2012 Beverage Bottler of the Year: Admiral Beverage Corp.
Mountain bottler elevates its business through diversification, community involvement
The Worland, Wyo.-based company manufactures and distributes PepsiCo and Dr Pepper Snapple Group (DPS) brands, and distributes MillerCoors brands.
In total, the company distributes just less than 1,600 SKUs in its nine-state territory, mainly consisting of the country’s mountain states. In addition to Wyoming, Utah, Montana, South Dakota, Idaho, Colorado and New Mexico, Admiral Beverage distributes in Alaska and parts of Texas. But it all started in Wyoming.
A modest beginning
In 1945, Newell Sargent and his wife, Mabel, purchased a bottling facility in Worland, Wyo. The plant opened for business two years later with a single production line that bottled Canada Dry, Pepsi and Nesbitt Orange sodas. Two full-time employees produced, sold and distributed about 1,100 cases a week, according to the company. In 1948, the couple acquired the Schlitz Beer franchise, which helped them survive sugar rationing difficulties during the Korean War, it says.
The company was shaken in 1960 by the death of Mabel Sargent, who was killed in a vehicle accident on one of her routes. Her death, compounded with increases in company sales and growth, resulted in Newell’s need for a business partner. Forrest Clay joined the company in 1961 and helped to continue to strengthen its success. In the ‘60s, the company purchased the 7-Up Bottling Company in Thermopolis, Wyo., and Pepsi-Cola and 7-Up franchises in Casper, Wyo., expanding its territory.
In 1970, 13 independent bottlers joined together to build a canning line in the Worland plant, which officially formed the company known as Admiral Beverage Corp. As time went on, Admiral Beverage grew by purchasing some of these bottlers. Today, the company owns numerous PepsiCo and DPS franchises throughout its nine-state territory. Notably, it acquired the 7-Up Bottling Co. in Salt Lake City, the Coors distributorship in Salt Lake City and the DPS franchise for the entire state of Alaska. Most recently, Admiral Beverage acquired the MillerCoors distributor for the entire state of New Mexico, which has a portfolio of brands such as Corona, Heineken, Mike’s Hard Lemonade and a host of craft and import beers, says Kelly Clay, president and chief executive officer of the company.
There are a lot of synergies between beer and soft drinks, Clay says. In many cases, being involved in both categories can help maximize operating efficiencies; however, they must be handled as two separate selling systems, he advises.
“They’re two different products, two different consumers, two different categories,” he says. “So while you want to take advantage of the back room, warehousing, logistics, those type of synergies, you have to understand that you’re marketing to two different consumers and you have to approach your selling, your marketing and your merchandising separately.”
Whether they’re selling, marketing or merchandising soft drinks or beer, Admiral Beverage’s team is dedicated to being No. 1 in customer service. Admiral Beverage’s retail accounts consist of about 35 percent national chains and 65 percent local, or independent, stores, he adds.
Sales staff are organized by retail format and territory, and they’re also responsible for merchandising the product. In the past, employees were drivers, sales personnel and merchandisers all-in-one, says Patrick Reed, senior vice president of sales and field marketing. That kind of experience began the practice that has continually allowed the team to “own” their territories and learn the different facets of the business, he says.
The team focuses on its brands’ presence, promotion, and then price at retail, Reed says. Its sales staff not only are known for their creativity, but have won awards for some of their creative displays. For instance, Lane McPheeters, merchandising manager, spent two months building a Mountain Dew display to promote the new Xbox Kinect video game “Call of Duty: Modern Warfare 3.” Another merchandising promotion involved building a stage out of Pepsi cases and holding a singing contest, notes Wayne Swain, vice president of sales for Admiral’s Western territory.
“It costs you money to [build creative displays]: your time, your labor, your energy of building them, maintaining them, taking them down, but we really believe that it gives us a point of difference,” says Tom Taylor, senior vice president and chief operating officer. “Customers shop typically in a grocery store because they need to shop in a grocery store … people don’t come here because they didn’t have anything to do. They come here because they have to shop, so anything that you can do to make it more of an experience will attract them to you, and we’re such a high impulse item that if you get that attention, you’re probably going to have the benefit of that sale.”
The company also has a heavy focus on the foodservice side of the business. It has experienced growth from utilizing flavor shots, which are 1-ounce servings of flavored syrups that consumers can mix with a PepsiCo fountain drink, Reed says. For example, if someone wants a Cherry-Vanilla Pepsi, he can push the Cherry and Vanilla flavor shot buttons, then fill the rest of his cup from the Pepsi dispenser on the fountain. The flavor options offer mixology experiences for consumers and innovation for the market, according to the company.
“One of the things that we use to measure our success is how much of our concentrate is fountain, or foodservice, versus can and bottle,” Taylor says. “We’ll reach as high as 30 percent, which is almost twice what the [average level in the] country is. … We invest heavy in foodservice, which is fountain, and we invest heavy in vending and in coolers for single-serve type products. Growing up in the business, what we learned early was to put the product where people are and then when they go to the store, they’ll buy your product.”
