s up to date and the quality of the facilities here has been well attested to by the most grizzled of Hollywood veterans.”

But if there’s no marketing budget, no events budget and no media relations budget, how has the BC Film Commission succeeded?

Strategy, service and more service.

“The second part of our mandate—location scouting—can be challenging,” continues DesRochers. “If someone needs the Texas panhandle, we’ve got a problem. But maybe we can get that script rewritten for Montana. Double Jeopardy was originally supposed to take place in Boston. Then Bruce Beresford thought ‘Why am I trying to cheat this for Boston, when I can rewrite it to take place in the Pacific Northwest?’

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“We have to get in at the contract-signing stage. After that, there’s not much we can do to change their minds. So we look at the trades, track production, call people up. The key is to get producers to think of BC first. A producer will send a script to a dozen locations and his concerns are budget and what a location offers. They come up here and I show them around and say, ‘We can do it for this much here and it’s going to look good. But then I may take them to the Okanagan and show them the perfect location for the script and say ‘If we do it here, for this much, it will look fabulous’. Then they’ll go back and fight for that location. It may cost them a little more to go up to the Okanagan, but they’re still saving money by filming in BC, and they don’t have to compromise on the creative side.

“Also, since 1995, we’ve had the Regional Film Commission of BC, a network of regional film offices that helps us give people exactly the location they want. Production budgets are shrinking and it’s expensive to send location scouts everywhere, especially in a region the size of BC.

“We know how thin the margins are on these shows and we have to service that margin. If a producer needs a mountain and he can get great shots on Grouse Mountain, we’re not going to have him drag his crew over to Mount Robson. If he wants the Queen Charlotte Islands and we know he can’t afford it, we’ll find the alternative.

“We learned a long time ago to never bullshit the customer. If someone needs tundra and musk ox, I’m going to tell we don’t have it. We don’t want to screw up or disappoint our customers, because some of our customers are people who would go out of their way to tell their friends what a bunch of wankers we are. If you market yourselves as being something, that’s what you have to deliver.”

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Once a project has been landed, the third part of the BCFC’s job— location services—kicks in. The BCFC takes a hands-on approach, walking producers through the hoops and ladders of immigration, customs, tax credits, Canadian content issues and union agreements.

The latter, as has been well publicized, used to be a major bugaboo. “People want to come here and make movies, not learn labour law,” explains DesRochers. “There was a time when people considered the possibility of union problems if they came to BC. That may or may not have cost us business—and it did get to the point where the whole thing could have gone down the toilet. But out of that came the opportunity to figure out how to make it work. And we did. Now, unlike any other jurisdiction in North America, all of the unions and guilds have long-term agreements with the employers, and the union agreements are much more straightforward than they used to be. We now have labour peace.”

More recently, there was the issue of unrest among members of the Los Angeles film industry, many of whom were furious at the amount of business coming up here.

“This is a cyclical business, and the growth in production in LA has been more rampant than any other place on the planet,” says DesRochers. “But if there are impracticalities which cost money, and producers want to make a profit, they’ll go where they can get the biggest bang for their buck. Anyway, we haven’t heard much from them lately—the guy leading the charge had to resign to go work on a feature in Toronto.”

Delivering that bigger bang also means competing with 260 other North American film commissions—and with Toronto, Vancouver’s main competitor, whose film commission also gets way more support from its provincial government. Toronto also has location advantages that BC doesn’t have.

“The competition has to do with location-driven pictures,” explains DesRochers. “Toronto is always on the producers’ shopping lists. If you want that eastern city look—if you want New York, Toronto is more logical. But there’s the weather to consider. And we are chameleons.”

The BCFC’s final mandate component is community relations. This area is absolutely essential, given that, not too long ago, the goodwill and hospitality of British Columbians—Vancouverites in particular—was starting to run a little low.

“Vancouverites are easy to get along with, considering the amount of production going on in a relatively small inner city,” remarks DesRochers. “But we had to start spending more time making sure the neighbours were not going to lynch the next show. Now, the municipal and city fathers are educated on what all of this filming means to the economy. People get advance letters, friendly production people knock on their doors and answer questions. It may just be a courtesy or—if you want to land a helicopter on someone’s street at 2:00 a.m.—it may be crucial.

