Hansen Natural Corporation

views updated May 29 2018

Hansen Natural Corporation

2380 Railroad Street, Suite 101
Corona, California 92880-5471
U.S.A.
Telephone: (909) 739-6200
Fax: (909) 739-6210
Web site: http://www.hansens.com

Public Company
Incorporated: 1990
Employees: 50
Sales: $53.87 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: HANS
NAIC: 312111 Soft Drink Manufacturing

A descendant of a venerable California juice maker, Hansen Natural Corporation went from bankruptcy case to NASDAQ darling by focusing on innovation in the beverage marketplace. A new line of smoothies helped get the company regain profitability after some losses in the mid-1990s. Since then, Hansen Natural has pioneered the functional beverage category, the fastest growing segment of the industry, in the United States. All of Hansen Natural Corporation’s operations were carried out through its sole subsidiary, Hansen Beverage Company.

A Sunny Beginning

“Hansen’s Fruit and Vegetable Juices” first appeared in southern California in 1935. Assisted by his three sons, Hubert Hansen started the business in Los Angeles selling fresh, unpasteurized fruit juices. Hollywood film studios provided his first clients. That company became Hansen’s Juices, later known as The Fresh Juice Company of California, Inc. The plant it opened in Los Angeles in 1946 was used until operations were moved to a new plant in Azusa, California in 1993.

This company’s fresh juice line included orange, carrot, apple, strawberry, and banana juices, as well as blends. By this time, Hansen’s Juices was firmly established in the West and was shipped to the East Coast and Hawaii as well. Some of its 35,000 gallons of juice produced per week was marketed by an Illinois company, and some was shipped overseas, reported the Los Angeles Times.

One of Hubert Hansen’s grandsons, Tim Hansen, formed his own, separate fruit juice business in 1977: Hansen Foods, Inc. He obtained a license to use the family name as a trademark. The new company, also based in Los Angeles, specialized in pasteurized, shelf-stable juices, particularly apple. It was known for innovation in combining flavors as well as in marketing. Hansen Foods branched out into Hansen’s Natural Sodas in 1978. These featured all natural ingredients.

Hansen’s sales reached an estimated $50 million in the mid-1980s. Sales failed, however, to climb sufficiently to repay financing for a new factory, and the company filed for bankruptcy in 1988. California CoPackers Corporation (d/b/a/ Hansen Beverage Company), based in Hawaii, subsequently acquired the Hansen’s brand name in January 1990.

Annual sales reached $13.7 million that year and rose to $17.1 million the next. Hansen, always known for using cans, introduced its first glass bottle in the summer of 1991. At this time, Harold C. Taber, Jr. was serving as president and CEO of the company, then based in Brea, California.

Hansen Natural Corporation Created in 1992

An investment group including Rodney Sacks, who would become CEO, bought the money-losing company on July 27, 1992. The investors felt that the brand’s longevity and name recognition would be worth banking on and that its niche was just opening up in the market. Aside from Sacks, a corporate lawyer from South Africa, other new management talent included Taber, a 27-year Coca-Cola veteran. Investors included British industrialist Hilton H. Schlosberg, who became vice-chairman and president, and friends and family members. Hansen Natural Corporation went public at the same time, listing on NASDAQ. The company soon seemed to evidence a turnaround. Revenues reached $21.3 million in 1992.

Hansen employed about a dozen people at the time. Since Tropicana had acquired the Hansen factory in the bankruptcy, the company now outsourced most of its operations, even turning to flavor consultants for new formulations. Independent companies blended the drinks and shipped it to independent bottlers.

Pint-sized, bottled iced teas, lemonades, and juice drinks came out in the early 1990s. These competed in the “New Age” drink category, which also included alternatives to traditional cola drinks such as flavored water and iced tea. What defined the category was the public perception of these drinks as relatively healthy. Hansen’s heritage was perceived as particularly healthy. Its labeling began to proclaim, for example, “California’s original clear natural soda.”

