- Off the Coast of Massachusetts
- The Founders
- New Age Beverages
- Initial Distribution
- Tom & Tom Distribution
- Product Development and Packaging
- Success Factors
- Future Product and Company Plans
Off the Coast of Massachusetts
From the historic shores of Nantucket Island, two college friends and their love for that island embarked on a journey that would lift them from the seaside shanty that their marine service business operated from, to a nationally distributed new age beverage company competing with the likes of Snapple, Fruitopia, and Arizona Ice Tea.
Tom First and Tom Scott met each other at Brown University, and an intriguing similarity the two men shared was their extensive time spent on Nantucket Island during summers, and the desire to maintain a lifestyle on the island that they had shared for so long. Their endeavors after graduation from Brown led them to reside on the island where they employed themselves with a variety of small business efforts focused around the marine and boating industry of the island. What evolved was a small business called Allserve that sold groceries and convenience services to the boats that visited the harbor in Nantucket the two Toms had set up shop.
On a winter night in the late 80's, Tom First was experimenting in his house with a blender and some fruit and juice products to recreate a peach beverage he had developed an affection for during a vacation to Europe. Upon completing the concoction the notion came to the two men that this product could be bottled and sold from their convenience store to the customers on the Nantucket harbor. This product concept ultimately donned the name of Nantucket Nectars and became an early entry in to the then non-existent segment of the beverage industry called New Age Beverages. In six years the founders have been able to successfully mass produce and mass market their beverage product to the extent of being carried in retail outlets in over 30 states, and to reach revenues in 1995 of $20MM dollars. As a result of this growth, the company has moved off of Nantucket Island to its current headquarters in Boston, MA and the company has grown in size to seventy-five employees.
The EM visited with Tom First and explored the journey that Nantucket Nectars has been on since the cold winter night on Nantucket. Topics that were covered include a host of issues the fledgling company went through to be where there are today including production issues, marketing plans, distribution efforts, supplier needs, and all of the woes that go with such activities. What resulted was a fascinating story of a small company that worked its way through a new-born industry to become one of the earlier and more significant players. Ultimately the company became positioned as one of the favorite brands in that market, beating out in various aspects more powerful and influencial brands including Snapple, Coke, Pepsi and Arizona Ice Tea.
Beginnings back to top of page
The best way to describe the success and growth of Nantucket Nectars is with the word perseverance. In fact, as the founders of Nantucket Nectars learned from a radio interview with the president of the Young Entrepreneurs Association, perseverance is the trait most applicable to an entrepreneur trying to begin a successful venture. As Tom First put it, "Entrepreneur's never fail, they quit. An entrepreneur fails all the time, they just have to continue trying another way." Fortunately for them, their strong trait of perseverance helped them grow their dock side company into the successful business it is today. By the tales of their early days of operations, these two founders were able to overcome a lot of adversity to be where they are today.
Tom First and Tom Scott had spent many years of their lives on Nantucket Island and had developed a mutual desire to create a livelihood for themselves there. The Allserve service store was their first coherent attempt at trying to earn a living on the island. In fact, when speaking with Tom First, he reflects on what he considers his true desire for a livelihood which is to work on and around boats, "You put me on a boat to work on its engine or to service it and that's where I feel most at home." It was in that spirit that Allserve was formed to feed their desire to work in the marine industry in the place they very much enjoyed living.
From this small store on the dock of a Nantucket harbor Allserve established a small but effective retail outlet to the consumers that sailed into the harbor that were in need of supplies and service for their sailing trips. It was later on that this distribution outlet turned out to be the proving ground and channel that Nantucket Nectars would be initially introduced in.
The Founders back to top of page
First and Scott were graduates of Brown University when they embarked on their full time lifestyles on Nantucket Island. First is a Massachusetts native and Scott hails from the state of Maryland. Upon their graduation from Brown, both majoring in History, they forsook the corporate route and did no interviewing for jobs in New York like many of their friends had embarked on. First cites he did not wish to pursue that route for a lifestyle, while his partner once said he did not ever want to have to create a resume. So underneath their romantic affection for the life on an island, the two had motivations of being the masters of their own destiny and to build something that they could call their own and help themselves to survive. "Initially for the first one and a half years I was driven by the desire to have a company and survive on Nantucket."
In their current organization First and Scott prefer to call themselves by the titles of "Co-Everything". On a more corporate perspective they go by the titles of Founders of the company, and amidst the growth of the organization they have split the responsibilities to allow each one to control the aspects of the business that they prefer. First runs the sales and operations side of the company while Scott runs the marketing side of the business. First's duties include managing the accounting and production operations,while upwards of 80 percent of his time is spent on the road selling, setting up new distributors, opening accounts and working on major national accounts.
