Finding a Fruitful market niche

The great thing about market niches is

that they're often profitable.

The bad thing about market niches is

that their very profitability draws the sort

of competition that quickly turns a niche

product into a commodity.

That's the challenge at Damon

Industries, the Sparks-based outfit that sells

non-carbonated beverages ranging from

fruit drinks prepared for institutions to justadd-

liquor cocktail mixes. Customers for its

200 products range from casinos in Reno to

universities, prisons and other institutions

across North America. A few products ship

to Europe and Central America as well.

It's a wildly competitive business everyone

from Coca-Cola to local bottling companies

wants to take a sip from the bottle

and it's a business dominated by commodity

products.Who can remember, for instance,

whether the orange juice at the hotel breakfast

bar came from a machine marked Fruitful

Juice Products Damon Industries' brand

or one of its competitors?

"We need to focus on finding new niches

and increasing our top line," says Douglas

Damon, president and chief executive officer

of the family-owned corporation.

The company targets a 15 percent annual

sales increase, Damon said in an interview.

That requires a combination of a small

company's nimble, fast-moving approach to

the market with the discipline and systems

of a large company.

Damon Industries' 34 employees have

plenty of motivation to help the company

find those niches and hit them profitably.

The company's bonus program, available to

every employee except Damon, is linked

directly to profitability.

"We try to get people who realize the

importance of their jobs," said Damon.

"Everyone here understands what this

company is about."

A profitable niche for Damon

Industries needn't be merely a product such

as a mix for granita desserts or a smoothie.

A niche might be a type of account.

Military orders, for instance, have been a

recent focus. Or a niche might be geographic

such as Mexico with the unique

taste buds of its consumers.

"We're trying to fly below the radar

screen," Damon said of the company's work

to identify niches it can mine for a while. At

the same time that Damon wants his company

to hit opportunities quickly, he also

pays a lot of attention to strategic thinking.

Damon's a big fan of his membership in

The Execcutive Committee groups of

chief executives from different industries

who meet regularly to share their experience

and he puts considerable effort into

mission statements, formal succession planning

and other tasks more typical of big

companies than little ones.

The company's mission statement is the

height of simplicity: "Premium Products.

Perfect Orders. Every Time."

Succession planning at the company

owned by Damon and his wife, Diana, is

equally direct: Their two sons, Aaron and

Josh, have begun working in the business

and will take a larger role as the 56-year-old

Damon gradually reduces his involvement.

That sort of careful succession planning

is a far cry from the simple purchase agreement

that Damon reached when he bought

the company from Ernest Damon, his

father, in 1977.

But the business was simpler then.

Founded in 1963, the company was selling

soft drink syrups and orange juice around

the Reno area, mostly to bars and casinos.

Its big breakthrough came in 1977, when

Damon moved to bag-in-a-box technology

(think of the wine in a box you bought at

the market when you were younger).Today,

nearly everything it sells is distributed in a

shelf-stable bag-in-a-box.

"I wish I could tell you it was a wellthought-

out strategy," Damon said. "But it

just sort of happened."

That proved to be a big niche for Damon

Industries. It beat its biggest competitors by

more than two years into the bag-in-a-box

distribution of juice concentrates.

The company today works from a

50,000-square-foot facility filled with the

aroma of whatever product is being cooked

up today. Every week or so, a railcar filled

with orange juice refills a large tank in the

facility. Other large tanks are filled with

high-fructose syrups for the Fruitful drinks

that are less than 100 percent juice.

Some small bottles near the packaging

room contain the oils, essences and aromas

that contribute the smells that consumers

associate with products' taste. Other small

bottles, meanwhile, contain a sample drawn

from every batch the company makes.

They're stored for quality control testing.

Because so many of its customers are in the

hospitality industry, Damon Industries was

pinched by the slowdown after the Sept.

11, 2001, attacks.

Today, Damon said, the company has

regained its footing, and he described the

business as healthy.

The company serves Canadian customers

through a sister company that's 50 percent

owned by Damon and his wife. The company

also is working through a joint venture

to develop packaging and distribution

facilities in Mexico.