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Focus on food and drink

Polar Beverage's early entry into seltzers gives it an advantage in a booming market

October 1, 2018
Photo | Grant Welker
Photo | Grant Welker
Christopher Crowley, Polar Beverage's executive vice president and treasurer, stands amid the company's 1 million-square-foot Worcester operation.

Polar Beverages has been in the Crowley family for more than 120 years. But it's never had an opportunity quite like it has today.

Consumers are ditching soda in droves, and overwhelmingly are turning instead to seltzer, where the Worcester company has long been a mainstay, especially in New England, where Polar says it commands roughly half the market.

"We were the first to flavor seltzer," Polar President and CEO Ralph Crowley Jr. said. "We saw this coming in the '80s."

For much of the rest of the beverage market, at least, trends are causing companies to play catch-up. Seltzer consumption in the past two decades has risen from roughly 150 million gallons to nearly 800 million gallons, according to New York City consultant Beverage Marketing Corp.

Beverage giants Coca-Cola Co. and PepsiCo have increasingly elbowed their way into the seltzer market. Both have made overtures for Polar, and, rebuffed, Pepsi made an agreement with Polar roughly two years ago to run distribution centers in Idaho and Wyoming allowing Polar to make an aggressive move into the Northwest.

Ralph Crowley Jr.

Before that distribution agreement, Polar's only production center outside its Worcester and Scotia, N.Y., plants was one opened in Georgia in 2011. For a time, Polar was shipping its seltzers from Worcester to the Seattle and Portland, Ore., markets.

In the two years since Polar joined with Pepsi, Polar has grown to have a presence in 41 percent of supermarkets nationwide from an initial rate in the 20s, Crowley said. Polar is in CVS locations coast-to-coast, and distributes to at least some locations of many of the largest grocers, including Walmart, Kroger, Albertsons and Food Lion, among others.

"You know you're winning when the biggest guys want to be your partners," Crowley said of Polar's deal with Pepsi.

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Longtime industry player

Polar got its start when Dennis Crowley began making carbonated beverages and whiskey in the 1880s, with the later segment fizzling with Prohibition.

"You know you're winning when the biggest guys want to be your partners," Crowley said of Polar's deal with Pepsi.

It wasn't until more recent decades the seltzer market resembled at all what it is today: a $1.3-billion market when measuring just unsweetened seltzer sold just in grocery stores, according to Polar. The industry has taken off as more consumers give up soda, a trend that's accompanied awareness of the harms of sugary drinks.

Polar has long had a dominant presence in New England, and it remains one of the major players, along with Coke, Pepsi and LaCroix seltzer among carbonated beverages sold in the region, according to data compiled by Polar.

In fact, Polar hopes that New England's seltzer consumption is a harbinger of what's to come nationwide. In New England, per-capita annual seltzer expenditures at grocery stores totals $9.97, which doubles the next-highest spending region, according to Polar. The company is confident that growth will spread as more consumers in more regions move away from soda.

"There's no reason to think that it's not going to continue to penetrate into other areas of the country," said Duane Stanford, the executive editor of Beverage Digest.

Polar has not only grown geographically but also moved beyond its mainstays, like lime, lemon or orange vanilla.

In 2011, Polar launched its first seasonal flavors, and in 2015, it started its Impossibly Good line aimed at the youngest consumers. To go along with the Impossibly Good tag, Polar gave impossible names: Unicorn Kisses, Dragon Whispers, Mermaid Songs and Yeti Mischief. Gone were the more traditional can designs, and in were modern looks, smaller 8-ounce cans and marketing hashtags made to trend on social media.

"The only way to stay in the lead is to be an innovator," Crowley said.

Polar, which started its Instagram account in 2012, was flooded on social media with imagines of people stocking up on the bright little cans as soon as they went on sale. The Impossibly Good line was meant to be limited-time only but in August was made permanent.

"Our customers are increasingly brand-loyal," said Ralph Crowley III, Polar's vice president of marketing and research.

That move came a year after the launch of a line aimed at Millennials, Seltzer'ade, which combines lemonade with a range of fruit flavors and emphasizes what's inside has no sugar or sweeteners.

"Guilt free," the label says.

Ramping up production

If there's one parallel to Polar's growth it's the other cult favorite in seltzer, LaCroix. While Polar is a private company, more can be gauged about selzter's popularity by looking at National Beverage Corp., the maker of La Croix. The company is now trading at more than $115 a share. Until April 2016, it had never traded above $50. LaCroix's sales have spiked by 72 percent in the past decade, hitting $976 million last year.

New competition has popped up, including from Spindrift, a Newton company that began making fruit-infused seltzers in 2010.

"Today's consumers want healthier refreshment which has helped to boost growth of sparkling waters and seltzers," said Gary Hemphill, the managing director of research at Beverage Marketing Corp. "Both sparkling water and seltzer are likely to experience healthy growth in future years."

Polar, which also owns Adirondack Beverages, calls itself the country's largest independent bottler, making 224 million cases per year, with sales topping $500 million. Sales have grown at 20 percent in recent years, and Polar has even gone international, showing up on aisles in South Korea.

Much of the production takes place on the same South Worcester site off Southbridge Street where Polar has always been based and where half of its total space of 2 million square feet sits.

Under the giant inflatable bear waving to motorists in I-290, machines are cranking 24/7 to make not only Polar's own ever-growing roster of drinks but also many of its competitors. During a tour with WBJ in September, A&W, Trader Joe's, Crush and Gosling's were a few of the other brands whose products were making their way along production lines or stacked on pallets.

Christopher Crowley, Ralph's brother and the company's executive vice president and treasurer, leads the tour, checking in with employees monitoring the production line and pointing out the precision each machine requires.

"It's all very steady, very predictable," Crowley said. "We can rely on what we make."

The sprawling plant includes two assembly lines each cranking out 120,000 12-packs each day. Others lines assemble 1,200 cans per minute.

Competition, both good and bad

Polar is bottling some of its competitors at a time when soda appears to be in quick retreat.

A 2014 Gallup poll found that nearly two-thirds of Americans said they avoid soda in their diet, and by 2017, soda was overtaken by bottled water as the top beverage segment, according to Beverage Marketing Corp. Polar's own research has found 46 percent of its drinkers previously drank cola or diet cola.

"Even though it's been around for awhile," Stanford said of seltzer, "you've really seen in the last five years and really in the last couple years especially, this really exponential activity when it comes to sparkling water."

While these days mark an opportunity that Polar's founder never could have imagined, the trend away from soda has also brought soda's giants to seltzer. Coke's revenues from soda peaked in the late 1990s, and Pepsi's declined after around 2005, according to Beverage Marketing Corp. Both companies have reacted in large part by growing into bottled water and juices.

Last year, Coke bought sparkling mineral water brand Topo Chico for $220 million. Early this year, Pepsi launched its Bubly seltzer line, and then in August paid $3.2 billion for SodaStream International, whose seltzer machines let people make sparkling drinks at home.

It is moves like Pepsi's this year that worry Ralph Crowley Jr., whose otherwise quiet confidence extends throughout the company's 1,700 employees, or at least does at the Worcester headquarters.

"We're paranoid," Crowley said, "because we know everyone is out to get us."

But Polar admits all the celebrity attention LaCroix has gotten and all the money being invested by Coke, Pepsi and others brings something else to the very low-key Polar: publicity to the seltzer market.

"It's the best thing that could happen to Polar," Stanford said. "Because Polar is already an established product. Polar only stands to gain from all that."