“Like any business, once you’ve done your marketing and landed the business, your future success lies in how efficient you are at servicing that business. We have a multi-tiered client base and we don’t want anyone to feel used and abused.”

In 1995, the BCFC needed someone to deal only with community relations. It didn’t have the money to pay that salary, so it went to those with a vested interest—lawyers, accountants, post-production facilities, unions etc., and had them each chip in $4000. to pay 75% of the salary for a community relations person, something which most film centres don’t have.

The BCFC’s community affairs manager, Gordon Hardwick, is responsible for working with production companies and helping them deal with municipal administrators, Crown corporations and the private sector—helping them cut the red tape.

“I’m currently trying to organize municipal administrators to discuss ways of standardizing things,” he says. “The Greater Vancouver Regional District has 21 municipalities, all with different application and permit processes. Each year, filmmakers make 1,250 applications to the City of Vancouver, which has 400 files open at any one time. So things can become quite complex.”

Hardwick is also working on a marketing plan aimed at raising public awareness of the industry’s fiscal benefits.

“The film community supports a lot of charitable and service organizations, and there are many good-news stories to be told. We have a very low complaint level, but sometimes people get this idea that they’re being exploited by Big American Film Companies. Once they realize that a lot of the productions are Canadian, and that the guy next door makes his living this way, they understand. So the goal of the marketing plan will be to get the good news stories and the economic information out on as localized a level as possible.

“My job is to find ways to accommodate everyone and communicate with businesses and residents so that they can plan their lives around what’s going to be happening. Without that communication, communities would get fed up with the road blocks and noise and racing vehicles and say ‘forget it’. That’s what happened in some communities in the Los Angeles basin, which simply no longer allowing filming. Collectively, our locations are a resource that needs to be managed, with an eye to preservation for the future, just as the fishery or forestry resource does. This is a resource that needs to be both promoted and protected.

“The film industry here grew as a location-based industry—it was never about studios and back lots. We’ve always needed public support and understanding and the willingness to accept inconvenience once in a while. This industry employs 25,000 people—you don’t want it to go away just because it occasionally blocks your driveway.”

Perhaps the human element complicates things more than in this industry than in other sectors. But the other key to the BC Film Commission’s success is that it has been very good at forging solid, long-lasting relationships.

“We’ve developed a great rapport with the decision-makers in this industry,” says DesRochers. “When I go down to LA, I meet with people and find out what we’re doing right and what we’re doing wrong. We stay abreast of their desires and wishes and respond quickly. People there know we’re open to suggestions and that we’re committed to delivering the goods. That confidence is better than any advertising you could run.

“This is show business—a mix of creativity and fiscal responsibility. You can’t separate money from the other benefits. You can’t put a dollar value on knowing that you’re going to get the product you want, on time and on budget. And those relationships may save money in the long run, even if the up-front cost is a little higher. So you’ll get producers who come here again and again, no matter what company they’re working for.

“Sure, there’s the exchange rate and the tax advantages, but it’s also the people. Producers know they can depend on our people. We’ve earned the respect of our community on both sides of the border—from studio guys, to unions, to composers, to the guys renting cell phones. We’ve done a good job in forging relationships and keeping those warm and fuzzy feelings about us.”

 

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.”

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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.”

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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%.”

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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.

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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!”

 

AG Whiz: AG Professional Hair Care Products Works Consumers Into Lather & Cleans Up

Blitz Magazine, July 2000

In the late ‘80s, a friend of John and Lotte Davis’s came to them with an idea. He planned on starting a line of hair care products, which he would market in California. He figured that, since California has the same population as Canada, but in a much smaller space, he would make a killing. John, a former hair stylist who was then in the antiques business and Lotte, a graphic designer, dropped everything and became immersed in their friend’s venture. Which promptly flopped. There they were, unemployed and broke, with a little momentum and a bit of knowledge of the hair care products industry. They decided to continue and, in April 1989, founded AG (Advance Group) Professional Hair Care Products.

