If there is one thing that doesn’t change much in good times or bad times, it’s alcohol consumption. Phil Terry knows that fact pretty well.
“Demographically over the years you can see that it’s pretty consistent,” says Terry, CEO of Monarch Beverage Co. Inc. “The economy affects it some, but it’s not like new car sales or home sales where a slight turn in the economy can have a devastating effect on demand. Our demand is pretty consistent; good times don’t spike and bad times don’t depress it that much.”
So why would Monarch, a beverage seller who does $275 million in business a year, step out of the box where its bread and butter lives and develop a non-alcoholic energy drink? Why bother to spend precious time and resources on something so peripheral?
The answers to those questions lie partially in a venture the company started a few years prior to the energy drink experience. A sales manager who was a real fan of exotic beers and the new trend of microbreweries suggested that the company start to focus on those products.
“He said we ought to pay some attention to these people because it is not like our mainstream brands,” Terry says. “There is not a huge demand for it. Maybe this was a way for us to distinguish ourselves from our competitors.”
That was the reason Monarch committed some resources to this, and launched its World Class Beer division.
“It has grown and worked out very well,” Terry says. “We were a little bit ahead of the wave on that. We created a network of other wholesalers that creates sales divisions focused on microbreweries and new and exciting beers.”
Meanwhile, back to the energy drink story.
“One of us had an idea that maybe we should get into the energy drink business,” Terry says. “We developed a product and spent some time and money formulating and getting it produced and putting graphics on it — and we still have a lot of that in the warehouse! It’s not doing too well.
“And the one of us who came up with that idea was me,” Terry says. “I’ve been reminded a few times that that wasn’t our finest move!”
Here is what could have gone better with the energy drink and how Terry keeps listening for whispers of innovation in an industry in which product demand is about as steady as a rock.
Try your best idea — and learn
There just isn’t a crystal ball that gives a clear picture of what’s ahead for a business. So you use your data, your gut feeling, and you try something new. As one investor is fond of saying, if you start with nothing and you fail, you haven’t lost anything. Even looking at the past doesn’t help a whole lot to explain why some things succeed and others flop.
“When I look back over the years at things that worked right or didn’t work right, many times the successes are due to serendipity rather than smart planning,” Terry says. “You try to plan, you try to have a vision for what is going to be the next thing, but the future is so unknown. It’s just a big challenge figuring out what is next and what you have to do to keep the business viable and committed and customers happy. It’s not easy.”
Focus groups and market tests are often prerequisites when a new product is launched because a great product alone isn’t enough. It has to cause excitement. Terry can attest to that about Etomic, his energy drink.
“It’s good stuff; all the blind taste tests that we did show that everybody loves it,” he says about Etomic. It was another aspect of the launch effort that caused serious problems.
“It was just the marketing,” Terry says. “Marketing means so much on how consumer products do. We just weren’t experienced with that, and we are still learning.”
Once Etomic was launched, it didn’t sell well. Nevertheless, Terry didn’t give up on the energy drink.
“We thought it would shoot off the shelf; it’s a good product,” he says. “But energy drinks are just marketed a whole lot different than alcohol is. “That’s an area, which we weren’t accustomed with. Alcohol has so many rules and regulations around it; the law prescribes what you can and can’t do.
“But with energy drinks, going in and buying shelf space is a common practice. We didn’t budget anything to buy shelf space. There are some barriers to launching a new product that we just weren’t aware of. Bigger companies pay for ideal locations.
“We haven’t given up on that drink; there may be something there, but in terms of innovation, that is one that didn’t work. We are learning, and we may get that right.”
You needn’t break the bank
Capitalizing on an innovative idea needn’t be expensive. The research and testing on the Etomic energy drink, let alone the costs of developing it, weren’t free, but when it comes to using social media, the cost is next to nothing and the benefits immeasurable.
When Monarch Beverage launched its World Class Beer division, it was a natural next step to use Twitter to help it gain a following.
“We have a free World Class Beer Craft Beer Locator iPhone app and Twitter accounts that tweet things like, ‘This account has a keg of a microbrewery’s Gumballhead and they’re going to tap it at 7 o’clock tonight,’ Terry says. “So we spread the word through social media, and people show up!”
Another low-cost idea that is bringing results at Monarch Beverage involves beverages — that’s right, alcoholic beverages.
