A Sunny Outlook
Sunny Delight Beverages Co. expands beyond its core brand of SunnyD juice-based drinks.
In 2004, SDBC was established when Boston-based private equity firm J.W. Childs acquired the SunnyD and Elations brands from Cincinnati-based Procter & Gamble. The new company’s lineup expanded with the creation of its Fruit Simple brand of smoothies in 2007. That same year, SDBC acquired Veryfine and Fruit2O brands from Kraft Foods Inc., Northfield, Ill. The companies partnered again in 2008 as SDBC became the licensed producer and marketer of Crystal Light ready-to-drink bottled beverages. In 2009, SDBC acquired Los Angeles-based Bossa Nova Beverage Group Inc., expanding into the superfruit juice category.
With lineages from large consumer packaged goods companies, SDBC’s brands as well as its employees have created a corporate culture that Cyr describes as a “highly motivated band of big company refugees.”
“We seek to become very successful at doing the things that beverage companies do, and that beverage companies do well, and not be a small part of a large packaged goods company â€” that’s not who we are,” Cyr says. “That dominates our thoughts every day and how we seek to do what the big companies that we used to be part of cannot do. And we’ve been successful at that.”
At the end of 2010, the company announced a $70 million investment in its North American production facilities. In addition, the company divested its Western European Sunny Delight juice drink business to Orangina Schweppes, which is owned by Japanese company The Suntory Group.
“The European markets were very good markets for us,” Cyr says. “We had a very strong presence there, but we frankly viewed our opportunities in North America to be much bigger and much more significant, so it helped us bring focus.”
Its production investments include upgrades to its five North American manufacturing facilities as well as the purchase of a plant in Sherman, Texas, from The J.M. Smucker Co., Orrville, Ohio. SDBC had been leasing space at the Sherman site since 2004 for SunnyD production. It also maintains facilities in Anaheim, Calif.; Atlanta; Littleton, Mass.; and South Brunswick, N.J.
The investment was a result of a year-long look at SDBC’s supply chain, the bulk of which was inherited from Procter & Gamble and was installed between 1990 and 1994, Cyr says.
“Since then, several important changes have happened,” he says. “One is the consumer preferences for our different packages changed. We sold relatively few 1 gallon bottles back in 1994, and today, gallon bottles are more than half of our business. The second thing that changed is that technology has changed. The speed of filling lines that you could buy that produce high-quality products has grown dramatically. You can buy much higher speed fillers, which are inherently more efficient for us. The third thing that has changed is our customer mix. Who are the customers that we’re servicing? Where do we ship to them? What are their expectations?”
Hip to be square
As part of the supply chain analysis, SDBC created a new package that would complement its planned supply chain upgrades. The company spent 18 months designing a square gallon bottle, which is its first departure from SunnyD’s iconic cylindrical bottle that launched in the ‘90s.
The new bottle began shipping to customers served by the Texas plant at the end of last month, with a national rollout scheduled this year. The square gallon bottle was designed to better serve consumers as well as the company’s customers, Cyr explains.
“It’s economical, it’s efficient, it’s environmental and it’s ergonomic,” he says. “It’s a winning proposition for what moms want. They love the gallon bottle because it’s the most economic package that we sell, but they want to be able to have their kids pour it. So we’ve come up with a product that’s more ergonomic. It’s the first time that we’ve moved the spout off-center and so the center of gravity works better for pouring.”
The square gallon bottle also provides benefits to SDBC’s supply chain. The square design provides more stability in cases, so the company can pack in trays or high wall cases that use less cardboard for shipping.
At retail, the new compact design provides 22 percent more products on the shelf, which helps to eliminate out of stocks, Cyr says. The design also solves a label display problem that occurred frequently with the round bottle, says Rick Zimmerman, senior vice president of marketing and innovation for SDBC.
“Our stuff moves quickly so by squaring it up, we now have a bottle that has a registered label, meaning it’s always facing forward,” he says. “The shelf impact is absolutely humongous, and it allows us to better differentiate our flavors because we have a lot of flavors.”
The benefits of the new square gallon package’s design build on the sustainability goals that the company set for itself first in 2008. SDBC began to study sustainability after a 2007 visit to a summit hosted by Wal-Mart, Cyr says. Although the trend was new to them, SDBC realized that many of the principles aligned with the lean manufacturing policy it already had in place, he says.
“We thought this a very simple thing for us to do,” Cyr says. “It’s important to our customer. It leverages the focus that we have in lean [manufacturing], and guess what? Our consumers are starting to demonstrate interest in how we do against these things. So we began our journey.”
In 2008, the company rolled out its sustainability program, which is organized around three pillars: economic, environmental and social. The economic goals focused on increasing the company’s portfolio of wholesome products, environmental was organized around waste elimination and social initiatives aimed to improve the communities in which SDBC lives and operates as well as an employee wellness program, says Ellen Iobst, senior vice president of global manufacturing and technology for SDBC.
The environmental goals included 25 percent reductions in usage of water, electricity and its carbon footprint. In water usage, the quarter decrease equates to 44.5 million gallons. The decrease in electricity consumption is equivalent to 12.5 million kilowatt hours, and cutting its carbon footprint included eliminating 2.3 million pounds of waste sent to landfills, Iobst says.
