|Wholly owned subsidiary|
|Founded||Santa Cruz, California, United States (1980)|
|Headquarters||Half Moon Bay, California, United States|
|Steven M. McCormick, COO and General Manager
James R. Steichen, SVP Finance and CFO
Chris Brandt, Director Brand
|Products||Drinks, food bars|
|Revenue||US$187.9 million (2007)|
Number of employees
|Parent||Minute Maid, a division of The Coca-Cola Company|
Odwalla Inc. is an American food product company that sells fruit juices, smoothies and food bars. It was founded in Santa Cruz, California, in 1980 and since 1995 is headquartered in Half Moon Bay, California. Odwalla's products includes juices, smoothies, soy milk, bottled water, organic beverages, and several types of energy bars, known as "food bars".
The company experienced strong growth after its incorporation in 1985, expanding its distribution network from California to most of North America, and went public in 1993. In 2001, Odwalla was acquired by The Coca-Cola Company for US$181 million and became a wholly owned subsidiary.
A period of decline occurred as the result of a fatal outbreak of E.coli-H7 in 1996 that was caused by using bruised fruit that had been contaminated. Odwalla originally sold unpasteurized juices, claiming that the process of pasteurization altered the flavor of the juice. Following the E.coli outbreak, Odwalla adopted flash pasteurization and other sanitization procedures. Odwalla recalled its juices and experienced a 90% reduction in sales following the event. The company gradually recovered and the following year became profitable again.
Odwalla was founded in Santa Cruz, California, in 1980 by Greg Steltenpohl, Gerry Percy, and Bonnie Bassett. Odwalla's production facility is in Dinuba, California. The trio took the idea of selling fruit juices from a business guidebook, and they began by squeezing orange juice with a secondhand juicer in a shed in Steltenpohl's backyard. They sold their product from the back of a Volkswagen van to local restaurants, employing slogans such as "soil to soul, people to planet and nourishing the body whole".
The name for their start-up, "Odwalla", was taken from that of a character who guided "the people of the sun" out of the "gray haze" in the song-poem "Illistrum", a favorite of the founders, which was composed by Roscoe Mitchell and performed by the Art Ensemble of Chicago jazz group, of which Mitchell was a member. Steltenpohl, Percy, and Bassett related this to their products, which they believe "help humans break free from the dull mass of over-processed foods so prevalent today".
Odwalla was incorporated in September 1985 after five years of growth and expanded to sell products in San Francisco in 1988. Hambrecht & Quist Inc., a venture capital firm in San Francisco, was one of Odwalla's main investors at the time, investing several million dollars in the company. By 1992, the company employed 80 people at its company headquarters in Davenport, California, and sold around 20 different flavors of juice for between $1.50 and $2.00 a pint. Odwalla went public in December 1993 (NASDAQ:ODWA); the company had 35 delivery trucks, almost 200 employees, and made about $13 million a year. Soon afterwards, Odwalla expanded into new markets when it bought two companies in the Pacific Northwest and Colorado.
Odwalla built a new production facility located in Dinuba, California, in 1994 in order to better meet production demands. The following year, the company moved its headquarters to Half Moon Bay, California.
Continual growth and outside investments during these years allowed the company to expand and grow: Odwalla's revenue tripled from 1994 to 1995, and in 1996 they made more than $59 million in sales, their highest ever. This constant growth made Odwalla one of the largest fresh-juice companies in America by 1996, when the company was selling its products to stores in seven states and parts of Canada. It was estimated that they would reach $100 million in sales by 1999. Much of this growth resulted from the perception that Odwalla's products were healthier than regular juice because of unpasteurization.
On October 7, 1996, Odwalla made a batch of apple juice using blemished fruit, resulting in one death and 66 sickened customers. Odwalla made and marketed unpasteurized fruit juices for the health segment of the juice market. This batch was contaminated with E. coli.
Despite a net loss for most of 1997, Odwalla worked to rehabilitate its brand name. In addition to advertising its new safety procedures, Odwalla released its line of food bars (its first solid food product line) and entered the $900 million fruit bar market. Another new product was the Future Shake, a "liquid lunch" aimed at younger consumers. Because of these efforts, Odwalla was again profitable by the end of 1997, reporting a profit of $140,000 for the third quarter.
Having recovered, the company worked to expand geographically into markets like Philadelphia and Washington, D.C., and by the end of 1998 reported that revenue had surpassed pre-crisis levels. Growth continued over subsequent years, in part through the $29 million acquisition of Fresh Samantha, a large juice company based in Saco, Maine, in 2000. This allowed Odwalla to expand into additional East Coast markets, but incurred high transportation costs as products had to be shipped across the United States from California. To address this problem the company announced plans to build a second production facility in Palm Beach County, Florida. However, facing difficulties in obtaining building permits and allocating sufficient funds, the project was first delayed and eventually cancelled. Odwalla produced and sold products under both its own and the Fresh Samantha brand names for a few years; however, in 2003, the company decided to stop selling juice under the Fresh Samantha name and to only sell Odwalla-brand juice.
