Monday, January 13, 2014

Success story : Charles Hires & Root Beer

(from IBD 1/13/14)

Something revolutionary was brewing in Philadelphia in 1876.
In the back of a small drugstore, a 24-year-old pharmacist named Charles Hires was tinkering with herbs, roots, berries and yeast.

Adding sugar to the mix, he came up with a recipe for a classic American soft drink — Hires Root Beer.

Although Hires (1851-1937) didn't invent root beer, he was the first to promote it.

He took his sweet, foamy drink to the same 1876 Centennial Exposition in Philadelphia where Remington's typewriter, Alexander Graham Bell's telephone and H.J. Heinz's ketchup were introduced.

The city was soon raising a mug to Hires, who initially sold his root beer as a solid concentrate. Four years later he launched a liquid concentrate, and in 1893 he introduced a bottled, ready-to-drink product.

By the turn of the century, Hires Root Beer was America's favorite soft drink. And by 1921, the company was worth $2 million — which translates to $26 million today.

"My success is by no means due to any extraordinary ability or mentality, but merely the result of a little practical vision, a great deal of ambition and absolute honesty," Hires told a Florida newspaper in 1929.

Ahead Of The Pack
Hires Root Beer is frequently cited as the original root beer, America's first popular soft drink and the country's oldest continuously operating major soft drink brand. The company paved the way for soft-drink giants such as Coca-Cola (KO) and PepsiCo (PEP).
Hires hoisted his product with groundbreaking marketing.
A Quaker and teetotaler, he cleverly advertised his root beer as a health drink and wholesome alternative to alcohol just as the temperance movement and soda fountains took root in the country.

In an era before brand names were common in America, Hires Root Beer was practically as prevalent as Coke is today.

"Charles Hires was a marketer," Andrew Smith, author of  "The Oxford Encyclopedia of Food and Drink in America," told IBD. "He was the right man with the right product, and he promoted it in a way no one else had done. At that point there wasn't much advertising of food and beverages. He created a lot of excitement and made it possible to expand his business very quickly and nationalize it in ways most companies weren't able to do prior to that time.''

Hires was born near Roadstown, N.J., the sixth of 10 children of a farming couple.

In 1863, after little formal education, the 12-year-old took a job as an apprentice to a pharmacist at a weekly salary of $12, worth $225 today. By 16, he yearned to advance, so he took night classes at the Philadelphia College of Pharmacy while apprenticing by day.

"I was a young boy with only 50 cents to my name," he recalled. "I wasn't interested in farming and wanted to make my own way."

In 1869, Hires, now 18, opened a drugstore in Philadelphia with a $3,000 loan. He slept over the store, ate his meals at a boarding house next door and worked grueling hours. Still, he couldn't get his business off the ground.

Then he noticed some workmen excavating a cellar in an old house down the street. As they dug down, they came to an oily substance called potter's clay, which was valuable for removing grease from clothing. At the time it was sold in drugstores in broken clumps.

Hires came up with the idea of packaging it in clean, convenient-sized cakes. He named it Hires Potter's Clay, advertised it as a grease and spot remover, and sold it to wholesale drug houses. This sideline business earned him several thousand dollars, which helped launch his root beer business.

Legend has it Hires and his bride were honeymooning at a New Jersey lodge in 1875 when they tasted the landlady's herbal mixture of sassafras bark, wintergreen, sarsaparilla root, hops, juniper berries and pipsissewa. The newlyweds were hooked.

When Hires returned to Philadelphia, he asked two college professors to help him develop a powder that could be mixed with water, sugar and yeast to produce a root beer like the one in New Jersey.

"After a great deal of experimentation, I hit (on) ... the right combination,'' Hires said.
Added Smith: "There would have been hundreds of other products available at the time. His combination of roots wasn't that unusual. Sugar was the key. When sugar is added, the audience is no longer adults who think they are taking this medication. They're relatively young people.''

Hires first planned to market his product as Hires Herb Tea.

19th Century American Trade Card for Hires Root Beer, 1894.

He changed the tag to root beer to appeal to the large market of tough Pennsylvania coal miners — an early sign of his marketing prowess.

Thirsty customers were ready when Hires launched his product at the Centennial Exposition, the first World's Fair in America.

"It was a very hot summer," Smith said.

With people guzzling the root beer, Hires marketed it as a solid concentrate.
Customers mixed the 25-cent packets into 5-gallon batches, making it the first soda drink to tackle the home market.

Commercial Boost

The drink might have fizzled if Hires hadn't run into a newspaper publisher in 1877.

"I was in the Philadelphia Public Ledger office one day," Hires told Printer's Ink magazine in 1913, "and George W. Childs saw me and led me back into his office. 'Mr. Hires,' he said, 'why don't you advertise that root beer extract of yours?' I told Mr. Childs that I hadn't seriously considered advertising it, and that I hadn't any money to spend for advertising in any event."

Still, Hires bought an ad, saw sales soar and quickly ordered more ads. Later that year he was at the forefront among manufacturers with his purchase of a full-page newspaper ad promoting a product. "My experiment with the Ledger was so successful that I began to wonder if the same thing could not be done in a national way," Hires said.

He added: "I think it was the year I went into the magazines that my expenditures into advertising amounted to $10,000 and the profits from my root beer business were $28,000. Next year I increased the space in the magazines and, encouraged by my success in the Ledger, added a list of big city newspapers.''

Hires set the tone again in 1884 with his purchase of a color advertisement on the back page of Ladies Home Journal.

Hires Root Beer rose to the top of American soft drinks at the turn of the 20th century and eventually became part of Dr Pepper Snapple Group. 

The Promoter
During a three-month period in 1893 "Hires spent more than $200,000 (worth $5.3 million now) on newspaper ads, signs, trade cards, posters and other forms of advertising — a remarkable expenditure at that time," Anne Funderburg wrote in "Sundae Best." "That same year, he promoted his root beer at the Chicago World's Fair by installing a soda fountain, where visitors could savor a free sample."

By the time he launched bottled, ready-to-drink root beer, soda fountains were changing American social habits.

On a typical weekend afternoon at one of these establishments, a family might be seated around one table, a group of 16-year-olds around another, a gaggle of adult friends around yet another — all of them sipping on Hires Root Beer.

"The soda fountain was the perfect gathering spot,'' Smith said. "(Before) there was no place for young people to meet. You aren't going to go into a bar or saloon — they only had men. If you really wanted to socialize, the location you could do it was the soda fountain. Simultaneously, you've got a real strong temperance movement, and a mechanism for bottling, so if you enjoy it, you can take it home. So you've got all these things going on all at once.''

Hires, who was married twice, remained in charge of his company until 1925, when he turned it over to his two sons.

Consolidated Foods bought the company from the Hires family in 1960 and sold it two years later to Crush International. Procter & Gamble (PG) bought Crush in 1980 and sold Hires Root Beer to Cadbury Schweppes nine years later.

Cadbury spun off its soft-drink arm in 2008, and the beverage company renamed itself Dr Pepper Snapple Group (DPS), which has been on a 300% stock run since 2009.

Today, consumers can still buy Hires' sweet carbonated drink — 138 years after the young pharmacist unveiled it to the public.

Hires' Keys

  • A Philadelphia pharmacist, he introduced root beer as a commercial product at the 1876 Centennial Exposition in Philadelphia and went on to make it America's longest-running soft drink brand.
  • Overcame: Ignorance of the product and technological barriers.
  • Lesson: A breakthrough idea may not be profitable unless advertised.
  • "Doing business without advertising is like winking at a girl in the dark. You know what you are doing, but nobody else does."

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