When your sales are blocked at home, foreign markets may be the answer

Santa Fe lives up to billing.

The sky is clear, the natives friendly, and the town gorgeous. Everything -- including the Woolworth's in the heart of the city -- is done in pinks and flesh tones with contrasting dark blue or brown trim.

No, there's no doubt that Santa Fe is a wonderful place to be -- unless, of course, you're trying to sell a mass-market product. The problem is, there's no mass to market to. The town -- including all the writers, artists, and leftover flower children who call it home -- has only 55,980 people. And with a population of some 1.5 million, New Mexico ranks 37th nationally -- great if you like open spaces; awful if you're trying to sell all-natural juices and sodas, as Richard Becker is.

Becker, 36, is president of Blue Sky Natural Beverage Co. The $1.8-million company was started by his brother-in-law, Robert Black -- a former California meat processor who came to Santa Fe to study at one of the town's massage schools -- and Becker's sister, Marla, a therapist, who is very fond of natural products.

Upon moving to Santa Fe in 1980, Marla was surprised to learn there was no fresh juice to be found anywhere in town. Could we, she suggested to Black, provide some?

And so Blue Sky was born. The juices were a hit, and the natural sodas, which were added later, fared even better.

But today -- nine years after the Blacks began squeezing juice by hand and delivering it in ice-laden coolers -- Blue Sky has captured just about all the sales there are to be had in "The Land of Enchantment."

The solution, of course, is to sell elsewhere. Obvious? Yes. Simple? No.

There's a reason words like "battle" and "war" are used to describe the $40-billion soda-pop industry. If you choose to enter the fray, you never know where the next shot will come from. Not only do you have the established armies of Coke and Pepsi doing everything in their power to fend off new combatants, but you also must worry about the retailers. Slotting fees -- basically a charge for renting supermarket shelf space -- have become commonplace.

It takes an awful lot of money to expand beyond your home base, and, says Becker, "we just don't have it."

But Becker, an attorney by training, has figured out a solution. He's bypassing all the problems that an aggressive U.S. expansion would cause by going overseas -- specifically to Japan. Starting from a tiny base, foreign sales are up twentyfold in three years, and, says Becker: "I can see this being a very significant, if not the most significant, part of our business in the future."

It's an interesting marketing strategy. Most people see exporting as a way to increase volume. And Blue Sky does, too. Last year shipments to Japan accounted for 10% of sales. But for Blue Sky, going international is also a way to hedge its bets.

With more and more natural sodas, sparkling waters, and flavored waters -- many of them produced by huge beverage companies -- entering the U.S. market, Becker sees going international as a possible escape route. If things get too intense here, he can focus over there.

There are other benefits, too. Foreign sales generate good press. And there's the Back to the Future aspect of all this. While all-natural everything has become virtually pass here, it's still a relatively new idea in Japan.

"In a funny way, selling overseas lets us turn back time," says Becker. "It's too late to apply what we've learned over the past 10 years to the market opportunities that were available in the United States in 1981. But it's not too late to do that in Japan. When it comes to no artificial anything, it's 1981 over there."

All this seems very well thought out -- now. It wasn't in the beginning. In fact, Blue Sky had never given international sales a thought, until the state planted the idea.

Every other year, the Western U.S. Agricultural Trade Association takes a booth at the Anuga Trade Show in Cologne. The man on the other end of the phone back in early 1985 was wondering if Blue Sky would object if the New Mexico Department of Agriculture delegation took a couple of six-packs with it to the upcoming show?

Well, no, came the response. Let us know what they think.

"They like it," state reps reported back, "especially the Japanese. Why don't you think about attending Foodex, the huge food trade show later this year in Japan? We'll give you space in our booth."

Becker went, poured what seemed like thousands of gallons of samples, and came back with a connection that led to an order for 1,000 cases. That was no big deal. Still, it was fun to tell people you were selling overseas. Says Becker: "We thought of it as a hobby."

When sales passed 5,000 cases -- or about 3% of total revenues -- two years later, Becker started reevaluating that hobby. All of a sudden, he had a reason to.

For one thing, Blue Sky had come close to saturating the New Mexico market. And despite the company's attempts at national distribution, in-state sales still accounted for more than 40% of revenues.

