Cheers to Cheerwine

Published in CSP Daily News

Venerable regional soda seeks to expand

SALISBURY, N.C. -- Some 20 years ago, the last big expansion thrust by the makers of one of North Carolina's favorite homegrown soft drinks, Cheerwine, fizzled miserably.

It wasn't so much because the cherry-flavored soda with the unusual name went flat with customers in other parts of the country. The problem was getting enough cases of the drinkfirst mixed in Salisbury, N.C., in 1917to places like New Jersey, said the Associated Press.

Distribution is king, said Mark Ritchie, president of Carolina Beverage Corp. and the great-grandson [image-nocss] of Cheerwine founder L.D. Peeler, whose portrait hangs on the wall of Ritchie's office. 70% of our job is just being there.

Despite the name, there is no wine in Cheerwine, which gets its moniker from its burgundy-red hue. Now, the drink is making another push beyond its traditional Southern base, into places like Pennsylvania, Illinois, Indiana, Iowa and Michigan.

This time, Ritchie predicted, all the pieces are in place to make expansion happen. Ritchie, who admits he bleeds Cheerwine red, has lined up distributors and already launched a series of promotional events and taste tests to drum up business. We have some momentum building, he said. A company has to keep moving forward or it risks dying. We want to make money, but it will be a long time before this will turn a profit. We also want people in other places to enjoy Cheerwine.

Based in Salisbury, privately held Carolina Drink Corp. has always competed in the shadow of soft-drink behemoths Coke and Pepsi. Their dominance comes from the two companies' strong network of distributorships, which forces smaller players such as Cheerwine to rely on independent distributors. That has made it hard for the drink to break out of its traditional market of North and South Carolina.

Nationally, Cheerwine's market share is just 0.1%, according to industry publication Beverage Digest's John Sicher. Still, Sicher is among the cadre of believers who buy Ritchie's argument that Cheerwine can break out of the Carolinas. The Ritchies are well known in the industry as good operators, he said. They have a regional brand, but a good national reputation. That will be an essential point of differentiation.

That reputation is what motivated Mike Bartel, president of Refreshment Services Pepsi, an independent bottling company in Springfield, Ill., to contact Ritchie about distributing Cheerwine in his state. Bartel had attended college in North Carolina, so he was familiar with Cheerwine.

I used to drink it, but what really sold me was when I took my family to North Carolina on vacation a couple of years ago, he said. My kids tried it and they ranted and raved over it.

So when Bartel went looking for a new drink to sell to supermarkets and convenience stores in his territory in central Illinois, he called Ritchie.

I wanted one with long-term growth potential and Cheerwine is one of those drinks, he said. It could start off slow, but I have high hopes.

Bartel recently started distributing Cheerwine in his Midwestern markets, using free samples and heavy discounts to entice consumers to give it a try. So far the feedback we're getting has been very good, he said.

Andrea Foote, editor of Beverage World magazine, said Cheerwine is a marketable product. There are two strong trends going on in this industry right now, diet and flavor, she said. Cheerwine is perfectly positioned in both these areas because it has a lot of flavor and consumers have said there's little difference in the taste between the regular and diet brands.

Cheerwine needs to create some enthusiasm around the brand, with sampling and other innovative programs, she said.

As they expand, Cheerwine's makers might have to overcome lingering confusion over its name, which has led some over the years to conclude it's an adult beverage. Back in 1992, the U.S. Bureau of Alcohol, Tobacco and Firearms reportedly considered investigating Cheerwine for encouraging underage drinking.

Jeff Slater, vice president of marketing for Carolina Beverage, said it was not unusual a century ago to name soft drinks after adult beverages.

At the turn of the century, they began giving soft drinks names like root beer and ginger ale, he said. So Cheerwine falls right into that line.

Sicher said Ritchie's biggest challenge will be to sign on enough bottlers and distributors to keep the problems of the ill-fated 1980s expansion from recurring.