Brian Alger, the 41-year-old entrepreneur who re-registered the lapsed trademarks for the Pop Shoppe.Hamin Lee
Brian Alger has the gleeful air of a kid in a candy factory as he watches bottles of Pop Shoppe soda roll down the production line. The noise of machinery and clinking glass is deafening as he strides around the snaking conveyor, pointing out how the bottles first go through a rinser before being filled with fizzy liquid—Black Cherry at the moment—capped, rinsed again and finally plopped onto trays of 12. These are then loaded onto 132-case pallets that rise in rainbow-coloured mountains by the shipping bays.
"It was touch and go if we could do the run," Alger yells over the cacophony, "because we weren't sure we'd get the bottles in time." The clear "stubbie" bottles were custom-designed—at the cost of a quarter-million dollars—to resemble those used by the original Pop Shoppe in the 1970s.
Back then, the Canadian discount soda was a staple of family life, requiring weekend runs to neighbourhood Pop Shoppe depots to refill two-fours with Lime Ricky and Cream Soda. What Alger is doing today is bottling nostalgia. Eight years ago, on a lark, the now 41-year-old entrepreneur started to re-register the lapsed trademarks for the Pop Shoppe. Two years later, he relaunched it—sans shoppes—as a premium brand, tapping into boomers' and Gen-Xers' fond memories and appealing to kids' penchant for retro cool.
And he pulled it off: Last year, the Pop Shoppe sold more than six million bottles, making it Canada's second-best-selling premium soda, ahead of Dad's and Stewart's and just behind Jones—all of them U.S. brands, and all of them, it bears noting, mere drops compared to the oceans of sugar water peddled by Coca-Cola Co. and PepsiCo.
Even given his surname, Alger's bootstrap success story is downright improbable for at least three reasons: 1) Alger knew absolutely zero about beverage production or sales when he started; 2) soda is about as cutthroat a business as you'll find; and 3) Alger is a one-man operation—no employees, no headquarters, just him directing his various suppliers and partners out of a lakeside home office in the fruit-belt town of Grimsby, Ontario. Most days, he's done by 1 p.m. Stefan Kergl, vice-president of sales at Beverage World Inc., the Pop Shoppe's national distributor, laughs at the mention of Alger's extreme outsourcing. Asked if, in his 25 years in the business, he's ever seen such a bare-bones operation, Kergl answers, "Never."
But that's Canada; the entire premium soda market here is worth only about $25 million. Alger's manifest destiny from the start has been to invade the United States. Just how challenging is it to launch a new brand of this quintessential American consumer item? "Very," says Darin Ezra, the CEO of Power Brands, a Los Angeles-based beverage consultancy. "Very. And one more 'very,' just for luck." There are some 200 premium sodas in the U.S., most of them regional products. And most have seen their sales hammered by consumers' recessionary belt-tightening. The best-known, Jones Soda, is bleeding red ink and has rejected a low-ball offer from a competitor that is also losing money.
A stroll around the production plant that manufactures Alger's pop doesn't inspire great confidence about international expansion. The 60-year-old facility in North Toronto starred as a South American bottling plant in the 2008 flick The Incredible Hulk (that's Lime Ricky on the line behind Ed Norton), and it's easy to see why: The pools of water on the concrete floor, the rattling equipment, the faded green walls are all "Third World factory" out of central casting.
Alger's well aware of the unimpressive surroundings and, as we circumnavigate the massive metal vats of water and sugar and step around pools of red soda swirling into a drain, he explains, somewhat apologetically, that this is one of very few plants in the area that still bottle in glass. And the new stubbie is a key part of the packaging that Alger wanted to nail down before tackling the States. A rep from the bottle manufacturer is here today, checking how the glass performs on the line. Eyeing a bucket of broken bottles, she says, "That's normal." Perhaps, but it's tempting to read it as a metaphor for Canadian entrepreneurs' American dreams.
Brian Alger may be smart, enterprising and shrewd, but he's also damn lucky. In fact, there's an element of Forrest Gump-like serendipity in the man's soda adventure. He's the first to admit that he knew nothing and no one when he got it in his head to relaunch the Pop Shoppe. Yet the first person to offer him encouragement and contacts was none other than the late Don Watt.