Industry leaders such as Coca-Cola and Pepsi fought for a share of this segment, the fastest growing part of the $50 billion a year soft drink market. Coca-Cola introduced Nordic Mist, and Pepsi offered Crystal Pepsi as an alternative. Snapple’s drinks quickly came to dominate this $1 billion category. It sold $232 million worth of iced tea in 1992. Its advertising and marketing budget that year—$30 million—exceeded Hansen’s total revenues, noted the Los Angeles Times. Some analysts, however, believed that Hansen’s long-term interests were best served by a focus on keeping costs down. They felt that the company was less likely to “crash and burn” in the event of a price war. Hansen embarked on a major expansion into the Midwest in 1993, introducing a multiserve, 23-ounce glass bottle to its packaging mix.

New Age drinks were faddish and in July 1994 Hansen introduced a line specially branded to appeal to young consumers. Equator drinks initially debuted in Southern California. They came in 16-ounce cans (a 24-ounce version also was tried) wrapped in environmentally conscious imagery and copy. By not packaging the drinks in glass bottles, they could be sold in more locations, such as gyms and swimming pools where risk of breakage might be considered a hazard. To capture the loyalty of younger consumers, the traditional Hansen’s brand, which was identified with older drinkers, was not featured on the packaging. The first flavors were Blue Raspberry Creation Iced Tea, Cosmic Mango Iced Tea, Black Cherry Eclipse Lemonade, Heavenly Strawberry Banana Juice Cocktail, and Guava Berry Earthshine Juice Cocktail. A portion of the proceeds from each can sold went to Earth Day USA.

A “Smoothie” Return to Profitability in 1996

Hansen Natural lost nearly $3 million in 1994 and 1995 ($1.4 million in the latter). The debut of its Smoothie drinks late in 1995 carried high hopes. They proved to be a lifesaver. In their first nine months on the shelves, the Smoothie line brought in one-third of the company’s revenues; one in every five cases sold contained Smoothies. Hansen Natural was able to report income of $357,000 in 1996.

Smoothies were available in 11.5-ounce cans and 11.5-ounce glass bottles. Though inspired by the smoothies found in fresh juice bars, Hansen’s were not formulated as thick so that they could be bottled. Some smoothies had herbal additives ginseng and taurine, a meat-derived amino acid featured in many Asian “energy” drinks. Radically redesigned packaging helped Hansen’s products stand out on store shelves. Smoothies were sold in distinctive fluted bottles.

The smoothies were more than a new product. They signaled a new innovative spirit at the company, Sacks told the Business Press/California. Previous national product launches had failed since they were too similar to what Snapple already had in stores—that is, iced tea, lemonade, and juice cocktails.

Company Perspectives:

The mission of Hansen Beverage Company is to satisfy consumers’ needs for superior quality and great tasting, healthy natural beverages. Our beverages will be positioned as an upscale brand and will be marketed at a premium to competitive mainstream products. In fulfilling this mission, Hansen ’s will be guided by the following values: Superior Quality. Quality is the cornerstone of the Company’s activities, and will never be compromised. Consumers should always be able to trust the superior quality and taste of our products, and have their families consume them with full confidence. Natural Beverages. Hansen’s products will always be free of preservatives, artificial flavors and colors. They will also have minimal, if any, sodium and, in general, will be without added caffeine. Caffeine may be added to certain functional drinks, where caffeine may be useful, i.e. to help accelerate the metabolism by the body of certain nutrients. Our Customers. We are in business because of our customers. We are committed to establishing and maintaining a profitable partnership with our customers by providing high quality products, superior service, and effective promotional support for our brands. Continuous Quest for Excellence. We are determined to be the best, both as a company and as individuals. We will never be satisfied with our current performance —no matter how good it is —and will continually strive to seek improvement, unparalleled excellence in our products and new opportunities for business growth. Respect for the Individual. Our people are our most valued asset and are critical to our success; we will recognize and respect their rights, dignity, opinions and individuality. Our people will not tolerate mediocrity. Uncompromising Integrity. We set high ethical and moral standards. We will never engage in or support any act that is unethical, illegal or inappropriate. Continuous Growth. We continually strive for growth opportunities to expand our markets and our product range with new and, where possible, different beverages, without compromising the excellence of our existing operations.

Another shot in the arm, Hansen’s “functionals” came out in early 1997. This category was defined as drinks bought primarily for health benefits. They typically included extra vitamins. This trend had already been established in Europe, where they first caught the attention of Sacks. Similar, often syrupy concoctions had been popular in Asia for more than 30 years and constituted a $3 billion market there.