And for another, it seemed that each day another large beverage company announced it was entering Becker's niche. Seagram now owns Soho Natural Soda. Pepsi-Cola is rolling out H20h!, and Stroh produces Sundance sparklers. There's only limited space in the beverage aisle -- especially if you can't afford to pay slotting fees. Could international sales, Becker wondered, become a serious business?

He vowed to find out. With help from the state, talking to other small companies that have done business overseas, and calling everyone he could possibly think of, Becker eventually hooked up with Tom Nakajima, the man who helped Seven-Up set up its distribution in Japan. The two met and agreed to work together at the 1989 Foodex show, where Becker would go to see if there was any serious interest in Blue Sky. (The distributor the company had been using couldn't handle any more volume.)

After lots of meetings, and lots of false leads, Becker finally met representatives from Cheerio Kansai, an Osaka-based manufacturer and distributor of soft drinks looking to import American products. What followed was a meeting and a series of faxes, once Becker returned home. The result? Blue Sky and Cheerio last year signed an 18-month test-marketing agreement.

At first blush it looks like Becker gave away the store. He's selling Cheerio his soda at a substantial discount, about a third less than he gets in the States, and he's letting Cheerio direct the Japanese marketing campaign.

But look deeper, says Becker.

First off, the price break is exactly what he gives domestic distributors when he really wants them to promote the product. And besides, he adds, Cheerio's first order of 20,000 cases -- which equals 8% of Blue Sky's total soda sales last year -- more than justifies the lower price.

As for Cheerio directing the marketing decisions: "We each have a vested interest in wanting to make this deal succeed," Becker says. "We have to trust they'll do a good job."

That can require a lot of faith. For example, consider Blue Sky's ads. In the United States, they're pretty basic. The New Mexico desert is in the background, with lots of condensation-covered cans out front. Occasionally the spots will feature a teenage boy's fantasy version of a cowgirl -- halter top and string tie -- staring longingly at the can. The whole thing is done in pastels and the copy stresses "all natural soda, no preservatives, nothing artificial." The tag line: "Blue Sky: The new taste of the old west."

While it's not ground breaking, at least you know what it's supposed to be: an ad for soda pop.

With the Japanese version, you're not so sure. The ad has a blood-red background with two cans of Blue Sky -- and just about all the copy -- shoved into the lower-left-hand corner. It reads: "We are drinking it again in Japan. Direct from Santa Fe's clear blue sky to the Japanese throat. Natural soda, Blue Sky, new introduction. No additives, no artificial color, no caffeine that your mom recommends (against)."

Not exactly "the heartbeat of America."

Cheerio has made other changes too. For one thing, it's had Becker redesign his cans -- the background blues have become less metallic, the contrasting colors brighter. And Cheerio has decided to carry only two of Blue Sky's six flavors (mandarin lime and lemon lime). The distributor says the others, such as root beer and cherry-vanilla cream, are too bizarre for Japanese taste buds.

The fact that Cheerio can pick and choose what it wants to carry, and run ads that Becker doesn't understand, shows again Blue Sky's lack of control over the situation. Becker, however, prefers to look upon that as a blessing.

"We don't have the resources to set up an office over there, even if we wanted to. But with the exception of Nakajima's involvement, we spend very little time on this. We're getting all these additional sales, and it's a wonderful way to get our foot in the door."


It's far away and they talk different. Still, they may love your product

As Blue Sky's experience shows, you don't need in-depth market research, armies of consultants, or even a valid passport to start doing business overseas.

But you do need to keep the following in mind:

* Why start from scratch? While you can spend a lot of time setting up an elaborate international operation, why would you want to? Market research? Odds are your state Department of Trade has what you need (see " Inc.'s Guide to 'Smart' Government Money," August 1989, [Article link]). Distribution? It's already in place over there. A sales staff? You can tap into existing networks. The trick is to leverage other people's time.

* The natives know. If you're going to tap into that expertise, it's silly for you to dictate marketing strategy. Let your distributors cherry-pick your line and design local advertising.

* Patience. While you can make a decision in 20 seconds, cultural differences may mean the people you're working with do everything by consensus. Don't blow it all by trying to force a decision.

* Protect yourself. Is your product patented? Your trademark protected? Have your suppliers signed noncompete clauses? (For more ways of protecting yourself, see International Sales, "Too Close for Comfort," January 1990, [Article link].)