A bright beverage outlook

When the Sunny Delight Beverage Co. (www.sunnyd.com) left Procter & Gamble (www.pg.com) in August — purchased by J.W. Childs, a Boston-based private equity investment firm — it didn't enter the world as a newborn.

"We think of ourselves as a $600 million start up," says Billy Cyr, Sunny Delight's CEO. "We have all the scale and benefits of being a $600 million company and all of the issues of being a start up."

According to estimates, Sunny Delight has 30% of the North American chilled juice drinks market. Also as part of the deal, Punica — a juice drink marketed in Europe — joined the new company.

Under terms of its deal, Sunny Delight has complete control of all manufacturing operations, owning or leasing six plants — four in the U.S. and two in Europe — as well as having a variety of contract manufacturing relationships in Europe. Cyr feels the efficiency of the company's plants is very good, so manufacturing operations have been maintained.

Looking at the company, Cyr sees three key core strengths as leading to sustained growth. First, he feels Sunny Delight has strong in-house marketing capabilities. Second, the company has its own in-house R&D operations, with one lab established at headquarters in Cincinnati, and another being built at its European headquarters in Hamburg, Germany. Third, Cyr points to the company's-supply chain, particularly with cold fill business for Sunny Delight and production and distribution of its Punica business.

With marketing and manufacturing settled, as Sunny Delight began business on its own, changes were made in its distribution.

"With our new company we felt third party logistics providers (3PLs) could do a much better job," explains Ellen Lobst, senior vice president of global manufacturing and technology. "We ship refrigerated and when we were a part of P&G, we were basically the only refrigerated product. Now working with a 3PL that has a bigger spend in that area, we can get more efficiency. Then, as we grow our business, a partnership with a 3PL provider will help us with that expansion more efficiently than if we had been a part of P&G or doing it on our own."

Cyr notes that in Europe, Punica has been using 3PLs for quite some time and has liked the experience and understood the benefits. For its U.S. business, Sunny Delight chose Transplace Inc. (www.transplace.com). Lobst expects to have the entire solution in place by February 1, 2005.

In the U.S., Transplace will provide complete logistics management outsourcing. It will optimize all shipments from manufacturing plants to Sunny Delight retail customers and mass merchandisers, like Wal-Mart, Safeway and Albertson's. Transplace will also manage a core group of refrigerated carriers, handle freight payment services for truckload and less-than-truckload (LTL) prepaid shipments and will arrange loading appointments for customer pickups at Sunny Delight plants.

"Our typical volume goes straight from our plant's warehouse directly to a customer's warehouse," notes Cyr. "In fact, over 90% of our shipments in North America are direct to a customer's warehouse."

At this time, these are defined functions Sunny Delight looks for from Transplace. "Inbound raw material movement is an area we are talking to Transplace about," explains Lobst, "as far as suppliers' materials to the manufacturing plants where they don't have their own transportation and we hire carriers." Sunny Delight manufactures premix at its South Brunswick, N.J., plant and ships it to the other three U.S. plants. It also distributes in Canada and uses tankers to move the pre-mix to plants there. In Canada, Sunny Delight uses a different model, partnering with Saputo Inc. (www.saputo.com), a large dairy. It sells Saputo the concentrate sent directly from South Brunswick. Saputo handles manufacturing, distribution and selling of Sunny Delight in all of Canada while marketing is by Cyr's U.S. team.

Sunny Delight runs lean, another factor that plays well for future success. "We have refrigeration storage at all of our sites and run our operations so that we keep very little inventory," explains Lobst. "We like to ship direct to the customer and I think that gives us more flexibility in meeting needs without having losses in our storage system."

by Roger Morton

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