Press

Special Report

Beverage Business INSIGHTS
June 10, 2008
Publisher: Benj Steinman   Editor: Gerry Khermouch   Senior Editor: Jim Sullivan

How NJ Beer House Peerless Is Finding Its Way in Alien NA Territory

For beer wholesalers who've never ventured into NAs in the past, the road is often proving a tortuous one. Even those who've finely honed their execution on beer side are finding that, when it comes to NAs, they simply lack the instincts to assemble balanced, cohesive portfolio and get each brand into right retail environment. NJ Coors-and-Corona powerhouse Peerless sought to avoid that problem last yr by teaming with an NA veteran, former Snapple distributor Marion Galluccio, to form separate NA shop called Crescent Marz (BBI, Aug 17 07). Peerless pooled Paterson warehouse from Marion's northern NJ co, Cott-Passaic, with Peerless warehouse in Union; partners added warehouse further south in Pennsauken. Point guy for Peerless is longtime exec Scott Beim. "We opened up a new company," said Galluccio. "The only thing in common with Peerless and my old company is Scott and me." Talk to suppliers now, a yr into alliance, and it's clear initiative is shaping up to be exception to beer-guys-don't-do-NAs pattern. "Very impressed with them," said Steve Hersh, co-founder of Grown Up Soda (Gus), who doesn't pull punches discussing wholesalers. "They're good, honest people who know what they're doing." Deal was sealed a yr ago, Jun 1, and operation launched last Aug.

By and large, it's entirely a pre-sell operation, tho drivers carry a few extra items that they try to place at some of their chain accounts. Unit employs 15 salespeople so far, incl chain mgr, channel mgr and 2 territory mgrs. About half comprise Galluccio's former staff from Cott-Passaic, who all made transition. For new hires, co has not drawn from beer side but prefers to recruit young people with right drive and personality and train them, Scott said. But best brains from beer side incl execs like Gary Harris and Jose Cano are involved in biz. Indeed, Gus' Hersh has been particularly impressed with caliber of beer vets "who're used to selling big numbers into big accounts" - a skill that's proved highly useful on NA side. Indeed, while he expected to have to make intros at Whole Foods, he was surprised to see solid relationships already in place there. In fact, Galluccio said new natural brands often come to Crescent Marz via recommendation from Whole Foods buyers.

While some newcomers to NA biz have chosen to assemble narrow portfolios, Crescent Marz has gone other way - some joke that it's Noah's Ark of distributors, taking in 2 of everything. For example, it carries organic mate under Bombilla & Gourd brand and sweeter, more mainstream mate under Herbal Mist brand. It carries Teany and New Leaf tea lines. Recent additions have included Norwegian water import Isbre, and enhanced water SoNu, which Beim heralds as potential homerun. Calypso lemonades are selling briskly on sheer good taste. Co just signed hi-end organic tea from Harney & Sons and has found that even arcane entry like Balance Water - colorless, flavorless water reinforced with herbs gathered in Australian outback - can serve useful role penetrating accounts otherwise locked up by Coke or Pepsi. (It gets in because the soda giants have nothing like it, Scott noted.) So far, he's sole DSD house to carry Tummy Yummies from Coke Consolidated's BYB unit, which otherwise is eschewing DSD for kids' drink.

It's taking a heavily data-driven approach to refining approach, using Salient's Margin Minder software - key tool on beer side - to sniff out which products do best in which retail environments. "We're trying very hard as a technique to analyze the outlets that are most suitable initially for our various products and to use that data to build the business," Scott told BBI. "It's a slower approach. We're using whatever level of data we can get. As we grow and get more placements and data and history, we can repeat our successes rather than taking a scattershot approach. It's a tedious process, but it's worthwhile when applied correctly."

In meantime, co has also found that it helps to follow guidance of suppliers like Zico and Teany on where brands do best - say, Bikram yoga studios for brands like Zico and Balance. (Peerless certainly wasn't making big drops of Corona at yoga parlors.) Its intimate knowledge of its markets also helps. "We know where Dominicans live and breathe" - so that's where Sol Maya drinks are sent, not upscale suburban stores, Scott said. If given bev shows signs of breaking out, Crescent Marz will follow evidence to hit right new accounts.

Some worry that, for all the brands Crescent Marz is taking on, it still doesn't have clear lead horse, one with broad appeal that can carry load in opening doors for other brands. Of course, it's hard to predict which brands will ignite and perhaps that next big hit already is in warehouse. Co's insistence on serving entire state also is proving double-edged sword. That offers tempting option of serving densely populated state out of a single operation - which retail chains particularly appreciate - and helps dampen perpetual problem of transshipping. But it also forces prospective suppliers to forego better-developed operations in some parts of state - say, Briars USA unit of Anheuser-Busch wholesaler High Grade, which has notched outsize successes over yrs building brands like AriZona, Fuze, Vitaminwater and Monster. While Peerless has depth in mid part of state and Galluccio knows northern sector well, some potential suppliers are wary of entrusting co with southern NJ, since both turf and segment are new to co. Beim said Crescent Marz is taking practical approach, focusing on most populous parts of area, while fully servicing chains. In summer, he said, that means Jersey shore and towns like Freehold, Princeton and Trenton/Camden. In any case, southern NJ is not big issue: aside from ethnically focused brands, "our suppliers are focused on north Jersey and the shore," he said.

In intriguing twist, co is seeking to establish Crescent Marz itself as brand connoting healthy bevs. Distinctive green coolers are branded with Marz logo and testimony that they contain "natural and cool" items - offering greater focus than Coke or Pepsi coolers that may contain everything from regular CSDs to bottled waters or teas. Marz is also participating in events like Healthy Beverage Week at Clark HS, teaming with foodservice giant Aramark to feature 1 of its brands each day, from SoNu to Hint to Steaz.

As co execs get grasp on biz they're starting to draw some conclusions on what their suppliers ought to be doing. Foremost among them, per Scott, is not to pursue landgrabs that leave them unable to support brands. "A lot of startups need to start with a smaller geography rather than spread themselves too thin," he said.

Beim makes no pretense that building Crescent Marz into profitable operation won't require sustained effort and deep pockets. The idea, he said, is to build capability and wide enough portfolio that can keep losses in check while still satisfying suppliers. "It's not easy," he said. "It won't happen in 2 years with an organization of this caliber." Still, as he closed books on Apr, Beim noted, "we had the best month ever this last month (Apr) and May was even better." That was welcome relief, he added, from unit's 1st experience working soda biz in winter. Back in Jan, he recalled, "we locked the guns in the cabinet and hid the keys."