It’s all about getting the consumer to have a Pepsi experience, which will in turn help market your brand, he says.
“And that crosses over into the beer business, too,” Clay adds. “If you’re in the beer distribution business and you have a high on-premise share in your taverns, bars, restaurants, and good penetration and exposure to your brands, that carries over into your off-premise business, into your retail business.”
To encourage the purchase of a brand, the product needs to be everywhere the consumer is, and that includes parts of a retail store that aren’t typically considered for beverages, Reed says.
“You’ve got to have presence throughout the whole store, not just the obvious ones,” he says. “You’ve got to find those auxiliary points within the store to get [shoppers’] attention, and then you win the battle.”
The next step is point-of-sale materials, he adds. Admiral Beverage has its own printers for point-of-sale displays, adding a special touch to attract consumer attention, the company says.
While the company’s presence, promotion and price strategy aims to encourage purchase of all of its brands, certain regions see higher sales of some brands than others.
“There is a regionality to brands,” Clay affirms. Mountain Dew and Diet Mountain Dew perform exceptionally well in the company’s eastern territories, and its Pepsi, Dr Pepper, SoBe, Coors Light, Miller Lite, Corona and Heineken brands also have been selling very well, he says. In 2010, the company started selling Gatorade in convenience store and gas station channels. According to Clay, the brand has far surpassed the growth rate hurdles that PepsiCo anticipated the bottler to sell.
Yet, a lot has changed in the last 25 years, he notes.
“Twenty-five years ago you had the great flagship brands of Pepsi, 7-Up, Dr Pepper and Mountain Dew, and also the flagship brands of our competitors,” Clay says. “Today there are so many more entries in the marketplace and in the industry for consumers to reach for, whether they’re isotonics, teas, energy drinks, water — there’s, I think, a new category invented every quarter. So you’ve got to have a diversified portfolio if you’re going to be in business today.”
Admiral Beverage offers ready-to-drink teas, bottled waters, 100 percent juices, beer, full-calorie soft drinks, zero-calorie soft drinks, and with the recent addition of Dr Pepper Ten, even mid-calorie soft drinks. Overall, it still puts the focus on its core brands, but makes a point not to ignore emerging products.
“You’ve got to take care of your core, but you can’t miss the opportunities with the growth of the future,” Clay says.
Proving his point, Clay notes the company’s foray into its own water brand, Aquavista. About 20 years ago, Admiral Beverage saw a need to get into the water business. Just 20 miles outside of Worland is one of the world’s largest Artesian wells that free-flows out of the Madison formation at about 4,800 gallons a minute, he adds.
“We take 6,000-gallon stainless steel tankers out to the well site, we pick up the water, we bring it in, we filter it and ozonate it, so it’s a natural Artesian water, and we market it locally,” Clay says. “We’ve got a few outside customers, but it’s been very successful for us, and it’s a great water.”
Challenges and solutions
A diversified portfolio combined with a passionate and knowledgeable staff has led Admiral Beverage to experience continued growth through the years — even during tough economic times, commodity price fluctuations and other industry changes.
For any bottler, one of the biggest challenges right now is commodity costs, Clay says. Bottlers are reliant on raw commodities such as aluminum, PET resin and high fructose corn syrup. Because prices are high, bottlers must find ways to become more efficient without passing the cost on to the consumer because they’re already strapped for cash and making strategic purchases, he says.
Admiral Beverage’s location in Worland, Wyo., significantly helped the company to decrease cost from its supply chain by sourcing cans from a Crown plant just three blocks away and sugar from the Wyoming Sugar Co., which refines beet sugar in Worland. Admiral Beverage uses granulated sugar in its heritage Dr Pepper and Pepsi Throwback beverages, which are offered year-round.
Even more notable, the company not only blow-molds its own bottles in both of its production facilities, but its Ogden, Utah, facility has two injection blow-molding lines that make preforms for the company’s entire supply.
Becoming as vertically integrated as possible has enabled the company to save money and be more sustainable, it says. Admiral Beverage recycles all of its materials and ships them out to be reused by other companies. Furthermore, any virgin plastic bottles that have been molded but not labeled are grinded down and used as resin for new preforms, notes Dave Willard, vice president of production for the Worland plant. Not one plastic bottle is sent to a landfill, he adds.
Additionally, the company has seen its industry change as PepsiCo and other major beverage manufacturers began purchasing many of their bottlers within the last few years.
“You’re dealing with a different landscape that is changed because you don’t have a traditional bottling system in a lot of areas and that changes how you have to operate,” Clay explains. “We’ve seen it change dramatically this way with the growth of some of the larger chains and how they go to market. … They’ve become more centralized, so that’s where your local relationships become more important today than they were five years ago, because if you don’t have that local relationship and if you don’t know that manager at the Smiths store, the manager at the Albertsons store, and have a relationship with them, they’re being directed so much from their central corporate offices that any local relationship just puts the icing on the cake in those programs.”
