Bottleneck Blues : Financing, Missteps Hamper Inner-City Beverage Plant
Amid the decay of a derelict factory, a small group of community and business leaders gathered in September 1993 to announce one of the largest post-riot efforts to funnel jobs and investment into south Los Angeles.
The fledgling Neighborhood Beverage Co. pledged $28 million to reopen the former Seven-Up bottling plant on Alameda Street, south of downtown Los Angeles, and hire as many as 250 residents from the neighboring Pueblo del Rio housing project. About 1,200 people eagerly submitted employment applications. Job training was to begin in a few months.
“This is providing jobs close to home, training close to home . . . and the opportunity for dignity,” Los Angeles Councilwoman Rita Walters told the crowd.
But as if mocking the ambitious plans unveiled 2 1/2 years ago, the plant today remains largely quiet, scarred by graffiti and used by only a few small businesses. The job applications sit on file, untouched.
Plans for the bottling plant remain in limbo after the initial financial deals unraveled, leaving Neighborhood Beverage without cash to renovate the plant. Although the founders of Neighborhood Beverage have not completely given up, the prospects for opening the facility are not encouraging.
When first proposed, the bottling plant seemed an ideal mix of minority entrepreneurship and private investment needed to rebuild south Los Angeles after the traumatic and destructive riots in April 1992.
Neighborhood Beverage was intended to serve as a model of inner-city development, but it has not worked out that way. Indeed, Neighborhood Beverage has started doing business, but not at this plant.
As the project has unfolded, it instead reemphasized the limitations of private-sector development as a way to revive painfully poor urban neighborhoods--even when the plans have promising local backing.
It is also a story of how little good intentions matter in the face of fickle community support, inexperienced management, unrealistic expectations and--above all--inadequate financing.
The ambitious project was the brainchild of Byron and Cal Jamerson, two brothers whose business savvy and social consciousness have attracted widespread respect in the African American community and a long line of prominent supporters.
For example, Byron Scott and James Worthy of the Los Angeles Lakers agreed to promote the firm. Many south Los Angeles community leaders embraced the bottling plant project as an important way to harness the area’s economic potential.
“It will take a major commitment like this for other businesses to come,” Juanita Tate, a prominent South-Central Los Angeles community activist and bottling plant supporter, said in an interview early this year. “The project is just one that can’t be denied.”
Yet the Jamersons have been plagued by a litany of woes, including their own mistakes that have cost them dearly. In one case, they paid $200,000 to investment brokers who never provided them anything.
The brothers also admit they were naive to buy into the post-riot hyperbole about a private-sector rescue of the riot-scarred inner city. They soon discovered that investor interest had cooled almost as quickly as the embers of a torched mini-mall.
“The riot got everybody’s attention,” Cal Jamerson said. “But an awful lot of momentum was lost and cannot be regained. There are a lot of expectations that will forever be unfulfilled.”
Unable to build their plant, the Jamersons have now contracted with an existing bottler to produce a line of fruit-flavored sodas called Vibes, which hit the stores in August. But the brightly colored cans of Vibes are filled by workers in a bottling plant in Orange County.
The Jamersons insist they remain committed to the project--if not at the Alameda site then somewhere else in south Los Angeles. But no matter where or when their bottling plant rises, they have already paid the price for raising expectations that have yet to be fulfilled.
“We are going to have people mad at us for the remainder of our lives,” Byron Jamerson said.
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Raised in a large workingclass family, the Jamerson brothers learned the virtues of civic involvement and hard work from their father, a Coast Guard cook turned pastor, and mother, a school cafeteria worker. Natives of Southern California, they had built comfortable middle-class lives before they started with their plans for Neighborhood Beverage in the summer of 1992.
Byron M. Jamerson, a 40-year-old with an athletic build and a goatee, left his job as a sales executive for Coca-Cola bottling in Los Angeles, and Calvin C. Jamerson, a bespectacled and bearded 47-year-old, left a career as a software engineer at Borland International.
What the pair had in mind was an inner-city version of actor Paul Newman’s food company or ice cream maker Ben & Jerry’s--socially minded firms that contribute a share of their profits to charity. The strategy would also distinguish Neighborhood Beverage products from the countless other soft drinks vying for customers and shelf space.
However, Neighborhood Beverage’s largest contribution to the community would be to open a bottling facility and hire workers at wages starting at $9 an hour.
“It’s not enough to simply make money. We wanted to create wealth [in the community],” said Cal Jamerson, whose wood-paneled family room in his home in Inglewood serves as the headquarters for Neighborhood Beverage. “That’s why we are focusing on this [plant].”
By mid-1993, the Jamersons had made major progress. They had located a bottling plant site, and Rebuild L.A., the group charged with attracting business and jobs to south Los Angeles after the riots, referred them to former Dallas Cowboys football star Roger Staubach. Staubach’s corporate relocation firm introduced the Jamersons to Austin Co., a design and construction firm.