A trade magazine editor had suggested that if Alger wanted a consultant, Watt would be a good guy to try. Only after Alger had made the call did he look up Watt and discover that the man who'd just invited him over to his house was the legendary graphic designer who, with Dave Nichol, kick-started the private-label revolution by introducing President's Choice at Loblaws. Over coffee and macaroons, Watt told him, "You have something here, true brand equity."
"That's when I first heard the term," recalls Alger. "I left feeling I just had to figure out what to do with it." So heartened was Alger that he drove from the meeting straight to Holt Renfrew and bought his wife a Louis Vuitton bag she'd been hankering for. "After that, I didn't make money for two years."
A small man with blond-streaked hair, clad today in jeans, a lilac shirt and a black leather jacket, Alger is understated and down-to-earth, eschewing nouveau riche flash (though those streaks come courtesy of a swanky Bloor West salon). Sipping a coffee at a Tim Hortons around the corner from the bottling plant, he merrily chuckles at his early naiveté. A high school dropout, he's been an entrepreneur all his adult life—starting with a fast-food delivery service at 19 and moving on through an importing business and an Internet café—but all were modest successes at best, providing him with little more than a job.
In 2002, he was sitting around with friends talking about the fate of various brands when the Pop Shoppe came up. The original company was launched in 1969 by two university grads in London, Ontario. They built a national network of franchised stores, to which customers took their empties for refills. At the peak, the chain was selling a million bottles a day. It became a cultural icon, with NHLer Eddie Shack as pitchman and Pop Shoppe coolers a staple of school dances and Little League games.
Selling at 10 cents a bottle, the Pop Shoppe was a discount alternative to Coke and Pepsi—until the two giants launched a price war in the 1980s. The subsequent ascendance of store brands squeezed prices even more. "By then, people found it a pain in the ass to go to the Pop Shoppe to get pop at a price you could get at Loblaws," says Alger. The company went out of business in 1983.
After that chat with friends in 2002, Alger did some digging and discovered that the trademark had been abandoned by the venture capital company that had bought out the original owners in the late 1970s. So he re-registered it, with no plan beyond enjoying the bragging rights.
When he did poke around the soft drink market, Alger quickly saw that the supermarket mainstream was a non-starter for a newcomer. But the premium sector, where 355-millilitre bottles retail for around $1.50, offered some margin. He jumped in, learning everything he could about the business, attending trade shows and seminars. Looking up his notes from the earliest days, he sees scribbles like "what's a CSD" with a huge question mark (that'd be "carbonated soft drink"). At one seminar, he listened to Peter van Stolk, founder of Jones Soda Co. "It was like seeing a messiah," Alger recalls. "But he was so on a high horse up there. I was going, I'm surprised they didn't rent a second hall just for his head."
The Seattle-based company was near its peak then, doing some $30 million (U.S.) in sales on the strength of its alternative cool and innovative marketing moves, such as putting Jones fridges into youth-filled electronics stores. Alger wanted that success, but with a retro spin—a marriage of über-hip Jones and old-fashioned Stewart's Fountain Classics.
In 2004, he relaunched the Pop Shoppe. He had obtained rough formulas for the flavours from a supplier to the original company, and also by buying unopened Pop Shoppe bottles from collectors on eBay and reverse-engineering the flavours. The first production run of Lime Ricky came out Frankenstein green. It turned out that Alger—for whom the flavour formulas might as well have been written in Greek—had got the colour formulations wrong. That was $1,500 literally down the drain. The first labels were also a disaster. Alger couldn't afford painted bottles, and the labels he printed looked pale and washed-out. By year's end, however, having spent almost $60,000 of his $80,000 in savings, he had a rented warehouse full of bottled pop. Now he just had to figure out how to sell it.
Distribution, beverage experts will tell you, is the toughest challenge for new brands. Alger soon realized as much. He sent information packages to gas station operators, supermarkets, convenience chains. No. No. No. Every distributor said the same thing—except Beverage World, a Hamilton-based distributor/wholesaler of niche drinks that had carried SoBe and Stewart's.