Terry and his team saw a trend with his 650 employees having some increases in driving under the influence charges. Of course, it was off-the-job incidents, but Terry was committed to do something.
“Our creative department came up with an idea for a campaign that we run every major holiday called Have a Plan,” he says. “The campaign is to remind people that you need to plan your celebrations, you need to do it responsibly and in moderation, and as a result of that, we went from six to nine cases a year to two once we instituted this.
“We have a lot of innovations that we are proud of but that is one in which I think we can see a real impact on our fellow employees.”
Get the best rate of return
While you are looking for other innovative ways to control costs, and you plan on spending some money — to make more money — you naturally evaluate the ideas as to which would provide the highest rate of return.
Terry and his team launched a clinic that he estimates for every dollar spent returns $2.
“Our costs to insure the health of our employees were going double-digit every year,” Terry says. “We tried all the things people do to try to contain that: self-insure, use third-party providers, negotiate fees.”
He wasn’t getting the results he wanted.
“So a senior vice president came up with this idea for a health clinic,” he says. “The idea was to get more involved in the health of our employees. I thought it was the craziest thing that I had ever heard. We’re in the beer business, not the hospital business.”
The clinic started small, being staffed by a part-time physician’s assistant a few days a week. It has grown to the point now where there is a full-time doctor, full-time physician’s assistant, part-time physical therapist and a medical technician. It offers annual physicals for all employees, and an annual health plan for each that is designed by medical professionals.
“The health plan each year focuses on three behaviors: smoking, diet and exercise,” Terry says. “It focuses on those because we know that those are the three behaviors that we can affect. We can improve health and lower claims. And it’s been working.”
Employees rank the clinic as the most important benefit they have working for Monarch Beverage.
“We survey our employees every year,” he says. “We ask of them of their benefits, rank them 1 through 50, and the clinic always comes up No. 1. So it is not just that it is doing good things for our bottom line; it’s doing great things for relationships among all of us who work here.”
Even workers’ compensation claims can decrease, thanks to the efforts such as the clinic.
“Those claims have come down significantly over the years because we manage that in-house,” Terry says. “People are healthier, we are having fewer claims than with traditional health insurance and our workers’ comp costs have gone down.
“We are almost to the point of being an evangelist for the stuff. I do wring my hands about what affordable health care is going to do for us long-term, but whether this model is still going to work, but we are committed to it. The government would have to change the economics of all this pretty drastically for us to move out of this.”
How to reach: Monarch Beverage Co. Inc., www.monarch-beverage.com or (800) 382-9851.
Try your best idea — and learn.
You don’t have to spend aggressively.
Get the best rate of return you can.
The Terry File
Monarch Beverage Co. Inc.
Education: I went to undergraduate at Indiana University. I am a recovering lawyer. … I went to the law school at the IU law school. So I am a Hoosier from start to finish.
What was your first job, and what did you learn from it?
I worked at a gasoline station pumping gas in high school, a discount gasoline station called Payless. I learned the value of an education. It wasn’t physically demanding work, but I could tell it was not something I wanted to do my whole life. And that if I wanted more, I needed to be educated.
Who do you admire most in business?
I would say Steve Jobs, in terms of being an innovator and being able to help people become the most productive, to create an organization that everyone can be proud of.
What was the best business advice you ever received?
I read this in a Jim Collins book, and it was essentially, ‘Don’t bet the farm.’ The way he put it was, ‘Fire bullets before you shoot cannons.’ Don’t bet so much on an innovation or a project that you jeopardize the company. Don’t put yourself in a position where the innovation has to succeed or you create difficulties for you generally. That’s what we’ve been following. We try to be measured on what we do and not get overexuberant about trying to figure out how to find the next big thing.
What is your definition of business success?
Whatever your mission is, serve that mission, and that mission does not include making money. We don’t judge success here by how much money we are making. We believe that if we have correctly identified a valuable social function, and we’ve served that social function well, we will succeed and we will make money. Our definition of success is accomplishing the mission. Monarch Beverage’s reason for being is to sufficiently provide an ever-escalating standard of service to its customers and to responsibly enhance demand for its products. In other words, serve the customer, create demand for your product. That’s why we’re here. And if we do those things well, we will make money. If we don’t do then, well, we won’t.