Scott on the other hand has developed a strong affection for the marketing aspects of the business. In fact, the company's success and attempts to expand in various national areas has led Scott to relocate to New York where he is setting up a marketing organization to assist in the product's expansion. "New York has become a big popular center for us. We felt the product was very New England centric so we are now trying to move it out to the New Jersey and Washington DC area and beyond."
New Age Beverages back to top of page
It was an evening in the winter of 1989 that Tom First created the first inklings of what was to become Nantucket Nectars. From a trip that he took to Spain he had become very fond of a peach beverage that he had consumed on a regular basis while he was there. On that evening in 1989 First and Scott began concocting an imitation of that beverage for themselves to enjoy back in their homeland. First recounts that time with vivid memories of the beach house they were living in and the blender work he performed that night to create his product. From the results of that home formulation, First and Scott began to ponder the possibility of making that product in larger quantities to sell out of their Allserve service store.
They began to produce the beverage, pasteurize and bottle it themselves. Nantucket Nectars was introduced to the public in the summer of 1990 from the Allserve store as well as being distributed on the island from two other retail stores. First views their initial efforts as what a large company would consider test marketing, "We were getting the product on the street to see what people thought about the fruit juice flavors and thought about the name." Unbeknownst to them, First and Scott had created a product that would fit into the quick to grow beverage category called "New Age Beverages". "We had never heard of it, and the consumers had never heard of it. It did not exist." The only thing that existed at that time according to First were products from New York Seltzer and Soho. There was also a product localized to the mid-Atlantic states called Elliot's Amazing, but nothing of the nature of Snapple Teas or Clearly Canadian.
The signals that they were on to something potentially big came from the customers that drank their beverages and enjoyed it. "We found out quickly that people were excited about high quality fruit juice drinks. Something that had personality to it and wasn't a commodity item like Veryfine or Ocean Spray." To capitalize on this consumer demand, First and Scott decided to mass produce their product in commercial facilities. With personal savings and family loans, First and Scott were able to fund their first large product run. 1,400 cases were produced at the cost of $9,000. Those cases were only able to last for a few weeks and added to the excitement of First and Scott that they had developed a marketable consumer product concept. "Two years into the company I remember at the time thinking this thing was going to be big. I expected to make it at the time...I always believed we would which helped drive me."
Initial Distribution back to top of page
When asked how the product was expanded to distribution areas around the island and onto the mainland, First answered with the words that many a growing entrepreneur would dream to hear, "Other people came to us and asked us if they could sell it." The popularity of their product caused them somewhat of a dilemma in that their goals were still set on trying to build a company on Nantucket. But what they found was that the Nantucket Nectars was pulling them out of Nantucket. "First there was the ice distributor on Cape Cod that was warehousing their product for us that asked if he could distribute it. Then there were people on Martha's Vineyard that asked if they could distribute it. We said sure to help get the name out." There were even offers to have the product distributed into Japan. From all this activity First and Scott realized the potential for their product and began to plan how to capitalize on the demand, "From these influences you start to think about what you can do with it and what you want to have happen. Each thing built the strength of the product and told us if we could sell it well in one market, why not another."
Tom & Tom Distribution back to top of page
It was time to bring Nantucket Nectars out into the mainland to give it an opportunity to grow in all the potential new markets that First and Scott had envisioned. There was just one slight problem according to First, "We did not have a plan." The company had been able to establish itself with the necessary resources and partners to allow them have mass production and packaging and warehousing. The use of out of state bottlers and supplier networks gave them the backbone for the production of the product. What was in a very undeveloped status was the distribution channels. But to avert his issue, Tom and Tom took matters into their own hands, "We did not have the money to give the product away or to advertise it when it came to the promotional aspects, so for getting the product out into the market we created another segment to our business which were our own distribution systems."
"We drove the company by spending money and putting it on the shelves ourselves. We created our own distribution in Washington DC and in Boston. We had our own trucks and worked with the retailers ourselves." In fact, some of the motivation to create their own distribution channels was based on their displeasure with the service from the distributors they had employed prior to setting up their own systems. The level of expectations they had for this service drove them to the old philosophy of if you want something done right do it yourself. "We are very detail oriented and we serviced the hell out of our accounts."
What ultimately drove them to doing their own distribution was the most basic instinct of all when it comes to a new business' operations, survival. "Getting into distribution was luck but also a survival thing. We had the choice of either going out of business or putting stuff on the shelf and turning it into green. Their displeasure with their local distributor led them to getting the rights to distribute their own products within the New England region. "That led us to also getting the rights to distribute other products through our systems such as Arizona Ice Teas. For a while we had a large distribution company including fifteen trucks from our warehouse and many other product lines." This strategy of taking on a new aspect of the entire product distribution process was done with the potential in mind that if their product ends up not selling well, perhaps they could become successful distributors.
