Shortly after starting their beveragecompany, Nantucket Nectars founders TomFirst and Tom Scott found themselves low on cash. To keepthe enterprise alive, the two juggled odd jobs that included running afloating convenience store for yachts visiting the Nantucket, Mass.,harbor, delivering bread, shucking and shipping scallops, and pumping waste.

That was 10 years ago. Today, Nantucket Nectars employs 160 people, sells itscolorful juice bottles in 35 states in the U.S. and abroad, and reports $60 million insales for 1999. Along the way, the founders have learned a number of lessons that are almost mantras for anyone starting a company, dot-com or otherwise: Listen to the customer; focus on what you know;learn from your mistakes.

First shared these lessons -- and samples of Nantucket Nectar -- with a crowd of nearly 500 people at Wharton's third annual entrepreneurship conference in November. He talked, for example, about how his typical response to a customer's criticism of the product used to be "What the hell do they know?" Eventually he realized that writing off "your critics as fools could mean ignoring a problem that will only become more damaging as time goes by ? If you let your ego get in the way, it could kill you."

The founders became so committed to listening to others that after getting funding from an angel investor in 1992, they made reformulating and repackaging the juices their top priorities. "The product stunk," admitted First, referring to both the initial recipe and the packaging. Drawing on all the questions and complaints received from customers, distributors, merchants, and their angel investor -- criticisms about everything from the color of the bottle cap and labels to the actual ingredients -- the founders set out to make Nantucket Nectars a better juice with a distinct package. Today's juice formulations and bottles evolved, in part, from many of those early suggestions.

In 1991, based on their products' success on Nantucket, the owners had begun looking into new markets. While Boston seemed an obvious choice for expansion, First was surprised to find that the juice did not sell there as well as expected. Believing the product's success on Nantucket was related to the founders' presence on the island and their relationship with local retailers, First and Scott decided they should become beverage distributors in addition to suppliers.

For a while, First took on product distribution himself, quickly moving beyond Nantucket and Boston into Washington, D.C. Eventually, however, the founders decided to begin distributing other companies' beverages alongside their own line.

That's when "the nightmare" began, says First. In addition to working until 2 or 3 a.m. most days, the two entrepreneurs had to cope with employee accidents, theft, incorrect orders, and pressure from clients. Within 12 months, First and Scott lost $2.5 million, an experience that First jokingly refers to as the $2.5 million M.B.A. Threatened with losing their main investor, the pair had six months to turn the company around. Their first step was to sell the distribution business.

"We went back to doing what we should have been focusing on all along -- Nantucket Nectars," said First. "We [were] not distributors and we could not be distributors. It is a tough business, and we learned that the hard way." Nantucket Nectars has been profitable since 1994, the year First and Scott got out of the distribution business.

The unusual marketing strategy that First and Scott developed may have contributed as much to their company's success as their attention to quality. Anyone who knows Nantucket Nectars is likely to be familiar with Tom and Tom, their dogs Pete and Becky, and the juice's Nantucket beginnings. Even the label of the Nantucket Nectars bottle, a picture of the two Toms and their boat, is replete with details of the company's history, including an account of their friend who jumps naked off roofs into the harbor. And underneath the bottle caps, juice drinkers can always find odd facts about the company, its employees, or historic Nantucket landmarks. This same down-home, let's-just-tell-our-story approach characterizes the company's radio ads, which feature the two Toms talking, unrehearsed, about themselves, their friends, and the juice.

According to First, he and Scott are happy just being "juice guys." They rely entirely on outside distributors and describe themselves as "the most distributor-friendly suppliers around." About his decision to become an entrepreneur, First admits that he was driven initially by a desire to live on Nantucket year-round and run a business. So far he has met both those goals. (In 1998 Ocean Spray bought half of the company for an undisclosed sum. Nantucket Nectars continues to operate independently.)

Echoing the words of Jerry Seinfeld during a recent 60 Minutes interview, First said, "Ten years ago I took a risk on myself, and it worked out."

All materials copyright © 1999 of the Wharton School of the University of Pennsylvania.


Published on: Dec 8, 1999