When Alger showed up to meet with one of the owners—who, luckily for Alger, fondly remembered the Pop Shoppe—his primary concern was hiding his ignorance. His timing was good: Beverage World was looking for an exclusive deal with a new premium brand. Alger walked out with a contract and a huge sense of relief. Not only did he have a partner with established retailer relationships to handle sales, but Beverage World would also deal with warehousing, shipping, accounts receivable and other back-office functions. "I have just one customer," says Alger. "Everything flows through them."
He still wasn't sure if the brand would take off. A hopeful sign came when he exhibited at the Canadian Restaurant and Foodservices Association trade show in Toronto, going all out with a booth made up like a seventies' rec room. Tears welled in the eyes of visitors as they shared memories conjured up by the brand.
But he knew boomer nostalgia alone couldn't carry his venture, since it's young people who buy most soda pop. Beverage World's Kergl doesn't sugar-coat the challenge: The market's current sweet spot is energy and so-called functional drinks such as vitamin water. "Most [store]buyers would ask, 'Why do I need another brand of soda?'" Kergl says. "They look at Pop Shoppe as a me-too to Jones and Dad's."
Consider this, says Kergl: A typical 7-Eleven or Rexall pop fridge has eight doors. Coke and Pepsi each have 1 1/2 doors; Gatorade has another; after water, dairy and other categories, you're left with one door for premium drinks. Each brand wants to commandeer one of the six shelves, but that's a tough sell when there's a new product on the market every few days. "The buyers are always looking for something new, niche, innovative and functional," says Kergl. What's more, the slotting, or listing, fees that some chains charge just to take on the product can be prohibitively expensive for a small company.
The Pop Shoppe's unimpressive packaging didn't help matters. "Nobody was telling us, 'Listen, your package is crap, that's why we're not listing you,'" says Alger. "They'd just say no." Cue some more Alger luck: In 2005, determined to find a new bottle company, Alger attended a beverage trade show in Orlando…that happened to be preceded by a major hurricane. In the nearly deserted hall, he came upon the booth of Vitro Packaging, one of the world's biggest glass manufacturers, tended by a bored-looking guy with his cowboy boots up on a table.
After Alger explained his problem, the man gave him his card and the name of a sales rep. "I look at this guy's card and he's the president of Vitro," says Alger. "I call the sales rep; now he thinks I know one of the top guys and agrees to bring me on as a client." A big break: Companies like Vitro usually demand minimum runs and a long corporate credit history; Alger would have stumbled on both hurdles.
That same year, Alger got a call from a new Toronto design company run by three young guys who loved the old brand and had heard of its revival. Great, thought a weary Alger; maybe they want to buy me out. He'd have been happy to walk away at that point: "Oh yeah. It was such a struggle." Instead, the trio behind Amoeba Corp. offered to refresh the brand at low cost, seeing it as a way to establish themselves. They updated the logo and conceived grassroots marketing tactics like having Alger drive around in a 1978 VW van handing out pop on the streets.
By 2006, Alger had his premium package and things started to turn around. The Pop Shoppe got picked up by Costco, Kitchen Table and Hasty Market, and then Zellers took it nationwide. Restaurants, however, remained a problem. Food service distribution is ruled by two companies—Sysco and Gordon Food Service—and they wouldn't take on the Pop Shoppe.
Luckily, a restaurateur in a remote corner of New Brunswick, who was buying Pop Shoppe retail at Zellers to offer it to his customers, persuaded Gordon to add it to its regional listings. While Alger is hopeful this will lead to a national deal, it's a limited market for him because Coke has a stranglehold on restaurant beverage sales. Any eatery with a Coke contract is prohibited from selling other carbonated drinks. Alger knows someone with a chain of poutineries who can't get the Pop Shoppe into some locations. "And he's one of my best friends!"