Fortunately for Nantucket Nectars, the results of the self distribution efforts proved that their own product was the one making the most profit for them. "We slowly learned that we were making money on our own product, and losing money in the distribution." Despite the economic difficulties of the distribution business, the efforts they undertook proved to be beneficial to the promotion and growth of Nantucket Nectars, "Distributing helped to promote the brand."
From these revelations First and Scott decided to get out of the distribution business to concentrate solely on the growth of their Nantucket Nectars products. "At the time we were handling five different distribution channels, and we made a one year plan to get out of the distribution business. We sold it and the whole proposition probably netted out at a loss over the couple of years that we did it. But overall it was a gain because our product exploded as a result of it."
Product Development and P ackaging back to top of page
All of the product formulation and new product development efforts for Nantucket Nectars takes place at their headquarters in Boston. According to First, "It is not that complicated. It is one of the first things that I learned to do because we could not afford to have other people do it." The freedom and flexibility of doing it under his own roof adds to the appeal of this for First, and allows him to start sharing his knowledge of this with other employees to expand the knowledgeable and amount of people involved in the process. There is no doubt that this has been successful for them because First views the competition and sees that other companies are doing what they have done.
It is evident that the six years that First has been involved with Nantucket Nectars he has developed an in depth and expansive knowledge on many facets of a new business venture. His understanding of changing market needs and constant product modifications to fit those needs are as evident now as they were when First and Scott were trying to tune their Nantucket Nectars to become established in the market place in the early 1990's. One of the biggest issues the company faced was the quality and effectiveness of their packaging. It became evident to First and Scott when they were early on in their commercialization that their packaging was one of the weaker elements of their product offering. "When we first started the product did not sell very well and we largely attribute that to the packaging not being very good." Therefore, from what they had to offer, First and Scott drove their product by emphasizing an aspect to the business they felt they could most effectively influence which was the distribution described previously.
As further proof of First's understanding of forward thinking for his business and the pitfalls of an entrepreneur not considering outside opinions, his considerations for new product packaging from a marketing expert early on revealed to him his need for constant consideration of changes to improve a product offering. Early in the 1990's First met with an associate of his wife who was a marketing expert and wanted to discuss the goings on at Nantucket Nectars. From that meeting the marketing person asked First if he had ever considered changing product's packaging. His answer to that is what he calls a typical defensive answer from an entrepreneur, "We felt the packaging at that time was a strong suit at the time and they were doing well with the brand name." Later that day, First reflected on the conversation and came to an interesting conclusion, "I realized I had not answered her question as to whether we had ever considered changing the packaging, I just defended my current position. The true answer to the question was no, I had not considered changing my packaging." The next day First faced his partner and told him they should consider making a change to the packaging. This resulted in what First considers the catalyst to the efforts to change their packaging. It also resulted in a lesson First pointed out which is, "Sometimes an entrepreneur's biggest enemy is himself." Very true when one considers why changes to something that is proving successful can be the last thing that is on an entrepreneur's mind. But it is the consideration of those changes that helps a company and its product offering stay tuned to the market needs and demands, and allows them to adjust to such changes so the company can operate in constantly varying environments.
In 1992 First and Scott raised capital to further the growth of the company. 50% of the business was sold to a private investor that has been described as the chairman of a $1 billion dollar-plus company. From these proceeds First and Scott put the money into redesigning the packaging. The results of their package redesign efforts were phenomenal and as First describes it, "We went from a product that we pushed off the shelf to a product that pulled itself off the shelf. That's a one in a million - coming up with a package that pulls itself off the shelf in their industry." First and Scott's package redesign efforts folded in to a broader strategy that they wanted to include in the changes to their packaging which was to develop brand equity. "We needed to build brand equity and it had to come from our vision. For it to be real it had to come from us. Our graphic designer knew that and fulfilled it with the new packaging."
Problems back to top of page
On the theme of perseverance that these two entrepreneurs have demonstrated throughout their company's growth, no where is it more evident than the troubles they have faced in growing the company, and the personal sacrifices and challenges they have overcome to be where they are today. "Looking back at some of the earlier times I can't believe we stayed in business. There have been several moments when we looked at each other and said is enough enough?"
When asked if there were any particular problems that stood out most evidently during their years of business, First could not think of any one because according to him there have been so many. "We have failed 5 million times! We have made many mistakes such as having inventory stolen, the wrong glass for packaging, incorrect inventory counts, delivery trucks stolen, delivery trucks vandalized, and even our product formulas stolen from our offices. We have done things because we did not understand the business well enough to make a wise business decision." But in the face of such setbacks comes the knowledge to try and prevent it a second time. A very metaphor First's that has come from his partner sums up such troubles rather well, "The skin on a scar is a lot stronger than your normal skin. We have a lot of scars." Or, put into terms that all entrepreneur's can relate to, "You make a mistake, you lose real money, you don't make that mistake again."