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Their first step was to contract a local company to make a shampoo and a conditioner. They said they wanted the products to be rich and creamy, be pink in colour and smell of strawberries. Other than that, they were unable to dictate product specifications. They bought a used peanut butter-making machine and spent their evenings filling and labeling bottles. Then they started knocking on salon doors. With great results.

“Our advantage then was that we knew what not to do,” recalls Lotte. “From our previous experience, we knew that we shouldn’t dream too big, that we had to start small, and do it in our own back yard. The California venture failed because we didn’t live there and we didn’t understand the market. Here, we went to one salon at a time and we didn’t rely on someone else to sell our products. No one has the conviction to sell a product like the people who make it.”

John and Lotte started visiting salons, developing relationships and persuading stylists to try, then recommend, their products. Although they initially hoped only to be able to make enough money to cover the mortgage, first-year sales topped $127,000.

“There was a well-established industry standard on how you did business,” remembers Lotte. “We came along and said ‘We don’t know how everyone else does it but here’s how we have to do it because we don’t have any money’. We had to get attention on a very short budget. So we offered salons a 10% discount if they paid us upon delivery. Our competition all had 90-day receivables. We allowed the salons to make a huge margin, and it got word of mouth going.”

Demand was increasing, but John and Lotte couldn’t rely on their private-label supplier for consistent quality. They knew they had to manufacture their own product. So they sold their home and used the proceeds to open a manufacturing facility.

Most professional brands, it turns out, use private-label manufacturers. They can make specific requests for formulations, but they have little control and don’t know if their recipes are being sold elsewhere.

“We needed the kind of product we could succeed with, not the kind of product our supplier was making for us,” says Lotte. “And we realized that it’s like cooking. You start with the basic formula, you get creative, you devise your own recipes. If you add the finest ingredients, you’ll have much better products. And John turned out to be an excellent chef. Making your own product is a lot more work, it’s more time-consuming and it’s more expensive, but it’s also cost-effective because that control over the finished product pays off.”

To Lotte’s knowledge, the only other salon product made by the marketer (the name on the bottle) is Joico, which is AG’s main competitor. In the BC market, AG and Joico are usually neck-and-neck, or AG is slightly ahead. Continent-wide, AG competes with Paul Mitchell, Aveda, Sebastian, Matrix, Nexus. It’s a rich business, with Mitchell reporting annual retail sales of $200 million, Matrix $300 million.

AG remains the only Canadian company in the field. Its sales aren’t leading the market yet but the company is doing well, with 100 employees and 1999 wholesale sales of $11 million (translating to retail sales of $18 million). In 1994, the company won the Canada Award for Business Excellence from the National Quality Institute; in 1996, Profit Magazine named it Canada’s fifth fastest-growing company, with five-year sales growth of 5,426%.

In addition to AG’s Vancouver headquarters, there are offices in Calgary and Toronto. This year, distributors opened up two Washington State markets—Tacoma and Seattle/Bellevue and, in California, San Diego and northern Los Angeles. There’s one distributor in New Zealand; in Canada, there are 35 AG sales reps, plus five independent distributors.

The AG line is now sold in 4,500 salons. The line currently consists of 30 shampoos, conditioners, styling products, finishing products and perms, priced at $9-$14. There are plans to expand into colouring products, and the idea of opening AG salons is under discussion.

Lotte attributes much of AG’s success to timing. “In today’s market, if we said ‘We’re going to try and take some serious market share from Joico’, people would think we were crazy. The field is just so competitive now, we probably wouldn’t succeed. But we stayed focused on how to make this work. We also had a knack for marketing.”

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When AG was founded, salons carried one or two lines; now they may carry 15. A salon is a busy, noisy environment. If you want to sell product, you’re going to have to get people’s attention. John and Lotte did this with bold, aggressive point-of-purchase (p.o.p.) materials. This sounds elemental now but, at that time, Lotte says that no one used p.o.p. materials to sell professional hair care products in salons.

