Fruit Juice Company Drinks In Success : Adept Marketing Has Helped Natural Kids Foods Become a Leader in Its Field in Just a Year

Natural Kids Foods Inc. in Westlake Village was started in 1989 by three entrepreneurs looking for a niche in the children’s food business. They found it in a big way.

Since the company’s all-natural fruit juices for children first appeared in supermarkets about one year ago, Natural Kids Foods has grown to one of the nation’s largest fruit juice marketers. The company said it sold more than 140 million containers of juice last year and expects the number to jump above 200 million this year.

Its juice sales have placed the previously unknown, privately owned company among household names such as Hi-C, Kool-Aid and Hawaiian Punch. Several independent market surveys, including one by the A.C. Nielson market research company, show Natural Kids Foods selling better than any children’s fruit juice brand except Coca-Cola Co.’s Hi-C in the fast-growing aseptic, or sterile, juice container market, which had $616 million in sales last year.

What’s so special about Natural Kids Foods’ juices?

Company President Don Ratner attributes much of the success to four turtles named Donatello, Michaelangelo, Leonardo and Raphael. Those rowdy reptiles from the immensely popular Teenage Mutant Ninja Turtle kids’ film adorn the company’s hottest selling flavors: “Leonardo’s Cowabunga Cooler,� “Michaelangelo’s Amazing Orange,� “Donatello’s Rad Grape� and “Raphael’s Primo Punch.�

The company also markets a Super Mario Brothers children’s juice based on the Nintendo video game and recently introduced a chocolate-flavored Ninja Turtle drink. A Barbie fruit punch, named after the popular doll and introduced last fall, has been selling well among girls, said Bob Brooks, the company’s executive vice president.

Ratner, a former toy company executive, is quick to add that there’s more to the drinks than fancy packaging. He says the juices taste great and are good for kids because they contain no artificial ingredients (although they do contain sugar).

Ratner declined to disclose his company’s sales or profits. At a retail price of about 36 cents per carton, sales of his drinks would have grossed roughly $52 million last year at the grocery store level. But Natural Kids Foods gets much less than that.

A considerable portion of revenues goes toward royalties for the right to use cartoon and film characters on Natural Kids Foods juices. Royalties typically run 3% to 5% of sales of a licensed product, Ratner said, and Natural Kids Foods currently has about eight licensing agreements.

Moreover, the company also must pay for the manufacture and delivery of its drinks--Natural Kids Foods doesn’t have such a plant. The company contracts with two companies to make ingredients and pays nine packers, six distribution centers and 90 food brokers who sell the juices to the supermarkets, Ratner said.

The drinks’ success has surprised some grocery executives.

“They have just literally come out of nowhere,� said Byron Alumbaugh, chairman of Ralphs Grocery Co., one of many supermarket chains that sell Natural Kids Foods juices. “If you look at the space we are giving them in the stores, it’s doing darned well. The space allocation is so tight in the supermarket business.�

Alumbaugh said the Mutant Ninja and Super Mario juices get 12 to 16 feet of shelf space at Ralphs markets, about the same amount alloted to long-established brands such as Hi-C, Kool-Aid and Ocean Spray. Natural Kids Foods juices are sold in over 95% of the nation’s supermarkets and by mass merchandisers (such as Target Stores) and major drug chains, Ratner said.

Ratner and Brooks said they didn’t expect the company to do so well either.

“What we did is carve out a niche for ourselves in the kids’ food area and the niche seems to be bigger than any of us expected it to be,� Ratner said.

Ratner and Brooks together own 91% of Natural Kids Foods. The remainder is owned by Sidney Horn, senior vice president of grocery for Billings-Horn, a Cerritos-based food broker. It was Horn who initially embarked on the kids’ juice idea with Ratner and Brooks in 1989 and helped secure the company’s first big supermarket accounts.

Ratner said the idea for Natural Kids Foods arose from his experience in owning his own toy company, American Entertech, where he learned the ins and outs of product licensing and made contacts with key players in children’s marketing.

Ratner sold his company in 1985 for an undisclosed sum to MCA Inc.; after four years with MCA he decided to start his own business in children’s foods. By chance, he met Ralphs Chairman Alumbaugh on a flight, and Alumbaugh later introduced him to Horn.

“It was a good fit,� Alumbaugh recalled. “The chemistry between the two has given the product impetus and brought it to life.�

Ratner wants his company to be around after the Ninja Turtle fad passes, so Natural Kids Foods this month introduced drinks featuring Bugs Bunny, Tweety and Sylvester from the Looney Tunes cartoon family. The juices are packaged in 64-ounce bottles and come in citrus, apple and fruit punch flavors.

The company also plans to introduce a Looney Tunes apple sauce this year as well as vitamin-fortified kids’ drinks with National Football League action scenes, Ratner said. Also on the drawing board are kids’ drinks featuring characters from the popular “Beetlejuice� television show and plans for a joint venture on a line of high-nutrition drinks and snacks.

“We feel this is not a quick hit, but the start of a long haul,� Ratner said.

The Ninja Turtle and Super Mario drinks come in 8.45-ounce aseptic, box-shaped containers manufactured by Tetra Pak, headquartered in Lausanne, Switzerland. Last year, Natural Kids Foods was Tetra Pak’s second-biggest customer on the West Coast, buying 117 million cartons, said Larry Buchman, Tetra Pak’s sales representative for the western United States. Coca-Cola, Tetra Pak’s top U.S. customer, bought between 900 million and 1 billion cartons, he said.

Buchman said Tetra Pak initially thought it could sell only 12 million cartons to Natural Kids Foods in 1990. “I don’t think anybody expected it to jump as much as it did,� he said. “They’re the brightest guys I ever came across, as far as marketing goes.�

The company’s success has attracted interest from some big grocery chains looking for acquisitions and stock brokerage companies hoping to take Natural Kids Foods public. But Ratner said he is not interested in either, at least not for now.

“We’re just in the building process,� Ratner said. “Going public right now is premature.