Clay also formed the Independent Bottlers Association with Barbara Parish, president of Wis-Pak Inc., Watertown, Wis., and Bradley Burnett, president of Carolina Canners Inc., Cheraw, S.C., to elicit open communication with the independent PepsiCo bottlers. As a result, the independent bottlers have developed a better relationship with PepsiCo, he says. Clay currently is serving a two-year term as the association’s chairman.
It also helps that PepsiCo, DPS and MillerCoors have excellent leaders to further their working relationships, Clay says. And great corporate marketing plans don’t hurt either.
“The marketing and media [MillerCoors has] on tap for 2012 is some of the best we’ve ever seen,” Clay says. “So we’re excited about our [corporate partners]. They’ve got the right people in the right places at the right time, and I think there are good times ahead.”
Brands remain central to the company’s future, Taylor notes.
“Our focus to continue to grow and diversify is at the forefront of our future,” he says. “Our commitment to our brands is as high as it’s ever been, and we certainly think organic growth, innovation and acquisitions are the three pieces that’ll help us grow as a corporation.”
Making a difference
As a community steward, the company plans to continue supporting its neighbors in any way possible.
In 2010, the Community Action Partnership of Utah awarded Admiral Beverage’s Leonard Hernandez, franchise manager for Pepsi-Cola Bottling Co. of Springville, Utah, with the Community Partner of the Year award. He was awarded for his work, and the work of his sales team, in collecting food for a local food bank, which was part of the Pepsi Refresh Project. During the holidays, plenty of food drives keep food banks stocked; however, the summer months typically don’t collect as much, Hernandez says. Admiral Beverage, in conjunction with its retail partners, developed a food drive that collected more than 100,000 pounds of food in 2010. The company used giveaways, samplings and even a local AA baseball team to collect food.
Last year, the company increased its collections to 118,000 pounds and generated a fundraiser to award a local student with a $500 scholarship. As a result of the program, the company started a backpack program for schools in the area. This program provides hundreds of children at local schools with a backpack full of food to eat over the weekend because it was discovered that many children were typically going without food during the weekend.
In the summer of 2011, the company embarked on a breast cancer awareness campaign in which it offered Diet Pepsi cans with pink ribbons and messaging. The four-month-long campaign resulted in monetary donations to the Huntsman Cancer Foundation and the Benefis Sletten Cancer Institute.
“Every penny of that donation specifically went to the research of cancer,” Reed explains. “The community really responds to those types of campaigns and so it was great to highlight Diet Pepsi and make that donation.”
For more than a decade, Admiral Beverage has been the corporate sponsor of the Wyoming All State Marching Band, which has allowed students to participate in parades at the Orange Bowl, Cotton Bowl, Macy’s Thanksgiving Day parade in New York City, St. Patrick’s Day parade in Dublin and President George W. Bush and Vice President Richard Cheney’s inaugural parades in Washington, D.C. One of the bands had about 670 students, which was possibly the world’s largest marching band, Clay notes.
“Most of these kids never had the chance to leave the state of Wyoming,” Clay explains. “They’ve grown up on farms or ranches or in small towns, so it’s a great experience for them and we’re really proud to be associated with them.”
Internally, the company has a Support Our Troops initiative. Each one of its 40 distribution centers displays a Support Our Troops box for employees to donate items to U.S. troops overseas. Five to six times a week, each office sends care packages to soldiers who are from areas in which the company operates.
Food bank donations, breast cancer programs and armed forces initiatives are just a few of the charitable causes Admiral Beverage supports.
“Whether you live in a town of 5,000 people, 50,000 people or 100,000 people, you have to be part of the community. You have to be involved, you have to care and you’ve got to give back,” Clay says. “And if you’ve got that philosophy, you’ll be successful — not only in business, but in life.” BI
|Insight on Admiral Beverage from PepsiCo|
As a long-time Pepsi bottler, Admiral Beverage Corp. has a far-reaching partnership with PepsiCo. Mario Mercurio, senior vice president and general manager of Pepsi-Cola North America Beverages’ Franchise Business Unit, shares the following thoughts on the company and Kelly Clay, president and chief executive officer of Admiral Beverage Corp.:
“When I first met Kelly Clay, I asked him a simple question. I said, ‘Kelly, what is it you want from PepsiCo?’ Kelly’s answer was just as simple: ‘Mario,’ he said, ‘I want partnership, and I want respect.’ I said, ‘No problem, I can give you both. We’re nothing without partnership and respect.’”
Mercurio commends Clay’s leadership style: “Kelly is as savvy and up-front an operator as they come. He’s best-in-class in both retail and on-premise execution, he speaks his mind intelligently and passionately, and I’m proud to have him as a partner in Pepsi.”