The city of Los Angeles’ one-stop permit center quickly processed the necessary construction permits and related paperwork to renovate the old bottling plant.
On the political front, Tate, the community activist who heads the Concerned Citizens of South-Central, got the Jamersons an appointment to meet Councilwoman Walters, in whose district the proposed plant is situated, to win her support.
The state of California has also been involved, with Rebecca Morris, an investment advisor to the state Commerce Department, working closely with the Jamersons to find financing.
Most important, the Jamersons lined up several investors and a letter of credit for up to $16 million from an unidentified “major institutional investor.”
But within months of formally unveiling their project in September 1993, the Jamersons suffered numerous setbacks.
Scott, who was to promote and help manage the firm, cut his ties to Neighborhood Beverage after the Jamersons said they asked him for an investment. Scott, who now plays for the Vancouver Grizzlies, declined comment through a team spokesman.
Meanwhile, the representative of the institutional investor with the $16-million credit line kept delaying the deal. After setting up an escrow account for the funds and preparing a $40,000 cashier’s check to pay for brokerage fees, the Jamersons discovered the broker had no connection to the investors he claimed to represent.
“It was embarrassing,” Cal Jamerson said. “It cost us an awful lot of credibility.”
Meanwhile, other investors were not swayed by Neighborhood Beverage’s inner-city commitment. Many, including some African Americans, viewed the plant as more of a social program than a venture to make money.
“It’s almost as if [our community commitment] worked against us,” Byron Jamerson said.
Early last year, the city’s Industrial Development Authority agreed to issue bonds to finance the project--if Neighborhood Beverage found someone to guarantee the bonds in case of default. Finding buyers for such bonds is impossible without a guarantee.
Many outside investors ignore south Los Angeles because they do not take it seriously as a place to make a profit, said Don Perry, whose Los Angeles-based investment firm raises money primarily for minority and female clients.
“Everybody from the mayor on down thinks you can’t make a profit in South-Central,” Perry said. Mayor Richard Riordan couldn’t be reached for comment.
Neighborhood Beverage’s large investment needs also dwarfed the financial resources of the various private groups and government agencies dedicated to help entrepreneurs. As Byron Jamerson put it, “We are not looking to start up a lube shop.”
Perhaps the Jamersons should have been less ambitious to start, say experts on new businesses. Any new company without a single sale is going to have an extremely difficult time raising $28 million from investors, said Tom O’Malia, director of the Entrepreneur Program at USC.
“If someone has never sold [a product] and tries to raise $500,000, I think that is unreasonable,” O’Malia said.
The Jamersons often struggled simply trying to find what public and private resources were available. The city’s Business Team, which helps retain and attract firms, fell short in providing comprehensive assistance and direction, Cal Jamerson said.
“When we explored enterprise zones, tax credits and subsidies, there was no one place to go get a comprehensive, bottom-line answer,” he said.
Business Team marketing director Cathy Stansfield said team members had met with the Jamersons on several occasions. “We’ve tried to be helpful with resources that might be available,” she said.
After failing miserably on the financial front, the Jamersons concentrated on generating sales to attract investors. Last spring, Neighborhood Beverage began taking orders for Vibes from retailers--such as Smart & Final, Lucky’s, Price Club and several smaller food and liquor stores--that had agreed to take a chance on a new product.
“It was a good cause and we thought it tasted good,” said Leanne Reynolds, a spokeswoman for Smart & Final, explaining why the chain became the first major retailer to stock Vibes.
The Jamersons have also benefited by their relationship with Worthy, whose public appearances helped boost the firm’s profile. At Papa’s Grocery near Liemert Park, store manager Joy Gough said customers see the Vibes display and say, “Is this the James Worthy company?”
Although Worthy has had to cut back on his promotional role, he remains an investor and sits on the company’s board of directors, the Jamersons said. Worthy also could not be reached for comment.
In January, as available funds and inventory were running low, the Jamersons won their first major financial victory by obtaining a $3-million credit line from Los Angeles-based A.R. Capital, an African American-run investment group. The cash has helped the firm increase inventory and distribution, including to East Coast stores.
After 3 1/2 years of hunting for capital, the Jamersons have raised an estimated $4 million--still a fraction of what is needed to renovate and equip the Alameda bottling plant.
The Jamersons say they remain committed to hiring residents at the Pueblo del Rio housing project. But they have begun to explore other possible sites in south Los Angeles where they might team up with developers and community groups to build a new bottling plant.
That has upset supporters of the Alameda site and has certainly not improved the mood of the residents eager for jobs. “They are upset. They are very discouraged,” said housing project leader Matthew Brown of the mostly Latino and African American residents. “They felt promises were made and not kept.”
Meanwhile, store sales of Vibes have been rising and the Jamersons will soon need another bottling plant to meet their production needs. But with most other area bottlers running at full steam, the Jamersons say they may have no choice but to look elsewhere for a suitable producer.
The most likely production site, they say: Arizona.
