Nantucket Allserve, Inc.

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Nantucket Allserve, Inc.

45 Dunster Street
Cambridge, Massachusetts 02138
U.S.A.
(617) 868-3600
Fax: (617) 868-5490
Web site: http://www.juiceguys.com

Private Company
Incorporated : 1990
Employees : 100
Sales : $30 million (1996 est.)
SICs : 2086 Bottled and Canned Soft Drinks & Carbonated Waters

A start-up company of the 1990s, Nantucket Allserve, Inc. was one of the fastest-growing entries among the “new age” fruit-flavored alternatives to traditional soft drinks. This hotly competitive market was led by Snapple, which sold an estimated 23.6 million cases in 1996, compared to an estimated 2.3 million for Nantucket Allserve. Fruit beverages accounted in 1995 for $12.5 billion of the $169.5 billion beverage industry, which was selling an average of 2.5 bottled drinks to each American each day.

Struggling for a Toehold, 1989-92

The “real world” held no allure for Tom Scott and Tom First when they were attending Brown University. “In our senior year all our friends were interviewing for jobs at big New York firms,” First told Judy Temes in the Boston Globe. Instead, after graduation in 1989, the two headed for Nantucket, the island off Cape Cod where they had both vacationed as children. First and Scott had spent the previous summer on the island operating “Allserve,” a motorboat that became a floating convenience store after Scott swapped it with his father in exchange for his car. The two Toms delivered food, beer, ice, cigarettes, newspapers, and laundry to yachts in the harbor— and even performed services like pumping out bilge tanks. They also converted an icehouse in the harbor into a general store.

Reality set in during the bleak winter months on the island. First and Scott worked odd jobs and cast around for some other way to stay solvent. For a cooking contest, First tried to recreate a peach drink he had sampled in Spain. After his potion of peaches, sugar, and water, mixed in a blender, won a prize, the two decided to make the drink the nucleus of a new business. “I remember thinking it could be a big thing,” Scott said, “but to us, big might mean $50,000.”

At first, First and Scott sold peach nectar by the glass off the deck of Allserve. The response was so enthusiastic that within weeks they began pouring it into recycled wine bottles they ordered from a catalogue at 20 cents each, capping the bottles with a hand press they bought for $170. They sold 2,000 bottles at $1 each all over the island. Business was so good the two invested their combined savings of $17,000 to have 1,700 cases of the nectar professionally pasteurized and bottled in New York. Before the summer was out they were selling the drink on the neighboring island of Martha’s Vineyard and parts of Cape Cod as well as Nantucket. During the last months of 1990 First and Scott introduced three flavors: peach-orange (their best seller), lemonade, and cranberry-grapefruit. The young entrepreneurs took in an impressive $52,000 in their first year of business.

At this point in their enterprise, First and Scott began receiving an education in hardball economics. A Philadelphia juice man, who had helped them develop new blends and arrange for bottling, cut them loose, charging them with trying to muscle in on his own territory. Without this contact, the only bottler they could interest in the juice was not equipped to handle the heated liquid needed for pasteurization. “We had bottles exploding on us, we had caps blowing off. We had bottles freezing in the winter,” Scott recalled. Moreover, some of Nantucket Nectars’ distributors proved treacherous, stashing the bottles in nooks and crannies where they could not threaten the competition.

All the money the partners had grossed, as well as their own savings and family loans, had been sunk into production and distribution. Scott was so strapped for money that he spent the summer of 1991 sleeping in his car. “And even when we lived in homes, we never turned on the electricity,” said First. “We burned our pallets in a wood stove to keep warm.” In the course of their struggles, the two Toms took odd jobs like waiting on tables, shucking scallops, and shampooing dogs. “We were naive, and we didn’t know it,” Scott recalled. “We just refused to quit. And refusing to quit can get you through a lot.”

Nantucket Nectars’ fortunes began to turn around when an Ohio bottler agreed to spend $10,000 to equip his plant to handle a 12-ounce bottle for the drinks. During 1992 Scott and First began distributing their product in Washington, D.C., landing accounts in museums and colleges, and even in Congress. Revenues climbed from about $200,000 in 1991 to about $300,000 in 1992. Even so, the two were having trouble keeping their heads above water. A few of their employees, who had gone unpaid all year, stole more than $100,000 in merchandise from a Boston-area warehouse before the two noticed that something was amiss. “We often wondered if we could go on at all,” Scott told Temes. “We lived like vagabonds.”

Going Big Time, 1993-94

To keep the business running, Scott and First needed a backer, whom they found, while cleaning his yacht, in the person of Michael Egan. The owner of Alamo Rent A Car, Egan received about 100 unsolicited proposals per year and had never made an investment outside his industry, but he put down $500,000 for a half-interest in the fledgling juice company, now dubbed “Nantucket Allserve.” “I was more fascinated by them than the product,” Egan told Temes in 1994. “I’ve never seen two young guys who’ve sacrificed more to get a business going. Even today they live on peanuts.” Interviewed in 1997 by Julia Flaherty for the New York Times, Egan confirmed that he had invested in the entrepreneurs rather than in their business. “The juice wasn’t actually too good,” he said. “They had some flavors that were horrible. They had this bayberry tea that had to be about the worst-tasting, snake-oil elixir you could find and put in a bottle.”

