Marygrace Sexton sits in a grove in southern Florida, surrounded by honeybell oranges Image: David Yellen for Forbes
Across town from Tropicana’s factory in Fort Pierce, Florida, which swallows dozens of truckloads of oranges each run and fills the air with the sting of bitter peel oil, Marygrace Sexton is walking through the considerably smaller juice plant she owns. At 7 pm, the first of six semis rolls up with 50,000 pounds of fruit. Workers check each orange for bruising before a claw-like machine juices it. By 3 am, 30,000 gallons will start flowing into bottles.
While Tropicana’s juice can remain for a year in million-gallon tanks covered with a blanket of nitrogen, Sexton’s product is shipped out later that morning. “Feed your body like you want it to treat you,” the tan, athletic 60-year-old says. “We were making fresh juice before it was chic.”
It was in 1989 that Sexton was inspired to compete with the preservative-laced cartons on supermarket shelves. With $20,000 she had saved from a job as a radiologist’s receptionist, she installed two 1,000-gallon stainless steel tanks and a juicer in a shack surrounded by groves and borrowed a butcher’s refrigerated truck to deliver the first pallet herself. Thus was born Natalie’s Orchid Island Juice Co, Natalie referring to Sexton’s first child, born nine months before.
“In those early days, I had a terrible fear of poverty,” says Sexton, who was raised by a single mother who worked as a maid. Sexton herself started working at a movie theatre at the age of 14, and later as a waitress, to help pay her family’s electric bills. “Knowing what poverty does,” she says, “I was just so driven.”
Natalie’s now sells 25 flavours—from tangerine to matcha (green tea) lemonade—in 42 countries and 5,000 US supermarkets and makes private-label juice for chains like Pret A Manger. Sales last year topped $60 million on a volume of 7 million gallons.
What’s this baby worth? Let’s suppose that Natalie’s Ebit margin (profit before interest and income tax) is not far from the 13 percent Pepsi enjoys on its North American soda and Tropicana business. Suppose, too, that a buyer would pay the same multiple of Ebit that all of Pepsi goes for. Then those two steel tanks, still in use, have expanded into an asset conservatively worth $140 million.
A fast-talking devout Christian with a twangy accent and nails painted silver, Sexton got to this point without taking on outside investment or, until a recent $3 million mortgage, any debt. “It’s organic growth,” says Sexton, who’s wearing a polka-dot blazer with leopard-print flats. “But it’s really hard when you’re up against these people that’ll get capital infusions of $20 million or $40 million.”
Sexton uses only Florida oranges, even though they have gotten expensive as bacterial disease has killed off a lot of groves. She spends $10 million a year warehousing fruit so she can juice it fresh in the summer, another industry rarity. With all these costs, she turns down lowball contracts, such as the one offered to her years ago to have her juice sold in Disney World.
Isn’t this a commodity business? Not exactly. There are variations in how much processing goes into the juice. Tropicana doesn’t add sodium benzoate, the traditional preservative, but in lieu of that has to deaerate the juice, pasteurise it at around 200 degrees for as long as 30 seconds and then restore flavour using orange peels, according to patents and allegations in a 2011 lawsuit pending in federal court. Natalie’s pasteurises at the FDA minimum—165 degrees for 3 seconds—and skips the flavour enhancement.
“Big companies like Nabisco and Kraft and General Mills are now struggling to position their products to appear to be fresh or minimally processed,” says chief operating officer Frank Tranchilla, 51, who came to Natalie’s in 2011 from salad vendor Taylor Farms. “This is something that Marygrace has been doing since the beginning of the company.”
Sexton is not afraid to say no to a private-label customer who wants to use preservatives. She killed off a test line of juice-based popsicles that would have needed a gum additive to prevent crystallising in the freezer. She is an unrepentant perfectionist. “If there’s a madness in this company, then you just better drink the juice,” she says. “We care enough that we want that madness in the company.”
That’s a hard-won lesson. In 2001 she sold Natalie’s to North Castle Partners, a private equity firm known for investments in Equinox and Jenny Craig. “They said I was doing a great job but wasn’t going to be able to take it to the next level and they could,” Sexton explains, shaking her head. “They got me all twisted.”
North Castle also bought four other juice companies at the time, including Saratoga Beverage Group and Naked Juice. Sexton thought her top executives (three of whom were her brothers) would stay on. But the new owner bundled the companies together under a new boss brought in from Tropicana.
How’d that go? Not great. North Castle sold off Natalie’s in 2003 at a loss, although it more than recouped the loss with a gain on Naked Juice, sold to Pepsi. The explanation from North Castle founder Chip Baird: “The front-end synergies proved difficult to achieve, and the economy was hit by a recession in early 2001. Institutional demand went way down. We quickly decided the strategy wasn’t working and retreated.”
The next owner, a Fort Pierce fruit firm, brought Sexton back in as a consultant in 2003 and two years later offered her 50 percent equity at a bargain price. “It was a wreck. I just straightened them out,” Sexton says. “When you’re in it, there’s so much to change, there’s so much to fix, you don’t sit and think about it. You’re just constantly doing it.” She and her family bought the rest of the shares in 2006.
Sales, which were $20 million at the time of the first acquisition, had dropped by 20 percent by the time Sexton was back at the helm. Benefiting from Natalie’s weakness, upstarts like Blueprint (acquired by food giant Hain Celestial in 2012) and Pom Wonderful (backed by billionaires Stewart and Lynda Resnick) entered the shelf. Juice mainstay Bolthouse Farms was acquired by the private equity shop Madison Dearborn Partners through a $1 billion leveraged buyout.
Sexton arranged a label redesign, sank $5 million into machinery and bought an 11-acre site with a warehouse for $3 million. She and other managers walk through the juice plant several times a day to oversee the 145 workers, who are expected to feel a certain level of ownership over the product; bottling-line operators see their initials printed on every jug.
“You can get investors to put in $20 million for marketing, but it’s the manufacturing that’s the hardest. That’s what holds you back,” Sexton says.
Over the past year, Natalie Sexton, the company’s now-30-year-old namesake, who joined in 2012, has been developing a new line of wellness-style drinks. The first three flavours, out in March, tout ingredients like tumeric, elderberry and passionflower.
“The beverage category is becoming so saturated and competitive,” says Natalie, the company’s vice president of marketing. “Many of these brands produce juices that they claim are clean or healthy, but if you read the ingredients, they’re not. We’re going to continue being the authentic option up against the canned juices.”
Even with her succession plan set and her heir apparent preparing to launch her first line with the company, Sexton says she will never retire. “You have to stay focussed and be true to what you are,” she says. And just in case it wasn’t clear, she adds: “The company’s not for sale.”