Hansen’s energy drinks were lightly carbonated. They were packaged in skinny 8.2-ounce cans, offering a more manageable serving for an energy drink. Each can retailed for about $2, whereas sodas cost 60 cents. They offered “an immediate boost whenever you need it the most.” Part of the pitch was naming the drinks not for their flavoring, but for the benefits they touted. An anti-oxidant (“anti-ox”) variety fought aging. Yet another pitched “stamina.” Finally, “D-Stress” was intended to enable the drinker to relax.

Some wondered whether the U.S. Food and Drug Administration would eventually regulate this category more strictly, but since the drinks were marketed as food, not as drugs promising any specific medicinal benefits, they fell out of that agency’s purview. Hansen labeled the amounts of different herbs and additives in its drinks to enhance its credibility and to advise people with allergies. Although the company always had avoided adding caffeine to its drinks, and even formulated its iced tea to be decaffeinated, it was added to some of the functional drinks for the purposes of stimulating metabolism.

Bullfighting in 1997 and Beyond

Hansen had ventured into Great Britain in 1994, but found the market unwelcoming. It also failed to differentiate its products sufficiently. Its subsidiary there, Hansen Beverage Company (UK) Limited, stopped operating at the end of 1997. Back home, Hansen faced some competition on its own turf from Red Bull, an Austrian company that virtually owned the $500 million European market for functional drinks. Speaking to a local newspaper, Sacks characterized Red Bull as a one-product company.

Another advantage credited to Hansen was that its drinks tasted comparatively good. The company also had an established distribution network. Hansen pitched its functional drinks heavily, giving out free samples and setting up literature centers in grocery stores. Convenience stores and liquor stores were among the first to sell the new beverage, but they were soon joined by a variety of retailers. The “new” Hansen received much praise from analysts for finding its own niche on the “cutting edge” rather than competing directly with the larger players.

In 1997, three-quarters of the company’s sales came from California. The success of the functionals line helped Hansen sell more of its other products out of state. Earnings were $1.3 million on revenues of $43 million. The next year, functional drinks accounted for a quarter of Hansen’s sales of $54 million, and the company’s earnings doubled. Within a year of the introduction of the functionals line, the company’s share price nearly quadrupled, to $6. The nutrient-enhanced beverage category of New Age drinks increased more than fourfold in 1998.

Hansen Natural relocated from Anaheim to Corona, California in January 1998. Its headquarters and warehouse shared a 65,000-square-foot building. It was developing the DynaJuice blended fruit drink, which contained 15 vitamins and minerals. This was first in a line of “Healthy Start” products for supermarket chains.

In April 1999, Brio Industries Inc. of British Columbia agreed to market Hansen’s products throughout Canada. More than 18,000 venues were to be offered opportunities to sell the drinks. Because of the vastness of territory and its lack of name recognition up north, Hansen planned to introduce its products gradually there. The company had worked previously with a small Toronto-based distributor. As Canadian law forbade adding any type of vitamins to drinks, some reformulations were in order.

Revenues were expected to reach $64 million in 1999. Hansen had signed distribution agreements with Dr. Pepper and 7-Up and secured a national product introduction through 7-Eleven convenience stores. The company was planning to bring out a nutritional boxed drink for children as well as a “super smoothie.” Also forthcoming were Signature Soda gourmet carbonated drinks made with cane sugar and clover honey. Sacks sought to differentiate the brand on nutrition, not taste. “What we’re trying to do is sell people something that’s honest—something that will do something for their bodies,” he told one California business journal.

Principal Subsidiaries

Hansen Beverage Company.

Principal Competitors

Red Bull North America; Triare Group; The Coca-Cola Company; PepsiCo, Inc.

Key Dates:

1935:: Hubert Hansen and sons begin selling juice in Los Angeles.
1977:: Founder’s grandson Tim Hansen establishes fast-growing Hansen Foods, Inc.
1988:: Hansen Foods succumbs to debt load in Chapter 11.
1992:: Rodney Sacks and others acquire company, list Hansen Natural Corporation on NASDAQ.
1996:: After two years of losses, company again posts a profit.
1997:: “Functionals” line energizes Hansen’s sales and share price.
1998:: Company relocates to Corona, California, from Anaheim.

