When Randy Miller graduated from Beverly Hills High School in 1982, college seemed a waste of time. What he wanted to do was run a company.
So he followed an old soda recipe used by his great-grandfather, who peddled seltzer and syrup on the streets of Brooklyn, and carted the resulting bottles of flavored seltzer around West Los Angeles in the back of his Mustang convertible.
Just four years later, sales of the vanilla cream, raspberry and blueberry concoctions labelled Original New York Seltzer total 1 million cases a month. As a result, New York Seltzer is leading a growing pack of soda makers that have bubbled their way up from within the industrial complexes of Southern California to become part of a trend toward specialty sodas.
No Bitter Preservatives
The new thirst-quenchers--including New York Seltzer, Hansen's, 5th Avenue Seltzer and Old San Francisco Seltzer--combine the current popularity of flavored mineral water with the sweetness of traditional soft drinks. The sodas have no bitter preservatives to mask with heavy syrup, resulting in a clear, light-tasting beverage.
Soft-drink leaders Coke and Pepsi haven't yet blessed the newcomers by adding to the growing list of specialty sodas, which cost about $3 a six-pack. But enough smaller companies have joined in to cause industry insiders to see staying power in the new products.
"These are not novelty items," said Larry Jabbonsky, editor of Beverage World magazine. "It's a new category. It's redefining the traditional soft-drink market as we know it."
According to Jabbonsky, the new sodas have cornered a modest $300 million of the $30-billion soft-drink industry. "But it's hard to measure because they are competing across lines," he said. "They could also be considered under the bottled-water category"--itself a $998-million industry.
With no artificial colors or flavorings, no salt and no caffeine, specialty sodas have caught the fancy of health-conscious consumers. Unlike other soft drinks, which can last about a year in a bottle, the new sodas have a shelf life of just three months. But at 80 calories per 10-ounce serving, they are hardly dietary substitutes for Coca-Cola, which contains about 100 calories in 12 ounces.
"It's the kind of stuff mothers aren't afraid to let their kids drink," said Rick Maletis, a Portland, Ore., beer and wine distributor who began carrying New York Seltzer a year ago. "And it's not so sweet, so adults love it too.
"I've never seen such an exciting product," Maletis added. "We're up against Coke and Pepsi, and we've been able to enter the market."
Expects Sales to Double
Miller, now 22, is president of Original New York Seltzer Co., which had retail sales of more than $100 million last year--a figure that he expects to double by January. The seltzer is now sold not only in chic West Los Angeles restaurants and upscale supermarkets but in more than 40 states, Saudi Arabia, Great Britain, Japan and the Philippines.
The company began four years ago when Randy's father, Alan, then a TRW aerospace engineer, tried to find a business that would allow his son to be "self-supporting." The elder Miller remembered the days when his grandfather, Jack, would bring syrups and seltzer home.
"We would sit there and make our own soda," he recalled. "It was so fresh, but not overly sweet. Now we've bottled that taste."
The Millers named their new product New York Seltzer because, they explained, "it's New York, not California, that started this."
They had the first few thousand cases bottled in the same Brooklyn plant that supplied Jack Miller's horse wagon. Since it proved expensive to fly the sodas to the West Coast for Randy to distribute, the Millers moved their operation to a local bottler and a 13,000-square-foot plant in Santa Fe Springs.
Sales have climbed to 1 million cases a month from 1,000, mostly during the last year. The company now fills an 80,000-square-foot warehouse in Walnut, near City of Industry. And last summer, Alan Miller left TRW to become chief financial officer of the company that his son manages.
While the Millers claim to be the first to combine seltzer and syrups for the modern market, City of Industry-based Hansen Foods has been manufacturing "natural" sodas since 1979. "In terms of product structure, we are identical to all these new beverages, except that they call themselves seltzer and we're still soda," said John Kidwell, Hansen's executive vice president.
The Hansen's sodas--in mandarin lime, lemon-lime, grapefruit, root beer, cola and lima flavors--also differ from the new seltzers in that they come in 12-ounce cans rather than in the distinctive 10-ounce Art Deco glass bottles. Hansen's originated as a producer of fruit juices, and most of its business, concentrated on the West Coast, remains in non-carbonated products.
Like Hansen's, 5th Avenue Seltzer was born within a firm devoted to juices. Downey-based L&A; Juice Co., which has manufactured its Health-Aid pineapple-coconut and apple-boysenberry juices for 30 years, introduced a line of seltzers to Southland supermarkets last March. With a name evoking New York and bottles similar to those of the Millers' operation, 5th Avenue Seltzer has been a "thorn in the side" of the Millers' operation, they say. But 5th Avenue's producers deny that they are "riding on the tails" of New York Seltzer.
"Since seltzers originally came from Europe and were flavored in the U.S., we wanted a name that reflected the U.S. origin of our product," said Bruce Langer, vice president of L&A; Juice, which also is managed by a father-and-son team.
"Fifth Avenue is a symbol of high quality and it does reflect New York, so we chose it. We did everything we could to make it look different. We have slanted graphics and brighter colors on our bottles, but the product essentially looks the same," Langer acknowledged.
The company is introducing three new 5th Avenue flavors this month--chocolate cream, chocolate orange and cola berry. New York Seltzer's chocolate egg cream will be on store shelves next month.
Old San Francisco Seltzer's manufacturer, like its counterparts, has no geographic connection with its name. Made in South El Monte and introduced last February, San Francisco Seltzer is found in some West Coast supermarkets, restaurants and delicatessens. Its main attractions are two exclusive flavors--peach and almond cream.
These California specialty sodas are sharing a growing market that includes New York-based Dr. Brown's and Soho soda products. They have been lucky so far in that the largest beverage firms have yet to develop seltzer-based lines, said Beverage World's Jabbonsky.
'Market Will Be Saturated'
"It seems like I get an announcement on my desk every week about a new seltzer company starting up," he said. "Pretty soon the market will be saturated, and these little companies will be swallowed by the bigger ones."
Jabbonsky noted that the 1% share of the market obtained by the small companies is "nothing to sneeze at, considering the money the competition has to spend on advertising and the fact that they are up against companies that have been around for decades."
None of the Southland companies' products are nationally advertised but rely instead on word of mouth and samples offered in supermarkets.
Under pressure from distributors, New York Seltzer will begin an advertising campaign next year. It has avoided that until now, said the elder Miller, "because we wanted the seltzer to have a certain mystique."
"In New York they think it's a deli image," he explained, "Out here they think it's a yuppie image. We really want no image."
Original New York Seltzer is carried exclusively by beer wholesalers, who pay immediately for shipments. "We have good cash flow," the elder Miller said. "We never started out with loans, and we've never been in debt."
As for the younger Miller, he seems to be enjoying his good fortune. The Mustang has given way to a Jaguar, and recent purchases include silk designer outfits, a speed boat and a house under construction in the Hollywood Hills.
The Millers have had several buyout offers that the elder Miller said he was ready to accept "but Randy flatly refused."
"I'm not selling, and I'm not going public," Randy Miller said, explaining: "If there's one thing I've learned, it's that when you bring in bureaucracy, it slows the whole system down.
"I love this," he added, gesturing toward the company's spiffy new headquarters.
Nor does he regret missing college. "I've got everything to learn here: negotiating, law, computers, personnel management. Why go to school?"