Nor-Cal Beverage’s diversified business
Family-owned business expands beyond co-packing
Shannon Deary-Bell, president and chief executive officer of Nor-Cal Beverage Co. Inc.
It’s one of the largest independent bottlers in California, but Nor-Cal Beverage Co. Inc., Sacramento, Calif., is more than just a contract packager. In addition to its successful co-packing business, which operates production facilities in Sacramento and Anaheim, Nor-Cal also is an Anheuser-Busch distributor in Northern California and markets its own Go Girl line of energy drinks.
The family-owned company was started by Roy G. Deary in 1937 as a franchise of Hires Bottling Co., explains Deary’s granddaughter and current president and chief executive officer of Nor-Cal Beverage, Shannon Deary-Bell. The franchise bottled and distributed Canada Dry, Dr Pepper and RC Cola brands in the Sacramento area.
“When my grandfather started it, he probably did about 20,000 cases annually, and they were all glass bottles,” Deary-Bell says. “And today, we can do 225,000 cases a day out of both plants.”
The company estimates its Sacramento plant will produce nearly 23 million cases this year, and its Anaheim facility is on track to manufacture 25 million cases in 2011.
Nor-Cal Beverage entered the contract packing business in the 1980s through an agreement with a local supermarket chain to produce a line of private label beverages packaged in cans, Deary-Bell says.
Opportunity also arose as Nor-Cal was packaging its own Sun Glow brand on its aseptic fillers, and in 1993, The Coca-Cola Co. approached Nor-Cal to aseptically package its line of Minute Maid juice products.
“Sun Glow wasn’t really getting any traction and this big company came in and we said, ‘Hey, let’s build this relationship,’” Deary-Bell explains. “We started doing a really good job for them. We started putting in faster equipment, better technology and all of that.”
Two years later, The Coca-Cola Co. offered to sell its Anaheim production plant to Nor-Cal. The co-packer passed on the acquisition then, but when the facility became available in 1999, it entered into a three-year lease with an option to buy what has now become its Anaheim production facility.
At the time, the company was unsure about expanding its business 600 miles south of its headquarters, Deary-Bell says. However, the investment in the Anaheim facility helped the company to realize the opportunities of being a large co-packing company. Its business also grew through its customer relationships, which include The Coca-Cola Co., Ferolito, Vultaggio & Sons’ Arizona brand, and Hansen Natural’s juices and Monster Energy Drink brand.
“We are very fortunate to have the customers that we have in our portfolio because they are the market leaders, the Coca-Cola’s of the world and Hansen’s and Arizona,” Deary-Bell says. “As they bring out new brands, we have to invest with them, which is good for us. It’s more volume, but it is a capital-intensive business — a highly capital-intensive business. But if you have a very strong base of customers and you do a good job for them, then it’s a win-win for both companies.”
Realizing the possibilities of co-packing, the company re-evaluated its organization, which was still running its franchise soft drink business.
In March 2007, the company decided to sell the carbonated soft drink distribution and sales business in Sacramento, which focused on Dr Pepper, Canada Dry, RC Cola and Squirt brands. The sale of the soft drink franchise did not come easily, however, Deary-Bell says.
“When we made that decision at the board, I think everyone at that table had tears in their eyes, but in the long run it was the smartest decision we ever made,” she says.
With the split, Nor-Cal invested $52 million into its Sacramento facility to improve its infrastructure for
co-packing clients. It also has invested more than
$50 million into the Anaheim production plant (see Plant Focus article on page 20 for more on the facility).
Importance of diversification
In addition to its co-packing business, Nor-Cal also maintains the Anheuser-Busch distributorship that the family began in the late 1940s. Initially, the company handled Olympia and Hamm’s beer brands, and its portfolio later grew to include Anheuser-Busch and Crown Imports brands.
The company distributes about 4 million cases of beer a year in the Lake Tahoe region and western slopes of the Sierra Nevada mountains, Deary-Bell says. In keeping with the family business, Deary-Bell’s brother, Tim Deary is vice president of beer operations for the company.