Hansen Natural Corporation

views updated May 09 2018

Hansen Natural Corporation

1010 Railroad Street
Corona, California 92882-1947
U.S.A.
Telephone: (951) 739-6200
Fax: (951) 739-6210
Web site: http://www.hansens.com

Public Company
Incorporated: 1990
Employees: 293
Sales: $180 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: HANS
NAIC: 312111 Soft Drink Manufacturing

A descendant of a venerable California juice maker, Hansen Natural Corporation went from bankruptcy case to NASDAQ darling by focusing on innovation in the beverage marketplace. The company offers natural sodas, juices, smoothies, teas, sports drinks, Blue Sky branded carbonated beverages, and the Junior Juice line of products for toddlers. The company launched its Monster energy drink in 2002 and sales have since doubled. In 2005, Forbes magazine ranked Hansen Natural number one on its annual list of the 200 Best Small Companies in the United States.

A Sunny Beginning

"Hansen's Fruit and Vegetable Juices" first appeared in southern California in 1935. Assisted by his three sons, Hubert Hansen started the business in Los Angeles selling fresh, unpasteurized fruit juices. Hollywood film studios provided his first clients. That company became Hansen's Juices, later known as The Fresh Juice Company of California, Inc. The plant it opened in Los Angeles in 1946 was used until operations were moved to a new plant in Azusa, California, in 1993.

This company's fresh juice line included orange, carrot, apple, strawberry, and banana juices, as well as blends. By this time, Hansen's Juices was firmly established in the West and was shipped to the East Coast and Hawaii as well. Some of its 35,000 gallons of juice produced per week was marketed by an Illinois company, and some was shipped overseas, reported the Los Angeles Times.

One of Hubert Hansen's grandsons, Tim Hansen, formed his own, separate fruit juice business in 1977: Hansen Foods, Inc. He obtained a license to use the family name as a trademark. The new company, also based in Los Angeles, specialized in pasteurized, shelf-stable juices, particularly apple. It was known for innovation in combining flavors as well as in marketing. Hansen Foods branched out into Hansen's Natural Sodas in 1978. These featured all natural ingredients.

Hansen's sales reached an estimated $50 million in the mid-1980s. Sales failed, however, to climb sufficiently to repay financing for a new factory, and the company filed for bankruptcy in 1988. California CoPackers Corporation (doing business as Hansen Beverage Company), based in Hawaii, subsequently acquired the Hansen's brand name in January 1990.

Annual sales reached $13.7 million that year and rose to $17.1 million the next. Hansen, always known for using cans, introduced its first glass bottle in the summer of 1991. At this time, Harold C. Taber, Jr., was serving as president and CEO of the company, then based in Brea, California.

Creation of Hansen Natural Corporation in 1992

An investment group including Rodney Sacks, who would become CEO, bought the money-losing company on July 27, 1992. The investors felt that the brand's longevity and name recognition would be worth banking on and that its niche was just opening up in the market. Aside from Sacks, a corporate lawyer from South Africa, other new management talent included Taber, a 27-year Coca-Cola veteran. Investors included British industrialist Hilton H. Schlosberg, who became vice-chairman and president, and friends and family members. Hansen Natural Corporation went public at the same time, listing on Nasdaq. The company soon seemed to evidence a turnaround. Revenues reached $21.3 million in 1992.

Pint-sized, bottled iced teas, lemonades, and juice drinks came out in the early 1990s. These competed in the "New Age" drink category, which also included alternatives to traditional cola drinks such as flavored water and iced tea. What defined the category was the public perception of these drinks as relatively healthy. Hansen's heritage was perceived as particularly healthy. Its labeling began to proclaim, for example, "California's original clear natural soda."

Industry leaders such as Coca-Cola and Pepsi fought for a share of this segment, the fastest growing part of the $50 billion a year soft drink market. Coca-Cola introduced Nordic Mist, and Pepsi offered Crystal Pepsi as an alternative. Snapple's drinks quickly came to dominate this $1 billion category. It sold $232 million worth of iced tea in 1992. Its advertising and marketing budget that year—$30 million—exceeded Hansen's total revenues, noted the Los Angeles Times. Some analysts, however, believed that Hansen's long-term interests were best served by a focus on keeping costs down. They felt that the company was less likely to "crash and burn" in the event of a price war. Hansen embarked on a major expansion into the Midwest in 1993, introducing a multiserve, 23-ounce glass bottle to its packaging mix.

