Cheerwine Gets a Toehold

SALISBURY, N.C. –Twenty years ago, the last big expansion thrust by the makers of one of North Carolina’s favorite homegrown soft drinks, Cheerwine, fizzled miserably.

It wasn’t so much because the cherry-flavored soda with the unusual name went flat with customers in other parts of the country. The problem was getting enough cases of the drink – first mixed in Salisbury in 1917 – to places like New Jersey.

“Distribution is king,” said Mark Ritchie, president of Carolina Beverage Corp. and the great-grandson of Cheerwine founder L.D. Peeler, whose portrait hangs on the wall of Ritchie’s office. “Seventy percent of our job is just being there.”

Despite the name, there is no wine in Cheerwine, which gets its moniker from its burgundy-red hue. Now, the drink is making another push beyond its traditional Southern base, into places like Pennsylvania, Illinois, Indiana, Iowa and Michigan.

This time, Ritchie predicts, all the pieces are in place to make expansion happen. Ritchie, who admits he “bleeds Cheerwine red,” has lined up distributors and already launched a series of promotional events and taste tests to drum up business.

“We have some momentum building,” he said. “A company has to keep moving forward or it risks dying. We want to make money, but it will be a long time before this will turn a profit. We also want people in other places to enjoy Cheerwine.”

Based in Salisbury, privately held Carolina Drink Corp. has always competed in the shadow of soft-drink behemoths Coke and Pepsi. Those two combined control about 75 percent of the American soft drink market.

A lot of that control comes from the two companies’ strong network of distributorships, which forces smaller players like Cheerwine to rely on independent distributors.

That’s made it hard for the drink to break out of its traditional market of North and South Carolina, where 80 percent of Cheerwine is sold.

Nationally, Cheerwine’s market share is just 0.1 percent, according to John Sicher of industry publication Beverage Digest. Still, Sicher is among those who buy Ritchie’s argument that Cheerwine can break out of the Carolinas.

“The Ritchies are well known in the industry as good operators,” he said. “They have a regional brand, but a good national reputation. That will be an essential point of differentiation.”

Sicher said Ritchie’s biggest challenge will be to sign on enough bottlers and distributors to keep the problems of the ill-fated 1980s expansion from recurring.

“Their reputation and industry knowledge will help them get it done,” he said. “They are bottlers themselves and they are well respected and known by other bottlers.”

That reputation is what motivated Mike Bartel, president of Refreshment Services Pepsi, an independent bottling company in Springfield, Ill., to contact Ritchie about distributing Cheerwine in his state.

“Mark was a little surprised, because usually they call people like me to see if we want to do business,” he said. “I called him and told him I wanted to carry Cheerwine.”

Bartel had consumed his share of Cheerwine while attending college in North Carolina.

“I used to drink it, but what really sold me was when I took my family to North Carolina on vacation a couple of years ago,” he said. “My kids tried it and they ranted and raved over it.”

So when Bartel went looking for a new drink to sell to supermarkets and convenience stores in his territory in central Illinois, he called Ritchie.

“I wanted one with long-term growth potential and Cheerwine is one of those drinks,” he said. “It could start off slow, but I have high hopes.”

Bartel recently started distributing Cheerwine in his Midwestern markets, using free samples and heavy discounts to entice consumers to give it a try.

“So far the feedback we’re getting has been very good,” he said.

As they expand, Cheerwine’s makers might have to overcome lingering confusion over its name, which has led some over the years to conclude it’s an adult beverage. In 1992, the U.S. Bureau of Alcohol, Tobacco and Firearms reportedly considered investigating Cheerwine for encouraging underage drinking.

Jeff Slater, vice president of marketing for Carolina Beverage, said it was not unusual early in the last century to name soft drinks after adult beverages.

“At the turn of the century, they began giving soft drinks names like root beer and ginger ale,” he said. “So Cheerwine falls right into that line.”