Sunday, August 17, 2003

New flavors help keep Faygo afloat

Product line, marketing evolve as competition does

By Marisa Maldonado
The Detroit News

DETROIT - When new businesses popped up in their neighborhood, officials at Faygo Beverages Inc. remodeled the outside of their 68-year-old bottling plant.

Likewise, the 97-year-old manufacturer of flavors such as Redpop and Rock & Rye continues to retool its lineup and marketing to stay afloat in the U.S. soda industry.

Coca-Cola, Pepsi-Cola and Cadbury Schweppes, which produces Dr Pepper and 7Up, control almost 90 percent of the United States' soda trade, according to the Beverage Institute.

While Faygo and other regional brands lack the marketing resources of those three, they maintain their niches by offering new products and creative advertising techniques.

Faygo's parent company, Fort Lauderdale, Fla.-based National Beverage Corp., is the No. 5 bottler, with 2 percent of the United States market. Its stock trades under the symbol "FIZ" on the American Stock Exchange.

National Beverage has shown slow but steady profit growth in recent years. During the fiscal year ending May 3, it posted earnings of $17.6 million on revenue of $500 million compared with earnings of $16.6 million on sales of $502 million during the previous fiscal year. National Beverage does not break out Faygo's specific revenue.

Company leaders and industry analysts say Faygo has maintained its market share with its unique flavors, including mainstays Redpop, a strawberry soda, and Rock & Rye, a combination of creme soda and cola. These have kept Faygo on the map in Michigan as the company has slowly expanded.

But expansion into national markets is difficult for regional brands, said John Sicher, editor of Beverage Digest. Good marketing, which Sicher said includes formulating new products, can help a regional brand gain its niche.

Faygo often changes its 50 flavors, introducing three or four new ones a year. The concentration of the soda industry on cola-flavored beverages helps Faygo maintain a niche of unique concoctions, said Faygo president Stan Sheridan.

Having a wide variety of sodas makes new ventures less risky, said Peter Ricchiuti, a professor of finance at Tulane University and analyst with Burkenroad Reports.

"If you only have to sell a few bottles to make it work, you don't have the risk where you're endangering the company on it," Ricchiuti said.

One advantage Faygo has is its price, traditionally cheaper than national brands.

But despite a solid share in local markets, Sheridan said marketing is vital. "We have always thought our products need to taste great," Sheridan said. "As good as the product tastes, we want that product to look even better."

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