Another sales channel that's proven difficult is supermarkets. The high product-listing fees—as much as $100,000 per product just to secure shelf space—are risky. "If Loblaws came to me today and said, 'We'll give you four facings in our beverage aisle, you pay your listing fee and we'll see how you do,' I don't think I'd take the business," says Alger. "You gotta sell a lot of Pop Shoppe to pay back that listing fee, and if you don't do it in a short time, you'll lose your listing, and you've lost your listing fee." Besides, while a convenience store or gas station shopper may drop $1.79 on a bottle of pop, the supermarket consumer is looking for deals, and $12 for a case of Pop Shoppe is almost double what a private-label or mainstream brand goes for one shelf over.
At each step of the way, Alger has been reminded of Don Watt's lesson about brand equity. "Parents who view Coke and Pepsi as the enemy don't have the same kind of disdain for the Pop Shoppe," he says. "And when I sit across from a Zellers buyer and he says, 'I loved the Pop Shoppe as a kid,' it makes all the difference. If I'm in there pushing 'Brian's Soda,' he wouldn't even take the meeting." There's brisk traffic in Pop Shoppe memorabilia online, and Alger has Eddie Shack back as a spokesman, with a bobble-head doll planned. But Canadians are sentimental about their iconic brands. Pop Shoppe was available stateside in its first incarnation, but never made as big an impression. Will Americans remember—or care?
Alger has been talking about venturing into the States for at least four years, and last fall he tested the waters at a massive convenience-store trade show in Las Vegas. He knows he has no chance at national distribution until he establishes some track record regionally in the splintered American market, and that means teaming up with smaller players. "You have to work really hard with them to get the brand built up and you have to get your own salespeople in," he says. "You also have to hold accounts receivable for a lot of those distributors." In short, he'd need to staff up, fast. His U.S. game plan calls for focusing on a few states, mainly in the West and Southwest, where the Pop Shoppe's name resonates most, then embarking on a grassroots promotional campaign. But many existing regional sodas rule their home markets, notes Kergl. The Faygo brand, for example, has 90% penetration in the Detroit area. "If you take the Pop Shoppe into Detroit, you'll get killed by Faygo," he says. "And that's just over the border."
Ezra, the American beverage consultant, notes that any U.S. partner would evaluate the margins, the number and strength of rivals, and Pop Shoppe's management team. He'd recommend starting in a test market—ideally, a medium-sized southern or southwestern city like San Diego or Tucson, where per-capita consumption of so-called new-age beverages is highest. "If you can't make it there, you don't have a chance anywhere else," he says. Still, Ezra says that every region has a core group of consumers—16- to 35-year-old hipsters interested in alternative culture—who like to try new soda products. And the nostalgia peg has definite value, he adds, provided it rings true. "But I don't think it can carry the day. The actual drinkability, packaging and execution of the brand, which channels you choose, the marketing support—that's going to be 90%."
All that, of course, takes money. To get it, Alger is mulling the prospect of taking the Pop Shoppe public in the fall. He believes he could play the nostalgia card once again. "If I'm a guy sitting at home, I'd buy 100 shares of the Pop Shoppe, why not? It's a brand I love," he reasons.
Alger has handed over the funding puzzle to Paul Ogilvie, a consultant who helps companies raise capital. Alger met him through his accountant and describes him as "a slick wheeler-dealer kind of guy." Ogilvie certainly has the patter. "The IPO climate for brands is very hot right now," he says. What sort of brands? He won't say, but adds that brands can command high valuations if they've established their power in the market. Ogilvie also notes that Jones Soda's decline offers an opportunity for rivals. But doesn't Jones's meltdown (as well as that of its rejected buyer, Reed's Inc.) make it a discouraging benchmark for investors always looking for comparable companies? "Well, that's two out of about 100 examples that have been tremendously successful." Such as? Ogilvie can't think of one.
A public offering is just one of three parallel tracks Ogilvie is exploring on Alger's behalf. Another option is venture capital, which would allow the company to stay private and thus more nimble for a few more years while it establishes itself in the U.S. The third is a joint venture along the lines of Coke's and Pepsi's partnerships with independent bottlers. A company like the giant store-brand supplier Cott Corp., say, could take a part-ownership in the Pop Shoppe in exchange for committing significant resources to establishing the brand in the U.S. "It's really about truck filling: If a truck is two-thirds full, you might as well fill the rest with the Pop Shoppe," says Ogilvie.