“Back then, p.o.p. materials were a drug store thing. We invested in high-quality racks, we introduced specially-priced Christmas and travel bundles, and we introduced price-driven promotions on litres. We used easily-remembered names and colour-coded our products so they’d be quickly recognized. Our p.o.p. materials are very bold and they quickly deliver the message to consumers, talking about the products’ benefits and uses and providing instructions. Everything’s high-quality, very colourful, and there’s lots of it. We provide salons with posters, header cards, mirror talkers, shelf talkers, masks. The competition doesn’t do that.

“Also, with Joico being around so long, our real advantage, because Joico’s an American company, was that we could offer salons a higher margin. That, along with our p.o.p. materials helping with sell-through, in addition to getting our products noticed and increasing sales, allows salon owners to focus on what they do best and still achieve an extraordinary retail business.”

John’s knowledge of the stylist mentality, and catering to that mentality, is another key to AG’s success.

“Stylists traditionally think of themselves as artists,” continues Lotte. “They’re not comfortable selling. They’re in the business of cutting hair. It has taken a lot of education—from the whole industry—to convince them that if clients can’t maintain their styles after leaving the salon, the clients are going to be upset. And you need hair products to maintain those styles. You have to know what products to use and how to use them, or your hair will go back to being limp. We had to convince stylists that, although they don’t have to do the hard sell on clients, they can at least tell clients what they used for their styles.

“That’s the basis of our business. The average woman sees her stylist every six weeks and buys at least two products each time. About 2% of consumers buy professional hair products because they’ve seen ads in magazines, 75% buy because stylists recommended it. At the beginning, we knew stylists weren’t actively recommending our products, so the p.o.p. materials had to do the job.”

This also led to another innovation—a salon education program, consisting of product introduction seminars, and styling, cutting and perming classes. AG sends top stylists into salons to introduce new cutting techniques, styling techniques, perming techniques. And, of course, to teach stylists how their clients can use AG products to keep their hair looking healthy and beautiful between salon visits.

AG also does 10 trade shows each year, with an enormous ‘booth’ that Lotte likens to the Steel Wheels Tour facility. At trade shows, AG stages hair shows complete with professional costumes, choreography and sound effects. “We spend about 3% of our sales on hair shows,’ she says. “It pays off because we have to educate stylists and that’s what keeps them interested in us.”

Stylists have always been impressed by AG’s innovative marketing approach. For example, no one else used customized delivery vans. AG’s reps used vans stocked with product and emblazoned with the AG logo. When a salon agreed to carry AG products, the rep only had to go out to the parking lot, return with the stands and products and set up the sales area then and there. As the company became more successful, it had to switch to couriers—reps had to constantly return to fill the vans—but they are still used in rural areas, small towns and when opening new markets, where they serve as excellent advertising vehicles.

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Also, no one else offered a refill program. AG customers receive a 25% discount if they bring empty bottles back to salons and refill them from larger dispensers. AG is still the only company in its industry that does this. AG is also the only company to offer samples in half-ounce bottles, while the competition persists with foil samplers. ‘Try-me’ bottles, in fact, have a higher perceived value and a greater capture rate.

Another innovation—this was the early ’90s—was the promise that no AG products were tested on animals, and that AG products contained herbal extracts, natural oils, vitamins, natural proteins and aromatherapy elements. They use things like silk protein, wheat, oat and human hair protein, and non-PABA based sunscreen. They offered alcohol-, wax- and oil-free formulations, and pH-balanced products made from photo-degradable and biodegradable ingredients. Products are blended in an herbal extract base and, perhaps most importantly, AG uses no sodium chloride.

Salt, it turns out, is what most other manufacturers use as a thickening agent. Salt dries out the hair and scalp. AG uses natural thickening agents, which are more expensive but make your hair feel better. It was important for AG to let people know about this, so much so that AG reps go into salons and make a drug store shampoo on the spot, using beakers and test tubes, fragrances and colours—and a box of Sifto.

AG uses very little water in its products, which means that they’re highly concentrated. So a $9 bottle of AG shampoo will last much longer than two $4 bottles of drug store shampoo. Advertising this had the effect of making professional products more affordable for, and accessible to, average consumers. AG was also able to promise consumers instant results.

