Clearly Main Stream

Bruce MacDonald has helped lead a tiny Vermont springwater company to its position as eighth-largest water company in the United States.

by Virginia Lindauer Simmon

Bruce MacDonald is CFO and executive officer based in Vermont for Vermont Pure Holdings Ltd. in Randolph. Vermont Pure's spring and filtered water lines generated $67 million in sales last year, making it the eighth largest water company in the country.

Who'd have thought 20 years ago that in 2002, water would be the fastest-growing market in the beverage industry? Not just any water. It's water harvested from a spring or distilled in a factory, then bottled and sold over the retail counter or shipped in trucks to homes and offices for daily use. It's water with cachet. In the Northeast, more often than not, it's water with a pink label that says, in blue letters, Vermont Pure Natural Spring Water.

With its roots and headquarters in Randolph, Vermont Pure has grown from nothing but an idea to bottle spring water and sell it out of Randolph village to be a contender in the rising flood of bottled water sales in the United States.

The Vermont Pure image conjures up a bucket brigade of mountain entrepreneurs hauling water from a mountain spring. While that might at one time have been true, according to Beverage Marketing Corp., Vermont Pure is now the eighth-largest water company in the country, serving 85,000 customers in the Northeast on a daily basis.

While the parent company, Vermont Pure Holdings Ltd., still calls Randolph home, its offices and bottling plant have moved from the 9,000-square-foot village space to a 70,000-square-foot facility on a hillside overlooking the village. An acquisition strategy has garnered a second plant in Watertown, Conn., and the distribution centers that have allowed expansion beyond retail bottled water to the home and office delivery market.

Despite its growth and evolution, it's important to note that Vermont Pure Natural Spring Water, the company's signature product, still comes from three springs within three miles of Randolph.

Running the Vermont operation is Bruce MacDonald, CFO and the executive officer based in Vermont. The company's CEO and chairman of the board, Tim Fallon, works out of a White Plains, N.Y., office, which allows the company to have a presence on Wall Street, advantageous even for a micro-cap stock company, says MacDonald. The company president, Peter Baker, runs the home and office side of the business out of Watertown, Conn.

Vermont Pure's roots hearken back to a tiny startup called Hidden Spring, founded in 1987, when America's thirst for premium water was expanding. "Water, I think, broke onto the beverage scene in the early 1980s in the U.S.," says MacDonald. "It was the Europeans who had the infrastructure in place. They were marketing it here for the most part as Evian and Perrier. Slowly the Canadians started getting involved and ultimately there were some domestic producers. In the late '80s, there were a bunch of entrepreneurs around who really started focusing in on [the fact that] this may be an opportunity."

A group of these entrepreneurs, among them a former president of Evian in the United States, bought Hidden Spring in 1990 with the hope of building an American premium brand of water. They changed the name to Vermont Pure and took the company public. "It was a very small company," says MacDonald. "They did less than $1 million in sales and were trying to put together a business plan to start a national brand on the retail side of the business, but it was a struggle," says MacDonald.

With a focus on retail, Vermont Pure sank the money from the public offering into marketing in the large market areas in the Northeast, and it wasn't working. In 1993, the investors hired MacDonald and a financial restructuring was begun.

MacDonald was at a perfect juncture in his career to make the switch. Having grown up in Montpelier, with family roots in the Northeast Kingdom, MacDonald returned to Vermont after graduating from the University of Rhode Island. He worked for several Vermont companies in financial functions: Vermont Marble in Proctor; a company called Express Food, whose assets now reside with Wyeth Nutritionals in Georgia; and Cabot Cooperative, where he spent six years.

Vermont Pure ships an average of 10,000 cases of individual bottles of water a day out of its Randolph plant. In summer, the number can be as high as 30,000. Manufacturing manager Charlie Ayers (left) and Dave Bullis, plant manager, make sure it happens.

"I was the comptroller and chief financial officer at Cabot until that company was sold to AgriMark," he says. "I had a good idea of how Vermont branding worked and experience dealing in the grocery and distributor business, so that experience did me well coming into a new Vermont startup company."

