So Far, Non-Alcoholic Drinks Have Proved to Be Nonprofit Enterprise : DISPIRITING RESULTS

With all the worries about health and drunk driving, the idea sounded inspired: a wholesale and retail business selling nothing but non-alcoholic beer, wine and aperitifs.

Laurie Fernandez said she and her husband decided to start the business after his recovery from alcoholism. Their New Way Beverage Co. is stocked with 25 brands of non-alcoholic beers and almost as many non-alcoholic wines, champagnes, and other beverages from around the world--including a harmless Harvey Wallbanger.

Their 4-year-old Northridge concern is apparently the only one of its kind in California, and the Fernandez family was poised for riches.

There’s just one problem: It doesn’t make any money. Laurie Fernandez, the president, says that, with 1986 sales of $350,000, the company barely broke even, and she didn’t even pay herself a salary.

“Everything’s a struggle,” she complained. “One supermarket said, ‘It’s too bad you’re such a little company. You just can’t afford the kickbacks.’ ”

At first, New Way’s timing seemed perfect. People claim to be more health-conscious than ever; drunk driving is a national issue, and there has been a marked trend toward lighter drinks.

But New Way faces a number of obstacles. Besides competition from bigger distributors who deal in both alcoholic and non-alcoholic products, Fernandez must cope with resistance to non-alcoholic beer and wine on the part of storekeepers and restaurateurs.

She is also plagued by the weakening dollar, which drives up the cost of the imports that make up the bulk of her stock.

And, for all the publicity non-alcoholic beer and wine have attracted, “It’s still a very small segment,” said Gary Hemphill, editor of Beverage Industry, a trade journal. Sales of the non-alcoholic beverages constitute a fraction of 1% of the U.S. alcoholic beverage industry, and industry experts say many consumers are unsure when to drink the stuff.

At $3 to $5 per bottle of wine or six-pack of beer, prices are similar to alcoholic beverages. Unlike grape juice, the better wines are fermented normally and then de-alcoholized. They are less sweet than grape juice and come in traditional wine bottles, complete with corks.

The beers are either brewed without alcohol, or de-alcoholized later. The taste is close to that of regular beer. Both the beer and the wine are lower in calories than their alcoholic counterparts, and are purchased, Fernandez said, by customers ranging from reformed alcoholics to pregnant women to dieters. She said the drinks also have restaurant potential for business lunches.

Hemphill said Laurie Fernandez’s encounter with the seamier side of beverage distribution is not unusual: “In some markets, you literally have to buy shelf space.”

Nevertheless, Fernandez said, New Way gets 95% of its revenue from its wholesale trade. The company also has a small retail store at the front of its 6,250-square-foot warehouse on Shirley Avenue. Overall, there is about $50,000 worth of inventory on hand, she said, and the business has four workers, including Fernandez and her grown daughter.

Officially, New Way products are mostly “non-alcoholic,” a labeling the government permits when the alcohol content is less than .5%. But, in fact, most have closer to .003% alcohol, making them virtually alcohol-free, although they still can’t carry that designation.

Fernandez said it would not pay to rent costly retail space on Ventura Boulevard, because she would still need a warehouse to store the bulk quantities essential to low-cost buying. She would also lose her wholesale discount from suppliers, she said.

A number of liquor stores and other retailers carry non-alcoholic beer and wine, and most sales are from the beer, industry experts say.

It still isn’t much. In 1985, for example, only 549,000 barrels of non-alcoholic beer were sold in the United States, contrasted with 183 million barrels of regular beer.

The wine segment is so small that there are no reliable figures. Jerry Lohr, whose San Jose winery produces a de-alcoholized wine called Ariel, said California produces about 300,000 cases annually. A spokesman for Seagram’s, whose St. Regis brand dominates the business, foresees steady but not explosive growth.

New Way has been growing too--1986 sales were up 27% from 1985--but not fast enough. Fernandez still does payroll, bookkeeping, and other services for clients to make a living, and her husband works as a bottler for Anheuser-Busch, as he has for years.

Industry sources, such as Lohr, say New Way is unique in dealing exclusively with non-alcoholic beer and wine. It even carries non-alcoholic creme de menthe.

Because of its broad selection and obscure location in an industrial park, Fernandez said, the retail business must depend on word of mouth and repeat customers.

New Way also does a mail-order business stretching from coast to coast, Fernandez said, and she always feels as if sales are about to explode.

But she acknowledged that her business is undercapitalized, lacks a big sales force, and can’t afford advertising. And some industry observers wonder if the market is ripe for a company such as New Way.

“America is going sober,” Hemphill said. “But I don’t think it’s going that sober.”