A Cider Maker’s Sparkling Success

When American League club presidents voted to nix champagne for post-season clubhouse celebrations, the pennant-winning Oakland A’s needed a palatable substitute. They didn’t have to look far.

It was Martinelli’s Gold Medal Sparkling Cider to the rescue.

Made since the 1920s in Watsonville, about 120 miles south of Oakland, the bubbly pure apple juice in the green champagne bottle has found its way onto many a Thanksgiving, Christmas and Easter dinner table.

But this was the first time it had ever garnered national TV attention by being the drink of choice for a gang of euphoric jocks--even if the over-iced beverage fell a bit flat (like the A’s themselves, as it turned out).

Nonalcoholic sparkling cider is at the core of S. Martinelli & Co., a small but prosperous maker of pure juice beverages. Founded 122 years ago by a Swiss immigrant, it still is run by his descendants in Watsonville, a farming town near Santa Cruz that was heavily damaged in last year’s earthquake.

The effervescent beverage helps set Martinelli apart from brands such as Tree Top and Mott’s, apple juice makers with big marketing budgets and distribution networks. Despite its small size, Martinelli has managed to become the second-largest apple beverage brand in California. It is sold in 10,000 stores in the West and East.

After a rough 1989, when the scare over the pesticide Alar made many customers shun apple products, Martinelli is poised to capitalize on the growing demand for healthful juices and nonalcoholic beverages with pizazz. This from a company that got out of the hard-cider business only after alcoholic drinks were outlawed.

“We invented sparkling cider during Prohibition,” said John Martinelli, 33, the company’s vice president and general manager and a great-grandson of the founder. “It took us 50 years to convince people there was a market.”

In a category dominated by big players, Martinelli is an anomaly--a tiny, family-run company that does little advertising and bottles all its products in one 60,000-square-foot plant.

Unlike its large rivals, which make juice from concentrate, much of it shipped from overseas, Martinelli makes its beverages the old-fashioned way: from freshly hand-picked apples, without adding water, sweeteners or preservatives. It sticks with the folksy slogan “Drink your apple a day” and packages many of its beverages in apple-shaped bottles.

From August through December, the busy season, 150 employees work around the clock six days a week, producing an average of 50,000 gallons a day. In a year, Martinelli said, they process 48,000 tons of apples, turning out about 8 million gallons of juice, cider, sparkling cider and sparkling apple-berry juices.

The privately held company won’t reveal sales and profit figures. But industry estimates put Martinelli’s annual sales at more than $30 million, a trifling amount compared to the overall grocery market for canned and bottled apple juice of $576 million. Nielsen Marketing Research of Northbrook, Ill., which compiled the figure, said sales of apple juice sold in convenience stores and warehouse clubs--important outlets for Martinelli--are not included.

By contrast, Tree Top of Selah, Wash., a cooperative of 3,500 growers that is the nation’s largest manufacturer, had overall sales last year of $276 million, more than half from juices.

The Martinelli company today is owned by Stephen C. Martinelli, a grandson of the founder, and his sisters, Alice Martinelli Kett and Doris Martinelli Brown. Stephen C., 60, is president but has turned over operations to his son John.

A 6-foot-3 Stanford University graduate, John joined the firm reluctantly but has taken to it. His nine siblings and cousins pursued other interests.

Five years ago, John completed a long-overdue expansion that tripled capacity. He moved the warehouse and installed $3 million worth of state-of-the-art bottling equipment from Italy.

The company still uses traditional hydraulic presses that squeeze the juice from fruit pulp held in cloths on stacked wooden racks, as in the old cider mills of New England. The more time-consuming methods help account for Martinelli’s higher price--20% more than other brands sold in California. On the East Coast, partly because of distribution costs, Martinelli sells for twice as much as rival brands.

Martinelli also pays its more than 200 growers twice the going rate for apples in an effort to ensure a steady supply of the types of fruit it needs.

“Without them, a lot of growers wouldn’t be here,” said Ray Travers of Travers Orchards, who said his contracts with the Martinellis have always consisted of handshakes rather than documents.

Martinelli has generally avoided going into debt to finance its growth, although John Martinelli winces when he notes that the company never bought land.

“We never acquired apple orchards,” he said, “but we survived two world wars, the Depression, Prohibition. We never went bankrupt.”

The industry has had its cautionary tales. Tim Hansen, a juice entrepreneur, expanded too rapidly and sought protection of the bankruptcy court in 1989. His beverage lines were sold earlier this year. The Martinellis bought most of Hansen’s equipment in Watsonville with an eye toward adding another bottling line in the next year or two.

Last year’s Alar controversy proved costly by preventing a planned price increase and prompting a big advertising push to inform consumers that Martinelli products were pesticide-free.

Sparkling apple-berry juices that the company rolled out at great expense in 1987 have met with mixed success. Similar products by New York Seltzer, Sundance, Koala and Calistoga hit the market at the same time.

Rather than continue to distribute those beverages widely, Martinelli now sells them by the case in warehouse clubs.

Like Tree Top and other apple juice makers, Martinelli sees Japan, where it already does some business, as a potentially explosive market. The company also is considering canned products.

John Martinelli thinks there are few obstacles to growth. “We’re interested in the long haul--slow, steady growth,” he said, adding that he expects to continue a trend of 5% to 10% increases in annual sales.