With the cash from Egan, Nantucket Allserve was ready to go big time. Scott and First added new flavors and improved the taste of their offerings by using more-expensive cane sugar, instead of the industry-standard corn syrup, as a sweetener for the company’s fruit cocktails. By the end of 1993 there were 16 different Nantucket Nectars, most of them all-juice drinks. After bottling, the product was shipped to the company’s leased warehouses in Boston and Washington. Ten thousand cases were sent to about 120 stores in 15 states each month. In the Boston area, Nantucket Allserve was delivering and selling 1,000 cases a week. Revenues reached about $1.3 million that year.

A Boston upscale cafe said the company’s juices were “selling themselves,” but Scott and First found that to move more product they had to hire salespeople to convince more retailers to stock the Nantucket Nectars. The two also sought to raise consumer demand by formulating and airing radio spots. One slogan, also printed on the bottle labels (along with a Nantucket seascape), declared, “We’re Juice Guys. We don’t wear ties to work.” This slogan was more successful than the follow-up “We knew you’d be back,” which turned off listeners by its arrogance.

In an ongoing publicity campaign, Scott and First sent purple Winnebagos around the country—seven were in operation in1997—to distribute free samples of the purple-capped product. The company also set up purple tents at football games and street fairs near the many college campuses of the Boston area and sold T-shirts sporting the Nantucket Nectars logo. Community activities became another form of promotion. Nantucket Nectars co-sponsored “Hoops for the Hungry,” a D.C. basketball tournament. The company also sponsored the 1996 AIDS Walk in San Francisco, took part in the annual Earth Day observance in Boston and New York City, and organized an annual party in Boston to provide warm clothing for the homeless.

During 1994 Nantucket Allserve’s revenues surged to $6 million, but its founders failed to turn a profit. Adding more than 100 new employees to the base staff of seven was one reason, but more important was the discovery that forging a distribution system amounted to an unacceptably expensive form of on-the-job training. Scott and First had expanded their network to five warehouses and 18 trucks, hired a sales force, and begun distributing other beverages, including Arizona Iced Teas and Clearly Canadian sparkling water. But the system’s volume still was too small, and after the company sustained a $1 million loss in 1994, Nantucket Allserve dropped the distribution operation and turned to outside services. This reduced the average cost for delivering a case to retailers from $3 to $2.

Double-Digit Revenues, 1995-97

Nantucket Allserve earned its first profit in 1995: an estimated $225,000 on revenues of some $15 million. Then, in 1996, sales doubled to an estimated $30 million, and profit before taxes rose to $600,000. That year Nantucket Allserve was ranked by Inc. as the nth-fastest-growing private company in the United States. Revenue was projected to double once again in 1997, to $60 million. In September 1997 the company made its first Nantucket Nectars shipment to the coffee-bar chain Starbucks, which was planning to sell the drinks in about 200 of its East Coast outlets. The product was available at this point in more than 30 states (mainly on the East and West Coasts) and Canada, France, Great Britain, South Korea, and Central and South America.

Nantucket Nectars products in 1997 ranged from 100 percent fruit juice, iced tea, and lemonade, to “juice cocktails” with only about 20 percent juice at a time when some competitors were marketing drinks with as little as one percent juice. Among Nantucket’s offerings were Pineapple Orange Banana 100% Juice, which was sweetened with white grape juice, and Kiwi Berry Juice Cocktail, which was 21 percent juice and contained water and cane sugar as well as pear, kiwi, and passion fruit juices. Mixed flavors included Apple Raspberry, Pineapple Orange Banana, Pineapple Orange Guava, Watermelon Strawberry, and Half & Half (iced tea and lemonade). Container sizes ranged from 12 to 36 ounces, but the midsized 17.5-ounce bottle was the best seller of the three.

The company introduced a new line called Nantucket Super Nectars in July 1997. These six concoctions were meant to appeal to health-conscious consumers by mixing herbs like ginseng and wheat grass with fruit juices. “Green Angel” combined herbs like echinacea with white grapes, bananas, and juices. “Chi’i Green Tea” was a tea-and-ginseng mix, “Protein Smoothie,” a soy-protein drink, and “Gingko Mango” a blend of ginkgo herb and orange and mango juices. “Vital-C” was a fruit juice made from the vitamin-C-rich acerola berry. “Red Guaranta Tea” was an herbal tea made with white clover honey, cranberry juice, and guaraná nut berry—a plant native to the Amazon with properties similar to caffeine. These specialty juices retailed at a recommended price of $1.79 compared to $1.09 for the standard drinks and were initially marketed only in New England.

Prior to the Nantucket Super Nectars, the company line consisted of eight 12-ounce juices and juice cocktails, six 17.5-ounce juices, eight 17.5-ounce juice cocktails, nine 17.5-ounce lemonades and ice teas, and eight 36-ounce juices and juice cocktails. Pressed Apple Juice and Cranberry (a juice cocktail) were the only ones being marketed in all three sizes. Nineteen were in kosher form. The apples came from New York, the lemons from Florida, the oranges from California, and the cranberries from Nantucket. No preservatives or additives were used in any of the drinks.

In 1997 Nantucket Allserve was using bottling plants in Warwick, Rhode Island; Reading, Pennsylvania; Lakeland, Florida; and Benicia, California. Company offices were relocated from Nantucket in 1992—first to Brighton, Massachusetts, then to Boston, finally to a former Harvard University fraternity house in Cambridge where the tieless Toms allowedtheir dogs to roam the purple-colored premises. The company was also running a Juice Guys juice bar on Nantucket as a prototype for others planned to open around the country.