“In our water usage, we’ve got two plants that have achieved their part of that goal, and the other plants are still working on the goal,” Iobst says. “On our energy, we have one plant that hit the goal, and one is at 19 percent. The others are still focused on reduction.”
The company has reduced packaging materials by almost 10 million pounds, Iobst says. The reduction includes 6.6 million pounds of paper and about 3 million pounds of plastic from bottles and caps, she says.
One of the goals that it has achieved was the one it presumed would be the most difficult to obtain, Iobst says.
“On our zero waste to landfill, which when we set this goal, we thought it would be the hardest goal to achieve because how can you get to zero?” she says. “I mean no waste to landfill. We got to zero in two years; it was three years ahead of the goal. In April of 2010, we got there and we started the program in 2008.”
Going forward, the company is looking at how to maintain the zero waste to landfill benchmark, she says.
“One of the things that we’ve learned is that staying zero waste is a challenge in itself,” she says. “We have new projects. We have new challenges to figure out waste streams for those and those new producers of waste. And we have new initiatives or new products that we’ve added that make that very challenging.”
In addition, SDBC has added a numeric goal to its mission to reduce its environmental impact: the company aims to achieve 25 million pounds of packaging reduction by 2015, Iobst says. It also hopes to quantify its community recycling initiatives.
This year, SDBC partnered with Keep America Beautiful and its local arm, Keep Cincinnati Beautiful to implement a program to increase recycling in Cincinnati schools. The “Bin It 2 Win It” program involved six area schools and had an education component and a challenge to schools to increase the amount it recycles. SDBC plans to expand the program to areas near each one of its sites, Iobst says.
As part of its overall sustainability goals, SDBC announced a plan in 2008 to reduce the average calories in its portfolio of products. The company planned to lower the calorie count of its beverages from 92 calories in each 8-ounce serving to 50 calories in each serving by 2015. It accomplished its goal this year, Cyr says.
“We’ve taken about 45 percent of the calories out of our lineup of products, not just SunnyD,” he says. “It’s our whole portfolio of products. We’ve continually focused on improving the products that we make, so taking out as much sugar as we can without impacting the quality of the product. The second thing that we’ve done is some product innovation that has helped us create some new lower calorie products. The third thing that we’ve done is that we’ve deliberately marketed and promoted those things that are naturally lower in calories.”
To achieve its 45 percent calorie reduction, SDBC’s research and development team approached innovation one product and flavor at a time, Zimmerman says.
“The first thing is to make sure that your current consumers cannot tell the difference in the flavor,” he explains. “When we do this, it’s by taking sugar out, putting low calorie or no calorie sweeteners in, and flavor enhancers in. Then we have several steps that we take. The first thing that we do is we formulate the new product, and we do what’s called a triangle taste test among our expert panelists.”
The taste test includes a combination of the full calorie option and reformulated product, and asks expert tasters which one is different with the aim of a 33 percent result on each, Zimmerman says. The taste test then expands to 100 consumers. After formulation adjustments, the company sends samples to representative users nationwide to see whether they can tell the difference.
As Cyr mentioned, the company also promotes the wholesomeness of products across its portfolio. In addition to lowering the sugar content in SunnyD, the company’s portfolio includes antioxidant-rich Bossa Nova and zero calorie Fruit2O. Its Veryfine brand also gives the company a position in the niches of the juice drink category in which SunnyD might not be able to fit, Cyr says.
The company’s portfolio also offers choices that answer specific needs, such as Elations, which is targeted at aging baby boomers, who have joint pain, Zimmerman says.
“The sensibilities of an aging baby boomer are different than, say, a mom with young kids, which would be SunnyD’s target audience,” he says. “Or different than a 30-something who is searching for the highest antioxidant quality beverage, which would be the Bossa Nova target. It’s a completely different target.”
Age also is a factor when it comes to SunnyD’s innovation. Fifty percent of SunnyD’s consumption is by consumers older than 21, and the company noticed a decrease in consumption by teenagers since the 1990s, Zimmerman says.
SDBC views the brand as for the young and the young at heart, so it is looking into ways to further appeal to those consumers, such as adding pulp and offering a less sweet flavor profile, he says.
To make sure its innovation is staying in line with consumers, the company stays in touch with its core audience of moms and children, Cyr says. In addition, Zimmerman monitors flavor trends, which he sees emerging from the ethnic populations in the United States.
“If you take a look at emerging flavor tastes among Hispanics, African-Americans and Asians, they are different, and we have opportunities to provide new flavors within the SunnyD brand franchise to those tastes,” he says. “For example, Orange-Strawberry is one of our top blend flavors â€” that didn’t even exist a few years ago.”
For the SunnyD brand, blends provide flexibility in flavor innovation.
“As you take a look at things such as pineapple, guava and passionfruit, there are SunnyD ways of doing that,” Zimmerman says. “We’ll never have just Passionfruit, but Orange-Passionfruit or Orange-Guava because SunnyD even going back to 1964 was a blend of five different juices. So you’d have grapefruit, lemon, orange, apple and tangerine in a citrus punch. Well, that gives you the freedom then to incorporate new flavors as consumers change their tastes.”
