School market going smoothie

Hopkins, Minn. — What’s a high school student to choose? A sugar-laden carbonated beverage with no nutritional benefits? Or a frozen smoothie made with real fruit, juice and dairy?

Robert Carr hopes more students and schools choose smoothies. In 2006, the “corporate guy” turned entrepreneur founded Healthy Holdings, makers of Fruchi fruit and dairy smoothies for schools, fundraisers and concessions.

Carr’s next target market is upscale grocers.

While a Fruchi costs more than soda, many schools are removing pop machines or locking them during the school day. Administrators are trying to make up lost revenue with healthy alternatives.

“What we have is a portable, convenient, real-fruit smoothie … no fat, no cholesterol, 100-plus percent daily C, more than a serving of fruit, 140 to160 calories,” Carr says. The 8-ounce serving “is really a pretty filling snack; it can be a meal replacement. … Most novelties in stores are three ounces or less … and some are just sugar water.”

Direct to school

Healthy Holdings markets to middle and high schools — an “easier sale” than elementary because older students have more school-lunch purchasing options.

Fruchi’s market launch coincided with a new federal mandate that schools must design wellness programs if they participate in the national school lunch program. “We marketed Fruchi as a key component,” Carr says. “As schools were losing soda revenue, they looked to à la carte products like ours” to replace lost sales.

“Our product is the only one like it that I’ve found,” Carr says. Fruchi comes in four flavors — Razz Pizzazz, Strawberry Escape, Berry Blitz and Caribbean Craze — packaged in ready-to-eat pouches. While most of the fruit comes from the West Coast — strawberries, peaches, blueberries, papaya — Fruchis are also made with apple juice.

“We would like to get apple juice from Minnesota,” says Carr who is investigating a local source. “The issue is, can we get the quantities we need, delivered at an acceptable price?” The fruit and juice is blended with frozen yogurt and sherbet.

Small batches

Carr’s office and production facility in Hopkins “is a pretty simple operation” with six commercial blenders retrofitted from retail operations and filling and sealing equipment, Carr says. Through a Hopkins school vocational program, special education students help with labeling.

The first Fruchis Carr marketed were made fresh daily. “We made them up the same day the schools took them. Most wanted deliveries twice a week. Each day we packaged them in styrofoam cups and delivered no later than 10:30 to be there before lunch hour.

“As we grew, the whole window got more difficult.” The initial 12 schools increased to 20 by the spring of 2007. “We struggled with this idea of making and delivering a fresh product every day.”

Frozen and new

Carr went to work designing a frozen product in a simple, environmentally-friendly plastic pouch with a tear-off top that he has filed a patent for.

Carr received some assistance with developing his business. For example, he meets regularly with marketing and financial consultants at the University of St. Thomas Small Business Development Center. He also found AURI food scientist Charan Wadhawan who helped with product development, nutritional analysis, packaging, labeling and “making sure we knew what we needed to do.”

“For someone like me starting this business, I have all this corporate experience, but a lot of that isn’t relevant when you’re in a hands-on mode. … It’s nice to have organizations like AURI. … I must say I’ve been pleasantly surprised at how many resources there are (for small businesses).”

The new Fruchi “is frozen, but if you let it stand 10 or 15 minutes and knead it a little, it’s exactly the texture of a fresh fruit smoothie.” It’s also easier to distribute and has a longer shelf-life. “Before, if schools didn’t get rid of all the fresh smoothies the same day, they could freeze them, but the quality deteriorated.”

Adapting markets

Although Carr has expanded his customer base to about 30 schools, the pouches aren’t selling quite as well — per school — as the fresh smoothies. “It’s become more of a frozen novelty now; before it was more like a beverage. By the time kids buy their regular meal and a beverage and a Fruchi, it’s more expensive.

“Also, it’s less of a phenomenon now … and has become just a regular part of the school’s à la carte offering. I’m fine with that because in many ways our growth opportunities will be outside the schools, and they still love our product.”

Healthy Holdings charges schools $1.20 per Fruchi and schools set the retail price — averaging $2 to $2.25 each. “There is little prep or clean up with our product, and schools make up some of the money they use to get from pop sales … (pop) markups are astronomical.”

“I’m not getting rich by any means,” Carr says. “But if it takes off, my costs will be offset by higher sales and lower labor and ingredient costs.”

A natural outgrowth of the school market has been team fundraisers, sports concessions, and parks and recreation facilities. Three Hennepin County parks sold Fruchis last year at concession stands. “Obviously there wasn’t any promotion,” but popularity grew by word of mouth, Carr says. “When parents try our product, we invariably get e-mails wanting to know where they can buy it.

“Hopefully we can get kids to sell products as a fundraiser and get Fruchis in the hands of parents. We’re going to push a lot harder to get more concession business and sports venues, concerts. It’s a grass roots effort.”

Corporate beginnings

Carr’s 24/7 entrepreneurial lifestyle is a long way from the corporate world he left eight years ago. “ I started with Pillsbury in finance. … I was CFO for Haagen Dazs, then for Northgate Computer, then Redline Healthcare,” where Carr was CEO for five years until the company was sold. “I decided to say goodbye to the big corporate world.”

“I did some adjunct teaching at the University of St. Thomas.” In 2003, Carr became interested in a fruit-smoothie retailer in California that was starting to franchise its business. He purchased Minnesota territorial rights and opened a smoothie store at the Mayo Clinic in Rochester, Minn.

However, faced with retail challenges, marketing a product unfamiliar to Minnesotans, and the restrictions of a corporate franchise, Carr decided he didn’t want a storefront and sold back the franchise rights. “When you have a new franchise, it’s unproven. They’re telling you how to do things, but they’re not out there on the front lines,” Carr says.

He liked the smoothie product, however, and their growing popularity with teenagers. “Smoothies are not a fad. They are a long-term and rapidly-growing trend, a product that especially appeals to younger people.”

“Rather than this retail business, which is a challenge to operate, I decided to start a wholesale business, produce larger quantities and cater to schools.” Carr launched his new company, Healthy Holdings, in the summer of 2006 and immediately started marketing to schools.

“Everything multiplies what we had in our retails store where we would sell 200 to 300 a day. Now we do 1,000 to 1,200 a day for schools.” As his own boss, Carr says he is “doing better with ingredient sourcing, packaging and the freedom.”

Heading home

Ultimately, Carr wants Fruchis in home freezers. To gear up for retail, the company is enhancing the product’s look. “We have designed a sleeve, like you get with a coffee cup, to slip over the pouch,” which is easier to hold than the cold plastic, Carr says. “And it serves as a push-up tool.”

“When we’re ready, Charan will help us reformulate our existing product” for retail and meet labeling requirements. “We are going to be working on healthier smoothies, using more functional (health-promoting) ingredients,” Wadhawan says. “And we’ll be working on more flavors.”

In the meantime, the company is upgrading its marketing with new label graphics, marketing materials and an upgraded Web site. Laurie Bauer recently joined Healthy Holdings as sales director to lead the new marketing effort.

“An upscale, local chain like Lunds/Byerly’s or Kowalskis is where we hope to go as a first step. They seem to support Minnesota companies and like innovative new products.”

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