Wall Street Journal Sunday - Far from the tree? Story of Innovation at Mott's

Far from the Tree? At 160, Mott's is enjoying a growth spurt

By JIM ZEBORA
Business Editor
June 16, 2002

If all you had to sell were the plain products of crushed or pureed apples, your only customers might be babies and the bicuspid-challenged.

That's not good enough for Mott's Inc., the Stamford-based division of Cadbury Schweppes, which has grown it business from $500 million to $900 million over the past five years and wants to keep the trend going.

Mott's, whose signature apple sauces and apple juices dominate the respective branded markets in the Unites States, is pushing the envelope internally and externally, seeking organic growth and to expand by acquisition.

"It's really a heavy combination of both," said Brad Irwin, Mott's president and a Darien native.

The result blurs the lines with surprising - and often innovative - effect.

Take the example of Hawaiian Punch, a sweet juice-based drink once known for its pugilistic advertising. Mott's bought the Hawaiian Punch brand in 1999, believing it could be grown in its own right and leveraged for launching other products. That prediction, made to Cadbury Schweppes' London based management team as Mott's sought approval for the acquisition, has more than borne fruit.

"Hawaiian Punch has doubled in size since we bought it in 1999," Irwin said. Among Mott's ways of growing the popular, noncarbonated beverage brand: including its distinctive flavor to the company's hot-selling line of single-serve applesauce cups.

"We find there is a lot more life in brands like Hawaiian Punch," Irwin said in a way that emphasized the understatement.

Innovation Strategy

To get where it is today - and where it plans to go - Mott's, founded in 1842 by Samuel R. Mott in Bouckville, N.Y. as a maker of cider and vinegar, has encouraged a culture of innovation that leads to such things as Hawaiian Punch-flavored applesauce.

"Innovation should be the headline strategy for us," Irwin said.

The company at any time has about 50 products in various stages of development. Thirty employees at the Mott's research and development lab in Trumbull are charged with the daily task of creating new products, but more than 40 percent of the firm's 1,700 employees have contributed ideas, according to Irwin.

[Imaginatik note: Mott's are using Idea Central - internally they call the system the Idea Exchange. This is part of an ongoing effort to add $140 million in revenue from innovation, according to Bob Bates, Director of Business Solutions at Mott's at a July 2002 PDMA conference. ]

The corporate vetting process weeds the potential products down, and two to four annually are deemed worth the risk of a pricey introduction to food retailers and consumers.

...

Synergy

At $900 million in annual sales (and heading for $1 billion, Irwin says), Mott's makes up more than 10 percent of Cadbury Schweppes' sales, which rose 21% last year, according to preliminary figures.

But Cadbury Schweppes has other marquee names contributing to its financials as well, including Dr Pepper and Snapple. (Cadbury candy is licensed to Hershey in the U.S. and not part of the equation.)

There are many synergies between the units. Dr Pepper produces the Hawaiian Punch that ends up in soda coolers, while Mott's makes the Hawaiian Punch for grocery store juice isles, each unit working the distribution channel it knows best.

Mott's owns the Snapple's packaging plant because of its 160-year track record of successfully packaging foodstuffs for sale.

This type of efficiency at Cadbury Schweppes was a core theme of a two-day investor seminar held in Paris. The other core theme was "above market growth", something the Stamford-based division has been perfecting in recent years.

"Look at what they did with Hawaiian Punch," said Stanford C. Bernstein equities analyst Andrew Wood, who follows Cadbury Schweppes. "It was soft of dying in the Procter & Gamble stable, losing volume at about 15 percent per year."

Cadbury Schweppes through Mott's plan to pick Hawaiian Punch up from P&G and put it back in play was a good one, said Irwin, a former P&G executive.

"When we identified it as an opportunity, they were quite supportive," Irwin said.

Mott's gave the old brand a new look, created new sizes and new packaging, and leveraged the product in other ways.

"They've been growing at 50 percent per year," Wood said. "What Mott's done is astounding."

As for Mott's big push into the snack isles, "I think it's a great idea," said Wood. "The company is doing exactly what they should be doing, leveraging their distribution, leveraging their products. But it's too soon to tell how it will play out."

Mott's would like to see some of the same success it had with applesauce and apple juice, that of being the No. 1 seller.

According to Wood, one in every five quarts of apple juice sold in the United States is made by Mott's - more than any other brand - but the company has countless private label competitors who will only grudgingly give up market share. That's why Mott's must keep the ideas and new products flowing.

"If your basic business is more slowly growing, you have to be adding innovation," said Wood.

"I'd like to see us produce successful innovation," Irwin said in agreement. "We think our trademarks are enduring. On the other hand, we think it's important to keep updating them."

Copyright 2002 Wall Street Journal.

[Note: the article has been edited slightly from the original which is not available online]