Success Factors back to top of page
As First has had time to reflect on his company's success, he has generated a strong self interest in learning and applying the marketing philosophies formulated by other successful businesses before him. Of course being in charge of his company's sales process, this element of gathering marketing knowledge also helps him develop new strategies to utilize in continuing the growth of Nantucket Nectars. "I am fascinated by other people's stories. When you grow as quickly as we did you don't get a perspective on things until six months later. Reading about other people's stories helps me understand my own story. I can read the story of a company that has become successful and say, 'God, these guys went through that too,' and I can say at least I know I wasn't an idiot. I read the stories of people like the founders of Nike and I laugh. A lot of this is not brain surgery, it's survival."
When the beginnings of the larger operations of Nantucket Nectars are looked at, one can certainly see that the desire to survive has been a strong motivator for the two founders, "We did not have any capital nor a business plan. We did not have a marketing strategy. We did not have one damn thing. All I did was get on the phone and convince people that we were going to be a huge beverage company one day so why don't you sell me the resources I need. Give two guys that have absolutely no credit, the credit to buy 200,000 cases of glass - and I did it. Nobody in their right mind would think they could go do that. I had us with all our suppliers on credit for 30 days and we didn't have a business...we had a tax ID number and that was it." Suffice it to say that their confidence in their product offering drove their efforts to search for resources and business partners to get the product into mass production.
An added benefit to the relationship First and Scott developed with their private investor was one of a knowledgeable business person that allowed them run the company as they saw fit after the partnership began, and the offering of advise to First and Scott as they sought out his assistance. "The investor was a big help. In 1992 when we sold half of the company to this guy, it just turned out that he was also a phenomenal human being that let us run the company, and is an advisor when we want him to be."
Advice is something that First and Scott get a lot of. When visiting a bar or eating at a restaurant plenty of people offer advice to them to improve products or business activities. Amidst this deluge of advise, First and Scott have implemented a philosophy of taking a certain input deeply to heart, the input from their customers. "We get hundreds of letters, over a hundred a week. We respond to every letter and we listen to every letter. A lot are similar, sincere and sound advise, and we read them. We read them, think about it, then answer."
An important aspect to First's views on efforts for a successful business encompasses having an open mind to all aspects of the business and the willingness to examine them and to determine if there are opportunities for improvement. "Consider everything no matter what: your accounting practices, your sales style and technique, your sales team, your packaging, marketing, advertising, PR, and production. If you haven't really stretched your brain in everyone of those aspects then you are missing something. We constantly go back to the table on everything."
This all encompassing approach also applies to their views on the product itself and how it is all put together and marketed, "We look at what's in the bottle, the bottle itself, the label, the cap and what is driving them forward." When it comes to the marketing of the product, they take their strategies by the example of an extremely large and successful company mentioned before which is Nike, "Nike never shows a sneaker of theirs against the one of a competitor. Their advertising is all about attitude and lifestyle. Nantucket Nectars has been marketed with our label, radios ads, and advertising with a whole feel of young, exciting, quality health food with a story, and people love that. I don't just market apple juice."
Future Product and Company Plans back to top of page
"We do have plans for product extensions. We have new, larger size bottles coming out in the next month and a half, and we have a new product introduction coming out within the next several months. As of now we haven't begun to do things with our products yet." When asked if the entrepreneurial bug has opened his eyes to the possibility of other ventures, First replied very quickly in the affirmative, "We have things on the table right now for new industries and ventures." This includes Scott his current partner plus some other participants. The intention is to employ their developed business and marketing skills to apply to different business concepts. To stay with marketing and wholesaling but not necessarily in the beverage business.
The new age beverage business has become extremely crowded and competitive since the early days on their dock in Nantucket. One might think that trying to compete with huge corporations with bottomless pits of money to put into new product development and advertising would be a daunting task for a small company to take on. But challenges are nothing new to Tom First and Tom Scott. They fully intend to continue driving their successful product line head on against these larger competitors, and to open new markets to strengthen their positions. To them accomplishing this means to never stay satisfied or complacent with the way the situation is. To always look for improvement and new opportunity to improve the products offering and exposure to the marketplace. "We just going to keep focusing on product, packaging, customer service, quality. Keep doing what we're doing. I think it's hard to stop that." Their intention is to just keep shooting high and stay very aware of the industry and the competitors. To them there is always an opportunity despite the fact that its crowded, "We have a distinct advantage of being flexible. We are reactive and can come up with a new product very quickly." As a final note, a last piece of advice from First when considering the competition with larger companies, " Know what your advantages are and use it against the big guys." - ###
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