New Age drinks were faddish and in July 1994 Hansen introduced a line specially branded to appeal to young consumers. Equator drinks initially debuted in Southern California. They came in 16-ounce cans (a 24-ounce version also was tried) wrapped in environmentally conscious imagery and copy. By not packaging the drinks in glass bottles, they could be sold in more locations, such as gyms and swimming pools where risk of breakage might be considered a hazard. To capture the loyalty of younger consumers, the traditional Hansen's brand, which was identified with older drinkers, was not featured on the packaging. The first flavors were Blue Raspberry Creation Iced Tea, Cosmic Mango Iced Tea, Black Cherry Eclipse Lemonade, Heavenly Strawberry Banana Juice Cocktail, and Guava Berry Earthshine Juice Cocktail. A portion of the proceeds from each can sold went to Earth Day USA.

A "Smoothie" Return to Profitability in 1996

Hansen Natural lost nearly $3 million in 1994 and 1995 ($1.4 million in the latter). The debut of its Smoothie drinks late in 1995 carried high hopes. They proved to be a lifesaver. In their first nine months on the shelves, the Smoothie line brought in one-third of the company's revenues; one in every five cases sold contained Smoothies. Hansen Natural was able to report income of $357,000 in 1996.

Smoothies were available in 11.5-ounce cans and 11.5-ounce glass bottles. Although inspired by the smoothies found in fresh juice bars, Hansen's were not formulated as thick so that they could be bottled. Some smoothies had herbal additives ginseng and taurine, a meat-derived amino acid featured in many Asian "energy" drinks. Radically redesigned packaging helped Hansen's products stand out on store shelves. Smoothies were sold in distinctive fluted bottles.

Another shot in the arm, Hansen's "functionals" came out in early 1997. This category was defined as drinks bought primarily for health benefits. They typically included extra vitamins. This trend had already been established in Europe, where they first caught the attention of Sacks. Similar, often syrupy, concoctions had been popular in Asia for more than 30 years and constituted a $3 billion market there.

Hansen's energy drinks were lightly carbonated. They were packaged in skinny 8.2-ounce cans, offering a more manageable serving for an energy drink. Each can retailed for about $2, whereas sodas cost 60 cents. They offered "an immediate boost whenever you need it the most." Part of the pitch was naming the drinks not for their flavoring, but for the benefits they touted. An antioxidant ("anti-ox") variety fought aging. Yet another pitched "stamina." Finally, "D-Stress" was intended to enable the drinker to relax.

Some wondered whether the U.S. Food and Drug Administration would eventually regulate this category more strictly, but since the drinks were marketed as food, not as drugs promising any specific medicinal benefits, they fell out of that agency's purview. Hansen labeled the amounts of different herbs and additives in its drinks to enhance its credibility and to advise people with allergies. Although the company always had avoided adding caffeine to its drinks, and even formulated its iced tea to be decaffeinated, it was added to some of the functional drinks for the purposes of stimulating metabolism.

Bullfighting in the Late 1990s

Company Perspectives:

The mission of Hansen Beverage Company is to satisfy consumers' needs for superior quality and great tasting, healthy, natural and functional beverages. Our beverages will be positioned as an upscale brand and will often be marketed at a premium to competitive mainstream products.

Another advantage credited to Hansen was that its drinks tasted comparatively good. The company also had an established distribution network. Hansen pitched its functional drinks heavily, giving out free samples and setting up literature centers in grocery stores. Convenience stores and liquor stores were among the first to sell the new beverage, but they were soon joined by a variety of retailers. The "new" Hansen received much praise from analysts for finding its own niche on the "cutting edge" rather than competing directly with the larger players.

In 1997, three-quarters of the company's sales came from California. The success of the functionals line helped Hansen sell more of its other products out of state. Earnings were $1.3 million on revenues of $43 million. The next year, functional drinks accounted for a quarter of Hansen's sales of $54 million, and the company's earnings doubled. Within a year of the introduction of the functionals line, the company's share price nearly quadrupled, to $6. The nutrient-enhanced beverage category of New Age drinks increased more than fourfold in 1998.