He credits Frank McDougall, director of government relations at Dartmouth Hitchcock Medical Center and a Vermont Pure board member, with helping him get the job. "Bruce MacDonald and Tim Fallon are the two best things that ever happened to Vermont Pure," says McDougall, adding that their complementary styles work well together.

Having earned his master of business administration from the University of New Hampshire while at Cabot, MacDonald was ready for the task. His first job for Vermont Pure was to begin sorting out the financial challenges. In '94, "the board decided to bring in some new experience in the form of a CEO from the beverage industry," he says. That experience came in the form of Fallon, who had considerable marketing experience with Pepsi and Cadbury. With a second injection of public money, Fallon "spearheaded the restructuring and changed the strategic vision," he says. "Tim and I were the senior management of the company."

That strategic change was making the move from strictly retail to the home and office segment, which was being largely overlooked by the rapidly growing water industry. "That was driven by a couple of factors," says MacDonald. "On the retail side, we're kind of dependent on a small number of large beverage distributors. We had just developed a relationship with Coca-Cola in the Northeast. The good news is, Coke's probably the best business partner you could have in the Northeast. But the bad news is, you put a lot of your eggs in one basket in terms of distribution.

"Luckily, Tim had enough foresight to recognize that eventually they were going to come up with their own product that was either going to be an alternative to our product or replace our product."

That is, of course, exactly what happened. In 2000, Coke launched its Dasani water line, having told Vermont Pure in 1999 that they were probably going to terminate their contract. Fortunately, Vermont Pure was far enough along in its diversification strategy and made a courageous move, canceling the contract and replacing the business with other distributors in the Northeast.

Meanwhile, the company resurrected the Hidden Spring label and began to use excess capacity to bottle private label retailer brands for companies such as Hannaford Brothers. "Water is still the fastest growing market in the beverage industry, and it's taking business away from soft drinks and alcoholic beverages," says MacDonald. "We had already committed to selling the Vermont Pure brand to the larger beverage distributors, and the Hidden Spring brand was to appeal to secondary tiers of distributors that wanted to sell water." Hidden Spring is generally distributed by dairy distributors, candy, tobacco and some beer distributors.

These events were happening concurrently with the implementation of the acquisition strategy, he says, noting that about 20 small acquisitions grew that part of the business from nothing to about $18 million in sales over a three- to four-year period between 1996 and 2000. Vermont Pure was now going into homes and offices in 5-gallon jugs for water coolers.

By October 2000, through the persisting growth of the retail and the acquisition growth on the home and office side, the company had grown to about $34 million in sales. This seemed like a good time for Vermont Pure to embark on a huge undertaking by merging with a company called Crystal Rock in Watertown, Conn. "They were a private company about the same size we were, so the merger, in effect, doubled the size of our company," says MacDonald.

Because Crystal Rock's product is a filtered water with minerals added back (similar to Dasani and Aquafina, the brands marketed by Coke and Pepsi respectively), the acquisition brought with it the ability for Vermont Pure to offer a choice of filtered or spring water to some of its home and office customers.

Crystal Rock is a 70-year-old company that was family-run for three generations, MacDonald says. "So they knew the water business, particularly in the home and office area. And while we had grown so fast through acquisition, we really could use that management expertise their family members who wanted to stay in the business afforded us."

One of those family members was Peter Baker. At the time of the merger, MacDonald was functioning as chief operating officer. "Because of the merger and our status as a public company, it became much more imperative that I move back into the financial function."

MacDonald (center) reviews logistics with Fred Newhall, Vermont Pure's controller, and Edna Laperle, customer service manager. The company employs about 100 people in Vermont, only a part of the 380 jobs the company provides here and elsewhere.

Peter's brother, Jack, stayed with the company as executive vice president and handles the quality manufacturing and safety issues throughout the company, "so we gained not only critical mass, but we also increased the talent and capability of our management team," says MacDonald. Members of the Baker family remain Vermont Pure's largest stockholders.

