New Way Was Hard Path for Beverage Firm

‘People said, “Yes, of course it will sell.” It wasn’t true.’

It’s last call for New Way Beverage.

The Northridge company, run by Laurie Fernandez, has spent the past five years as a wholesaler and retailer of only non-alcoholic beer, wine and other “drinks” normally laced with alcohol.

Given all the concern about health and drunk driving in recent years, New Way’s prospects had seemed promising. But the business kept losing money, and now Fernandez is calling it quits. New Way will close within a month.

“It just didn’t work out,” said Fernandez, who started the company with her husband, in November, 1982. “I really believe in my heart that I did everything right.”

Fernandez does concede one major mistake, however, one that’s made over and over by budding entrepreneurs: She was undercapitalized from the start. And, of the $200,000 the Fernandezes did begin with, they are likely to get back “zip,” she said.

4 Dozen Brands

New Way Beverage stocked about four dozen brands of drinks, and about 95% of its business came from sales to supermarkets, liquor stores and other retailers nationwide. But restaurants and bars never warmed to the concept and “would never give us a shot,” she said. The rest of her sales were made at New Way’s own retail store next to its warehouse on Shirley Avenue, where Fernandez would work about two days a week. She maintained an accounting practice the rest of the week.

In 1986, New Way’s sales had jumped 27% to $350,000, but even so it was losing money. And last year, “the bottom dropped out,” she said, with sales plunging to $100,000. Fernandez now hopes that, by selling her remaining inventory, she can repay her creditors without having to seek protection from the U. S. Bankruptcy Court.

There is a stable, albeit tiny, market for non-alcoholic beverages. Non-alcoholic beer, sometimes called “near beer,” has been around since Prohibition.

But it remains a tough battle for a small company to muscle its way into supermarket shelves crammed with dozens of beverages--some of which are backed with fat advertising budgets by their multimillion-dollar brewers and vintners.

“It is rough for a smaller group to gain distribution if the product isn’t well known and isn’t receiving huge advertising support,” said Kent Klagos, associate marketing manager for G. Heileman Brewing. Heileman, a major brewer, sells the Kingsbury brand, the top-selling non-alcoholic beer in the United States, according to analysts.

Less Than Half of 1%

Last year, U. S. shipments of non-alcoholic beer totaled about 678,000 barrels, double the 326,000 shipped five years ago, said Robert S. Weinberg, an associate marketing professor at Washington University in St. Louis who studies the beer market. But the 678,000 barrels still accounted for less than half of 1% of the 187 million barrels of beer shipped overall last year.

People perceive the market “as being much larger than what it is,” said Michael Bellas, president of Beverage Marketing, a New York-based consulting firm.

Indeed, Fernandez said demand for her products never met expectations. “People said, ‘Yes, of course it will sell,’ ” she recalled. “It wasn’t true.”

Fernandez cited other reasons why her business failed. Nearly all the brands she carried were imported, and the dollar’s severe decline over the last two years “increased the cost of my product to make it almost non-competitive,” and it eliminated her profit margin, she said.

She also claimed that certain supermarkets wanted kickbacks to stock her products on their shelves, some by suggesting that she deduct a certain amount from her invoices.

“And when I would say, ‘I can’t afford anything,’ they would say, ‘I’m sorry, there’s no room in our program for your product,’ ” Fernandez said.

Weinberg, however, said he objects to the notion that small distributors can’t compete.

Noting that Heileman is the only producer of non-alcoholic beer among the nation’s biggest brewers, he said: “Look, if you can convince the public that your non-alcoholic beer is an attractive beverage, you’re not competing with the top three brewers in the United States. If some small company has an attractive product, they will get shelf space.”

Much of Savings Lost

It’s a moot argument now for Fernandez, who lost much of her savings and now must start over. She plans to expand her accounting practice, and her husband continues working as a bottler at Anheuser-Busch’s Van Nuys brewery.

And what did she learn from the experience? Fernandez offered no platitudes on the perils of free enterprise, and instead said flatly: “Not to do this ever again. Just to do what I know best.”

But she’s not bitter. The customers she did have “were overwhelmingly grateful, which is a hug,” Fernandez said. “For the most part, it was fun. Except when the crunch came down.”