“Beer is actually a staple in our business,” she says. “We’ve had it for a long time. It’s been successful for us and we’ve continued to add territory to our portfolio, and it’s been strategic for our business. It’s like an annuity, to be honest with you, it just keeps increasing in value.”
In addition to the beer distribution company, Nor-Cal also operates an equipment solutions department that maintains and services the walk-in boxes at local convenience stores. The divisions are all part of its diversified business model, Deary-Bell says.
“It’s healthy for a business to have other entities and not have all your eggs in one basket — and that’s been our philosophy,” she says.
In late 2005, Nor-Cal also became a brand marketer when it partnered with entrepreneur Darin Ezra for the U.S. rights to the Go Girl brand of energy drink. Ezra, who managed Kabbalah energy drink at the time, approached Nor-Cal with the idea of the drink, which was already available in Ezra’s native South Africa.
The company changed Go Girl’s formula and packaging, moving from a glass bottle to sleek aluminum can for the U.S. market. In addition, Nor-Cal also opted to donate a portion of the proceeds of each case sold to breast cancer and ovarian cancer research foundations. Soon after the U.S. launch of the energy drink, Nor-Cal bought Ezra out as a partner and became the sole owner of Go Girl Energy Drink.
The Go Girl line is available in Sugar-Free, Bliss that has a Peach Tea flavor and Glo featuring a Pomegranate and Star Fruit flavor. Go Girl Glo also contains aloe vera, calcium, vitamin E, Super Citrimax and CoQ10. Deary-Bell’s cousin, Grant Deary, is vice president of external affairs and the Go Girl brand.
Nor-Cal recently added to the Go Girl line with a Lemon Drop Sugar-Free variety and a Pomegranate Blueberry Tea option.
“It’s been very successful,” Deary-Bell says. “It’s a niche. When women find out about it, they are very much behind the brand.”
For a co-packer, launching its own beverage has been a challenge, she says.
“We’re not a marketing company,” Deary-Bell says. “We never have been a marketing company. So it’s been somewhat of a new territory for us, but we have a lot of customers that are marketing companies, and we’re trying to follow suit. They’ve been a good resource for us in many aspects.”
Go Girl currently is available in eight states through direct store distribution networks, mainly on the West Coast, but Deary-Bell hopes the beverage will one day be available nationally.
For the next generation
In addition to establishing its own brand, the company continues to look to expand its production facilities. In December 2010, Nor-Cal purchased 5.1 acres of developed light industry land adjacent to its Anaheim plant. The property was formerly home to a trucking company and came with 50,000 square feet of warehouse space, office space and a shop facility. It also is looking into expansion in Sacramento as well as furthering its customer relationships.
“As [Deary-Bell] mentions family a lot, we look at customers a lot of the time as kind of family, too,” says Michael Gier, plant manager for Nor-Cal’s Anaheim facility. “As we build those relationships with customers, if we’re doing our job, they bring people to us.”
Diversification also remains an option for expanding the business, Gier says.
“We are looking to continue to grow the business as a co-packer, but we’re always looking at opportunities that would be associated with
co-packing, whether that be third-party logistics or something along that line in the future,” Gier says. “That may be a natural extension just based on what our customers are asking us to do. It’s not something we’re actively doing, but if you look at the future, could that happen? Maybe.”
In addition to building a strong business, Nor-Cal remains dedicated to its family ownership, Deary-Bell says. Prior to Deary-Bell’s transition to the role of president and chief executive officer last year, her father, Don Deary, brought in a series of outside consultants to identify the succession process for the company, she says.
“It’s not always easy having a family business, and there has been lots of work on my dad’s side,” Deary-Bell says. “I give him so much credit in regards to where we are today — all the credit, really.”
Nor-Cal continues to keep family at the heart of the business’ strategy, Deary-Bell says.
“[The family ownership] is why we are continuing to expand,” she says. “That is why we are continuing to build this business, hopefully for the fourth and fifth generations.” BI