SDBC’s portfolio also offers a range of options for incorporating trendy new flavors, such as cucumber-basil or mojito-inspired flavors. However, the company recognizes which brands might be the best fit for certain flavors, Zimmerman says, noting that mojito-inspired profiles would be unacceptable in SunnyD, but likely accepted by Fruit2O consumers.
Shortly after acquiring Fruit2O from Kraft, SDBC reformulated the top-selling Grape variety to be less sweet. Zimmerman says the feedback from fans was swift; they demanded a return to the previous formulation. Since then, SDBC has been careful not to tinker with the zero calorie brand’s No. 1 seller Grape and No. 2 seller Strawberry, but it does see opportunities, such as mojito-inspired flavor combinations or complex grape variations, similar to wine varieties.
For its Bossa Nova platform, innovation is not based so much on flavor, but what the next antioxidant-rich superfruit might be. Zimmerman notes yumberry and maqui berry are on the radar as are superfruit combinations. This month, Bossa Nova will begin its rollout of an Organic Acai Pomegranate juice variety. Like the remainder of the Bossa Nova lineup, Organic Acai Pomegranate will be available in the refrigerated section of the produce department. SDBC also is considering lowering the calorie count of its Bossa Nova beverages because consumers, “don’t want to drink their calories,” Zimmerman says. “They want to eat their calories.”
Additional forms are a focus for SDBC’s Elations brand. The fruit flavored dietary supplement beverage is formulated with glucosamine and chondroitin to help consumers alleviate joint pain. SDBC currently offers Elations in ready-to-drink and stick pack forms and is considering shots as well as new flavors and formulations.
“We’re always going to focus on joint health,” Zimmerman says. “It’s all about joint health, but there might be some efficacious dietary supplements that you might want to add on top of the glucosamine and chondroitin.”
As evidenced by SunnyD’s new square gallon bottle, SDBC has placed an emphasis on packaging innovation.
“We’re very focused on package innovation that services expanding channel needs as well as consumption occasion needs,” Cyr says. “We’ve got great products, and we’ve got good products for a variety of occasions. Now we just need to put them in the right packages to meet the needs of the different channels, the different kinds of customers and the different consumers’ consumption occasions. We’ve had great success when we’ve done that.”
A couple of years ago, SDBC created a 48-ounce SunnyD package specifically for the dollar store channel. Retailing for $1, the 48-ounce bottle has helped the company grow sales in dollar stores, which now contribute to 6 to 8 percent of SDBC’s business, Zimmerman says. The company also created a 35 percent orange juice drink under its Veryfine brand for distribution in discount retailers, he says.
The company also identified an opportunity in immediate consumption channels, such as convenience stores and chilled grab-and-go cases in grocery stores, where it offers a 16-ounce PET package. The package is available through independent distributors as well as through the Dr Pepper Snapple Group distribution network.
“We look to expand that business by coming out with more packages, more flavors and more configurations that meet the needs of that channel,” Cyr says.
The company recently launched Raspberry Lemonade and Lemon-Lime varieties in 16-ounce PET packages. SDBC has seen acceptance for the flavors from its distribution partners, and hopes to continue refreshing its flavor lineup each year, Zimmerman says.
Noticing the opportunities in the sector, the company created a dedicated sales force for the immediate consumption outlets. SDBC is expanding this team to increase availability beyond its current 50,000 immediate consumption locations. The new sales representatives will focus on immediate consumption retail accounts in some dense metropolitan areas, Cyr says.
“If we get that system working, we’ll put more of our products through that system and do more innovation on brands that we already have there,” he says. “But our goal is to expand our footprint, our presence and the points of distribution that we have in the immediate consumption channel very significantly. The last two years have proven that it’s a payout investment, and we’re just going to keep investing in it.”
With its success in dollar stores and immediate consumption outlets, SDBC also is targeting additional channels for expansion. The company sees opportunities in foodservice, discount retailers and schools, Cyr says.
“Our focus is to look at each of the channels as you can and figure out what are the needs?” he says. “Do our consumers shop there? What are the needs that they have when they shop there? What are the needs of the customers in that channel? And then, can we meet those needs as well? If so, then we’ll put together a proposition and try to meet it. If we can’t, we’ll move on to the next one.”
As it continues to carve out a niche as a beverage company, SDBC is content operating in its current space. Cyr characterizes SDBC as operating in the space between entrepreneurs and the largest beverage companies. Its specialty, he says, is taking brands in the
$10 million range and growing them to between $250 million to $500 million and expanding brands from 5,000 points of distribution to 100,000 to 150,000 outlets.
“We seek to live in that space in between where we have the depth, the scale and the capability that you’d expect of a very sophisticated beverage company,” he says. “The manufacturing operations, distribution and logistics that are very efficient, but at the same time, we are small enough and nimble enough that we can manage brands that would be much, much smaller and nurture them and grow them. We seek to live in that space, and stand out from the big company crowd or the emerging crowd of a lot of small people by being very unique and working in that space in between.”