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The Early Days of Nantucket Nectars: Financing, Marketing, and Growth

Financing and Marketing

In the first two years, the two founders invested their collective life savings, about $17,000, in the company to contract an outside bottler and finance inventory. For the next two years, Nantucket Nectars operated in an undercapitalized state on a small bank loan. Tom Scott recalled the situation: We were scraping along. Everything was going back into the company.

By early 1993, our few employees hadn’t been paid in a year, never mind that Tom and I hadn’t paid ourselves in three and a half years. But we worked all sorts of odd jobs on the side, especially during the winter. It was especially tough because we could see the juice really taking off.

The founders used the capital to improve distribution and increase inventory. First, they secured better, independent bottlers. Secondly, the founders created a unique private distribution strategy where they themselves sold, delivered, and stocked the product.

The early days were extremely frustrating for the two founders. While customers clearly liked the product,  Nantucket  Nectars  only  had  three  flavors—Cranberry  Grapefruit,  Lemonade,  and  Peach Orange—and the founders were completely unsure of how to grow the business. Tom Scott explained:  “The frustrations that we dealt with were immense.  We didn’t know what point-of-sale was, we didn’t know what promotion was, we didn’t know what margin we should be making.

As a means to differentiate, Nantucket Nectars committed to creating high quality, all natural juice beverages without regard for the margins; the quality of the product came first. This strategy translated into replacing high fructose corn syrup with only pure cane sugar, and to using four times the juice of other major brands to improve on their mantra of quality and taste.

The founders also differentiated their product by introducing a proprietary 17.5 ounce bottle to complement their existing 12 ounce line as compared to competitors’ standard 16 ounce bottle. From the original three juice flavors, Nantucket Nectars developed 27 flavors across three product lines during the first three years: 100% fruit juices, juice cocktails and ice teas/lemonades.

Fiscal year 1995 represented the first year of profitability for the company. The company’s margins were among the lowest in the New Age beverage category given the founders’ emphasis on quality. Unfortunately, high sales growth forced the founders to focus on increasing production to meet high demand, rather than delivering quality at a favorable cost. Their lower margins were also a result of limited futures contracts in commodity procurement.

In August 1997, responding to the launch of competitors’ new product lines, Nantucket Nectars launched a new line of beverages, called Super Nectars, which were herbally enhanced and pasteurized fruit juices and teas. Four of the six new flavors were made from no less than 80% real fruit juice while the remaining two were naturally steeped from green tea and flavored with real fruit juice and honey.

Each Super Nectar was created with a concern for both great taste and good health. The line of Super Nectars included Chi’I Green Tea, Protein Smoothie, Vital-C, Ginkgo Mango, Green Angel, and Red Guarana Tea.

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