Distribution has been a key motivating factor in many of the company's acquisitions. There are three plants: in Connecticut, outside of Albany, N.Y., and in Randolph.

Vermont Pure's distribution center in Vermont is not in Randolph, but in Williston, where it's closer to the population center. A distribution center in White River Junction ships product, and centers in Wilmington, Mass., and the New York cities of Buffalo, Rochester, Syracuse, Albany and Plattsburgh complete the picture. The company has expanded distribution into Northern Virginia, Washington, D.C., metropolitan Baltimore and northern areas in the Midwest.

Retail sales account for about 25 percent of the business these days, while the home and office segment brings in the rest.

A management team helps make sure everything goes as it should. "Dave Bullis is our logistics person," says MacDonald. "He makes sure that customer service is interacting with manufacturing and manufacturing is interacting with distribution. In other words, that we're getting raw material in that side of the building and the finished goods are going out that side of the building," he says, pointing.

"Charlie Ayers is our manufacturing manager. He most recently worked for Coca-Cola and has been instrumental in setting up a lot of equipment out on the line. Karl Nordin manages quality and safety company-wide, as well as all the logistics for our springs in terms of testing."

Other key people include, in Randolph, Edna Laperle, who runs the customer service in Vermont, and Jeff Gates, who runs the home and office distribution out of Williston and White River Junction.

Running a company this size is no small matter. Still, the water business seems to have been nourishing for MacDonald. He has a soft-spoken manner and appears to handle pressure well. "It has its moments," he says, laughing. "You know, any time you're senior management in a $75 million company, there's going to be pressure, so I think that goes with the territory. But I think what you get back from communities, from employees, from stockholders, and seeing success over the years is a reward for going through that. And hopefully it will continue to be successful."

An active member of Vermont Business for Social Responsibility, MacDonald makes sure that Vermont Pure vigorously pursues its mission of being a good corporate citizen. The company's beneficiaries include every aspect of community and business life imaginable.

Vermont Pure has water issues similar to those in the skiing industry and must make sure to preserve the natural runoff as it takes water from its springs, so the company works with state Department of Natural Resources to help develop standards.

On the charitable side, "We've worked with so many organizations, specifically in donating water for refreshments," says MacDonald.

"People are very, very appreciative, especially for things like road races, tennis events, firemen who want water in the firehouses for when they go to fires, the Vermont Symphony Orchestra when they go on tour in the summer, we give them a number of cases for their musicians to drink." Binders in the reception area hold an impressive array of thank-you letters from throughout the Northeast from Rotary clubs, churches, state and municipal governments to high schools, senior centers and Ben & Jerry's One World One Heart Festival; from public television and radio stations and Frog Hollow to the Consortium of Vermont Colleges and a multitude of races and meetings.

MacDonald says he has been "lucky to have an enriching career in a place where I want to be."

To relieve work pressures, MacDonald likes to ski and hike. He lives in Warren with his wife, Karen, an elementary school teacher he met skiing at Smugglers' Notch in 1989 and married in 1991, and their 15-year-old daughter, Sheena, a freshman at Harwood Union High School. They like getting away to a family cottage in the Northeast Kingdom.

MacDonald also enjoys serving on the board of Gifford Hospital and working with the Vermont Technical College business advisory committee.

Does he plan to stay at Vermont Pure? He gives an intriguing answer. "You know, when you have a strategic vision, you're always thinking about where you go from now and how our home and office grows, how our retail business grows so you're just kind of focused in on your future, I guess, infinitely. If it's what you like to do, that's what you picture yourself doing."

His advice for anyone considering following in his footsteps is a bit more clear and possibly autobiographical. "Find a place you like; find a place that likes you; and soak in everything you can about it. Be an asset that they can't afford to lose. Then whether it's becoming the CVO or the director of manufacturing or the manufacturing manager or whatever, you have the background to do it.

"Because I think companies are most willing to give back to employees what they're putting into the business."

Originally published in April 2002 Business People-Vermont