Odwalla was purchased by The Coca-Cola Company in 2001 for $15.25 a share, a deal which totalled $181 million and was unanimously approved by the Odwalla board of directors. Under the terms of the merger, Odwalla's management stayed on as heads of the company, and it was "folded" into Coca-Cola's Minute Maid department. The acquisition was one of several similar mergers which were aimed at expanding Coca-Cola's product line to include non-carbonated drinks. Odwalla benefited by obtaining up to a 124.3 percent premium on shares of the company, as well as from the stability and strength that ownership by The Coca-Cola Company offered. Odwalla also was able to expand into new markets because of Coca-Cola's well-established distribution network.
Odwalla continued to grow following the acquisition. This growth resulted in part from new product releases, which included a line of PomaGrand pomegranate juice (released at the 2006 Sundance Film Festival), two flavors of energy drinks, and three flavors of "Soy Smart" drinks, which contain soy protein, omega-3 fatty acids, and calcium.
Coca-Cola promoted Odwalla products in 2006 when the company aimed at removing carbonated soda products in schools. Odwalla continued to have good growth in 2007, when Coca-Cola, squeezed by poor growth in its North American markets, issued a company-wide hiring freeze; Odwalla, because of its good performance, was one of the few exceptions to the rule.
Odwalla uses what it characterizes as "fresh-sourced" produce (fruits and vegetables that have recently been harvested) to make many of its products, as well as organic oats for food bars and certain tropical fruits in a frozen purée form, purchased from an outside source and blended with fruit juice. Because Odwalla uses fresh produce, some juices are seasonal. Fruit availability and price is also affected by adverse weather, disease, and natural disasters. Throughout the year, Odwalla juice colors and flavors change slightly because different types of fruit are used.
After the E. coli outbreak, Odwalla improved the safety of several of its production processes. Before the fruit enters the factory, it is washed, sorted and sanitized. Once it has reached the plant, the apples, carrots, and citrus fruits are separated and washed again. The fruit is pressed to get the juice, which is then flash pasteurized and bottled. A sample undergoes quality testing, and, if it passes, the batch is shipped in refrigerated trucks to various distribution centers in the United States. Odwalla juice has a relatively short shelf life compared to other beverages and thus must be refrigerated. However, after the introduction of flash pasteurization in 1996 and a new plastic bottle in 2001, the shelf life has been considerably extended. Generally, Odwalla products are sold in special Odwalla-brand displays at grocery and convenience stores, instead of being intermixed with other products.
Odwalla Inc. produces many flavors of fruit and vegetable drinks, as well as dairy-free soy milk (marketed under the "Soy Smart" name), "PomaGrand" pomegranate juice, "Serious Energy" caffeinated fruit juice, bottled spring water, and Odwalla's Superfood smoothie line of products (see green smoothie), which are viewed as the core products of the company and are made of various fruit purées, wheat grass, and barley grass. These products accounted for roughly 95 percent of Odwalla's revenue in 2001. Odwalla juice is sold in individual 12 fl oz (formerly 450 millilitre or 15.4 US fl oz) bottles made of plant-based recyclable HDPE plastic, as well as larger 64 US fluid ounce (1.9 litre) containers. Odwalla's juice, because of production costs, is "typically sold at prices higher than most other juice products", and the price of the juice can vary over time because of weather or disease affecting the supply of fruit and vegetables.
Odwalla's sugar content can be even higher than Coca-Cola's. For example, Odwalla's "Mango Tango" has 3.67 grams of sugar per ounce--almost 1 full teaspoon of sugar in every ounce of juice. Coca-Cola contains 3.25 grams of sugar per ounce. This translates to 44 grams of sugar (nearly four tablespoons) in a 12-ounce "Mango Tango" versus 39 grams of sugar in a 12-ounce Coke.
Throughout its history, Odwalla has produced and subsequently withdrawn various juice flavors due to their lower popularity, including the Odwalla Superfood Amazing Purple, Soy Vanilla, and Pomegranate Mango drinks.
In September 1998, Odwalla began to sell energy bars made with fruit and grains, named food bars, as an alternative to its drinks in an attempt to raise revenue following the 1996 E. coli outbreak. The first three flavors released were Cranberry Citrus, Organic Carrot & Raisin, and Peach Crunch, all three of which are now discontinued. Within eight weeks of their release, the Odwalla Bar was one of the top-selling energy bar brands in the market. The bars come in a variety of flavors, and weigh 2 ounces (56 grams) per bar. As of 2001, before Odwalla was acquired by Coca-Cola, food bars accounted for less than five percent of Odwalla's revenue.
Interviews with former Odwalla managers and company documents show that in the weeks before the outbreak, Odwalla began relaxing its standards on accepting blemished fruit and reining in the authority of its own safety officials, culminating in tense, dramatic moments on the morning of Oct. 7, 1996, the day the contaminated juice was pressed. ...