Many people believe that it doesn’t matter what you put on your hair—that it’s what you put in your body that determines what your hair looks like. But we know that some products make hair look better. And we know that the wrong products can ruin hair. (You want alcohol on your hair, in a spray, but you don’t want it in setting lotions because it saps moisture. You don’t want oils because they stick to hair and can go rancid. Lanolin is not good for hair, silicone is.)

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Educating consumers and stylists about all of this has been crucial to AG’s success. But the key is in the final use.

“The first thing people do is take the cap off a product and smell it,” explains Lotte. “So it has to smell great. Next is its appearance as it’s being poured—it has to be creamy and rich-looking. Ultimately though, when someone gets in the shower, does she feel good about it? Is she going to buy it again? Having spent that money, is it giving her a good experience? We can say ‘yes’. Our products work. If we say that a product will make your hair look thicker, it will. Because our products do what we say they’ll do, we have a very high repeat performance. Which pays off for us, and for salons.”

Over the years, AG has worked hard to anticipate what consumers want. “We have an R&D team with two full-time chemists and we’re always changing ingredients, always looking for something of a higher quality,” notes Lotte. “We look at trends in fashion and hair styles, get stylist feedback and sales rep feedback about what people need and want. We don’t copy our competition because, if you do that, you’re always one step behind. We try to come up with innovative products before anyone else does.”

Packaging is also a big issue. In the early days, Lotte did all of the company’s design work. Two years ago, AG retained Vancouver’s M5 Design, which has just redesigned AG’s packaging.

“Packaging has to be something that people can relate to and find attractive,” explains Lotte. “But lately, people are into interesting packaging. As soon as new packaging comes out, consumers gravitate toward it. They’ll spend $30 on a bottle of bubble bath because they like the bottle. And now you’ll find salons with one chair and racks of product. So packaging has to make the product easy to spot. We went eight years with the same packaging, we’ve just changed it and we’re already looking at changing it two years from now. Joico recently changed its packaging and has to do it again because it wasn’t successful. We refresh our image, but we’re careful not to lose our brand image.”

The majority of AG’s marketing budget is spent on marketing directly to salons and stylists. Ads are placed in trade magazines; a PR firm, Vancouver’s Turtle & Hare, makes sure that AG’s products are regularly mentioned in fashion magazines. A web site went up last year. It’s lightly-visited and has not been a big part of the company’s marketing plans, although it will be in the future and it is about to be revamped. Its main purpose has been to attract new distributors.

AG is very deliberate in its choice of markets and distributors. One of the reasons for its success is single-line distribution, meaning that AG products go directly from the manufacturing facility in Vancouver, to contracted distributors, to salons.

One benefit of this is that the practice of ‘diversion’ is avoided. Diversion takes place when people buy products from salons for 10% more than the salons paid. Then they sell it to drug stores for a higher percentage. This is why you’ll see pieces of professional product lines in drug stores, but never the full line. In the US, diversion is harder to control because there are so many levels of distribution, but AG has been successful at controlling it.

And why would it matter if their products popped up on drug stores shelves?

“Drug stores sales are the death knell of a professional product line,” explains Lotte. “Once you start selling to drug stores and putting your product into a mass-market venue, you’re taking business from the salons and forcing  salons into competition with drug stores. The salons will drop you. Drug store sales also degrade the image and professionalism of a product, because it’s instantly associated with the cheaper, lower-quality products. So drug stores sales are absolutely contrary to our distribution plans.”

Lotte says that AG’s distribution methods are another area in which it is unique. “Most distributors carry multiple lines. So a sales rep will go into a salon and say ‘I have these lines, which one do you want to buy today?’ Our distributors can only sell AG. They can carry brushes or nail products from other companies, but AG is the only wet line they can carry. But we provide our distributors with a turnkey operation. All the p.o.p. materials, the education programs—everything that has made AG successful is passed on.”

So what’s next? New York?

“No way,” says Lotte. “We look for opportunities where there’s still opportunity, not where it’s over-crowded. Now that we know what works, we want to expand into markets that are about to take off.”

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.

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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.”

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