Initial Distribution
When asked how the product was expanded to distribution areas around the island and onto the mainland, First answered with the words that many a growing entrepreneur would dream to hear, “Other people came to us and asked us if they could sell it.” The popularity of their product caused them somewhat of a dilemma in that their goals were still set on trying to build a company on Nantucket. But what they found was that the Nantucket Nectars was pulling them out of Nantucket. “First there was the ice distributor on Cape Cod that was warehousing their product for us that asked if he could distribute it. Then there were people on Martha’s Vineyard that asked if they could distribute it. We said sure to help get the name out.” There were even offers to have the product distributed into Japan. From all this activity First and Scott realized the potential for their product and began to plan how to capitalize on the demand, “From these influences you start to think about what you can do with it and what you want to have happen. Each thing built the strength of the product and told us if we could sell it well in one market, why not another.”
Tom & Tom Distribution
It was time to bring Nantucket Nectars out into the mainland to give it an opportunity to grow in all the potential new markets that First and Scott had envisioned. There was just one slight problem according to First, “We did not have a plan.” The company had been able to establish itself with the necessary resources and partners to allow them have mass production and packaging and warehousing. The use of out of state bottlers and supplier networks gave them the backbone for the production of the product. What was in a very undeveloped status was the distribution channels. But to avert his issue, Tom and Tom took matters into their own hands, “We did not have the money to give the product away or to advertise it when it came to the promotional aspects, so for getting the product out into the market we created another segment to our business which were our own distribution systems.”
“We drove the company by spending money and putting it on the shelves ourselves. We created our own distribution in Washington DC and in Boston. We had our own trucks and worked with the retailers ourselves.” In fact, some of the motivation to create their own distribution channels was based on their displeasure with the service from the distributors they had employed prior to setting up their own systems. The level of expectations they had for this service drove them to the old philosophy of if you want something done right do it yourself. “We are very detail oriented and we serviced the hell out of our accounts.”
What ultimately drove them to doing their own distribution was the most basic instinct of all when it comes to a new business’ operations, survival. “Getting into distribution was luck but also a survival thing. We had the choice of either going out of business or putting stuff on the shelf and turning it into green. Their displeasure with their local distributor led them to getting the rights to distribute their own products within the New England region. “That led us to also getting the rights to distribute other products through our systems such as Arizona Ice Teas. For a while we had a large distribution company including fifteen trucks from our warehouse and many other product lines.” This strategy of taking on a new aspect of the entire product distribution process was done with the potential in mind that if their product ends up not selling well, perhaps they could become successful distributors.
Fortunately for Nantucket Nectars, the results of the self distribution efforts proved that their own product was the one making the most profit for them. “We slowly learned that we were making money on our own product, and losing money in the distribution.” Despite the economic difficulties of the distribution business, the efforts they undertook proved to be beneficial to the promotion and growth of Nantucket Nectars, “Distributing helped to promote the brand.”
From these revelations First and Scott decided to get out of the distribution business to concentrate solely on the growth of their Nantucket Nectars products. “At the time we were handling five different distribution channels, and we made a one year plan to get out of the distribution business. We sold it and the whole proposition probably netted out at a loss over the couple of years that we did it. But overall it was a gain because our product exploded as a result of it.”
Product Development and Packaging
All of the product formulation and new product development efforts for Nantucket Nectars takes place at their headquarters in Boston. According to First, “It is not that complicated. It is one of the first things that I learned to do because we could not afford to have other people do it.” The freedom and flexibility of doing it under his own roof adds to the appeal of this for First, and allows him to start sharing his knowledge of this with other employees to expand the knowledgeable and amount of people involved in the process. There is no doubt that this has been successful for them because First views the competition and sees that other companies are doing what they have done.
It is evident that the six years that First has been involved with Nantucket Nectars he has developed an in depth and expansive knowledge on many facets of a new business venture. His understanding of changing market needs and constant product modifications to fit those needs are as evident now as they were when First and Scott were trying to tune their Nantucket Nectars to become established in the market place in the early 1990’s. One of the biggest issues the company faced was the quality and effectiveness of their packaging. It became evident to First and Scott when they were early on in their commercialization that their packaging was one of the weaker elements of their product offering. “When we first started the product did not sell very well and we largely attribute that to the packaging not being very good.” Therefore, from what they had to offer, First and Scott drove their product by emphasizing an aspect to the business they felt they could most effectively influence which was the distribution described previously.
As further proof of First’s understanding of forward thinking for his business and the pitfalls of an entrepreneur not considering outside opinions, his considerations for new product packaging from a marketing expert early on revealed to him his need for constant consideration of changes to improve a product offering. Early in the 1990’s First met with an associate of his wife who was a marketing expert and wanted to discuss the goings on at Nantucket Nectars. From that meeting the marketing person asked First if he had ever considered changing product’s packaging. His answer to that is what he calls a typical defensive answer from an entrepreneur, “We felt the packaging at that time was a strong suit at the time and they were doing well with the brand name.” Later that day, First reflected on the conversation and came to an interesting conclusion, “I realized I had not answered her question as to whether we had ever considered changing the packaging, I just defended my current position. The true answer to the question was no, I had not considered changing my packaging.” The next day First faced his partner and told him they should consider making a change to the packaging. This resulted in what First considers the catalyst to the efforts to change their packaging. It also resulted in a lesson First pointed out which is, “Sometimes an entrepreneur’s biggest enemy is himself.” Very true when one considers why changes to something that is proving successful can be the last thing that is on an entrepreneur’s mind. But it is the consideration of those changes that helps a company and its product offering stay tuned to the market needs and demands, and allows them to adjust to such changes so the company can operate in constantly varying environments.
In 1992 First and Scott raised capital to further the growth of the company. 50% of the business was sold to a private investor that has been described as the chairman of a $1 billion dollar-plus company. From these proceeds First and Scott put the money into redesigning the packaging. The results of their package redesign efforts were phenomenal and as First describes it, “We went from a product that we pushed off the shelf to a product that pulled itself off the shelf. That’s a one in a million – coming up with a package that pulls itself off the shelf in their industry.” First and Scott’s package redesign efforts folded in to a broader strategy that they wanted to include in the changes to their packaging which was to develop brand equity. “We needed to build brand equity and it had to come from our vision. For it to be real it had to come from us. Our graphic designer knew that and fulfilled it with the new packaging.”