Yet Alger doesn't hide the fact that what he'd like best is to get taken out. He speaks enviously of Zico, a California maker of coconut water that sold a minority stake of itself to Coke and a team of investors for $15 million (U.S.). "It drives me bananas to see the companies [Coke and Pepsi]are going after," says Alger. "Who's going to drink coconut water? And that guy is now sitting on an island with a big stack of money with 'Coke' written on it."
Alger has had high-level discussions with the big pop makers in the past year, but they passed. "I have a rejection letter from one of the big players that I'm going to frame and put up: 'Great brand, keep us in the loop,'" he says. "But Canada is such a small market, they don't want to bother. If we had the same market penetration in the U.S. as here, we'd have had our acquisition."
If he went the IPO route, Alger says he'd lead the U.S. expansion himself. He admits, however, that the challenge feels overwhelming at times. And, after a successful five years guiding the Pop Shoppe, he's eager to move on. "I'm an entrepreneur. I never got into this thinking, I'm going to sell pop for the next 30 years of my life," he says. "I want to make this a success, and then move on to the next thing."
He already has the next thing lined up: Mother's Pizza Parlour & Spaghetti House, a defunct Burlington-based restaurant franchise. As with the Pop Shoppe, he's bought a brand in a business—chain restaurants—where he has zero experience. But he knows that, unlike with his pop venture, restaurants are "a big investment, really big risk and very long hours." He's hoping to draw an existing chain into a joint venture to bridge his capital and learning-curve needs. Still, he adds, "I sometimes wonder if [in leaving the Pop Shoppe]I'd be taking an easy gig and turning my life into a living hell."
That easy gig, however, could turn into a struggle if market trends continue. Sales of carbonated soft drinks are declining as consumers grow more health-conscious. Taking the Pop Shoppe into the U.S. should help sustain the sales volume for a time, says Kergl. "The wider distribution we get, the longer we're selling Pop Shoppe. But eventually nostalgia will wear off."
That's the risk with any brand that plays on past associations but doesn't have a compelling sell to new consumers. "A brand can't survive based on awareness alone," says Mark Thomann, CEO of River West Brands LLC, a Chicago-based company that specializes in resurrecting dormant brands. "The revitalization has to have an innovation to make it relevant to a new audience." For example, later this year River West plans to reintroduce the coffee brand Brim ("Fill it to the rim…"). But it won't be just the old decaf instant; the new Brim will feature a patented process that infuses the coffee bean with a nutraceutical, playing to consumers' susceptibility to health claims. The key, Thomann emphasizes, is "to use the iconic brand as an accelerant and marry it with innovation."
Alger's attempts to update his product haven't panned out so far: Two diet varieties were terrible sellers, and he's phasing them out. Ironically, refillable bottles could play great in today's environmentally conscious marketplace, but Alger would have to persuade a national retailer to take on the logistical challenge. He waves off the idea as near lunatic. Thomann—whose company revived a competing soda, Soho Natural—nevertheless tips his hat to Alger for what he's accomplished. The Pop Shoppe certainly has the iconic brand, says Thomann, who remembers it from his childhood. "But it's a tough category and it's going to be much more challenging in America because it's not as well known here."
Alger, of course, has faced naysayers before. He has a framed article from Marketing magazine in which a marketing professor says that most retro brands are flashes in the pan and the Pop Shoppe will likely be no different. That was in 2004. He's proven his longevity, Alger argues, and he's done it by putting all his effort—and the money he saved on office space, furniture, employees and warehousing—into marketing and brand promotion. After growing at 200% year over year, this year, he predicts, the Pop Shoppe will be the No. 1 premium soft drink in Canada. "And I did that from my house," he says. "I'm proud of that." He's used to being underestimated, and likes it that way. "I'm a bit like the Wizard of Oz. I don't show what's behind the curtain."
Special to The Globe and Mail