In April 1999, Brio Industries Inc. of British Columbia agreed to market Hansen's products throughout Canada. More than 18,000 venues were to be offered opportunities to sell the drinks. Because of the vastness of territory and its lack of name recognition up north, Hansen planned to introduce its products gradually there. The company had worked previously with a small Toronto-based distributor. As Canadian law forbade adding any type of vitamins to drinks, some reformulations were in order.

Revenues were expected to reach $64 million in 1999. Hansen had signed distribution agreements with Dr. Pepper and 7-Up and secured a national product introduction through 7-Eleven convenience stores. The company was planning to bring out a nutritional boxed drink for children as well as a "super smoothie." Also forthcoming were Signature Soda gourmet carbonated drinks made with cane sugar and clover honey. Sacks sought to differentiate the brand on nutrition, not taste. "What we're trying to do is sell people something that's honest—something that will do something for their bodies," he told one California business journal.

Success in the New Millennium

Hansen Natural experienced marked success during the early years of the new millennium. The company bolstered its holdings with two major purchases and also launched a new product that would dramatically increase its revenues. On the acquisition front, the company acquired Blue Sky Natural Beverage Company in 2000. Founded in 1980, the Santa Fe, New Mexico-based company sold nearly $6.5 million of natural soda in 1999. Hansen then added the Junior Juice brand to its arsenal in 2001.

Its most significant move, however, was the launch of its Monster energy drink in 2002. The company spent heavily to market the drink—nearly $1 million a year—in an attempt to pull market share away from competitor Red Bull. With a tagline of "Unleash the Beast," the drink was a departure from the company's natural offerings. Monster contained high levels of caffeine and sugar and was sold in large black cans with neon claw marks. The product secured several extreme-sport sponsorships, enabling it to capture 18 percent of the $2 billion a year energy drink market. Red Bull continued to dominate with a 50 percent market share, but Hansen's energy drink sales grew by 162 percent in 2004, which was more than three times the rate of Red Bull.

In just two years, sales more than doubled to $180 million and net income skyrocketed to $20.4 million. The company's stock had traded as high as $108 per share, up from $4 in 2002. Hansen's recent success had catapulted it into the upper echelon of small business. In fact, during 2005 the company was positioned at the top of the Forbes list of the 200 Best Small Companies in the United States, a ranking based on several criteria, including growth over the past five years, recent sales, net income, stock price, price-to-earnings ratio, and market value.

With new competitors, including PepsiCo and Coca-Cola, entering the energy drink scene, Hansen was forced to stay on top of its game to maintain its sales growth. As such, Hansen bolstered its energy drink line by adding the Joker and Rumba energy drinks to its lineup, as well as Monster Assault, which was found on store shelves with the words "declare war on the ordinary" printed on a black and gray can.

Despite the significant growth of the energy drinks segment, an August 2005 Barron's article claimed, "Energy drinks could well prove to be a passing fad." With this category accounting for nearly 70 percent of Hansen's sales, the company was indeed subject to changes in consumer demands. Nevertheless, Hansen Natural was confident the company was on track for success in the years to come.

Principal Subsidiaries

Hansen Beverage Company; HEB.

Principal Competitors

Cadbury Schweppes plc; Ferolito, Vultaggio & Sons; PepsiCo, Inc.; Coca-Cola Inc.

Key Dates:

1935:: Hubert Hansen and sons begin selling juice in Los Angeles.
1977:: The founder's grandson, Tim Hansen, establishes the fast-growing Hansen Foods, Inc.
1988:: Hansen Foods succumbs to debt load in Chapter 11.
1992:: Rodney Sacks and others acquire the company, and list Hansen Natural Corporation on the NASDAQ.
1996:: After two years of losses, the company again posts a profit.
1997:: The "functionals" line energizes Hansen's sales and share price.
1998:: The company relocates to Corona, California, from Anaheim.
2000:: Blue Sky Natural Beverage Co. is acquired.
2002:: Monster, Hansen's new energy drink, is launched.
2004:: Sales have more than doubled in two years, reaching $180 million.