Brand loyalty: Chatsworth company trying to brew interest in new domestic beer as it taps into already crowded market with label aimed at Hispanic Americans. (Small Business).

JOHNNY Hemandez was nearly 60 years old when, working out of the back of a pickup truck, he sold his first 10 cases of Otra Beer--a smooth brew, not unlike the Mexican imports, that has been his entrepreneurial lifeblood.

"I was the driver, the deliveryman, the marketing man, the switchboard operator' recalled Hemandez, a former deputy sheriff, real estate agent, restaurant owner and Anheuser-Busch marketer. "I really didn't have the kind of money to do the job."

Today, Hemandez and his North American Latino Beer Industries Inc. is slowly making traction. The 21-person operation sells 10,000 cases a month to over 600 accounts in greater Los Angeles, including Say-On drug stores, Albertson's Super Saver and Gigante markets and several area restaurants. The beer is priced slightly above domestics and slightly below Mexican imports.

Hemandez recently moved into a 15,000-square-foot building in Chatsworth that consolidates office and warehouse operations and is expansive compared with the 350-square-foot Van Nuys office he started with. "This is my dream," said Hemandez. "I started with 10 cases and look where I am today."

Hemandez's beer is aimed at Hispanic Americans, with a bilingual name and a taste closer to mass market domestics or Mexican imports than heavier microbrews. But coming up with a name and a pleasing recipe is one thing--getting it known and distributed is something else.

El Cholo Cafe in Pasadena, an offspring of the well-known Los Angeles eatery, has been carrying Otra for eight months and while manager Diego Fernandez supports the idea of carrying a domestic beer by a Latino-owned company and likes the "catchy name," sales have been slow.

"It's a product that needs to be pushed," he said. "Corona is a brand that is hard to pull down."

Longtime dreams

Gary Hemphill, senior vice president at Beverage Marketing Corp., a research and consulting firm, said the company has picked a good market but faces huge challenges.

There are 22 million Spanish-speaking adult consumers in the United States, and they have helped make Corona Extra the No. 1 selling import (replacing Heineken from the top spot it has held for years). On average, they consume more beer than other drinkers and are open to new products.

While new brewers can often find initial success distributing locally or throughout a region, expanding beyond that is difficult because of the stranglehold held by big brewers.

"Distribution will be his biggest challenge," said Hemphill, who noted that even if Otra were to achieve some success, the big brewers would battle back tenaciously.

Another hurdle: The beer market is growing only at a 1 percent rate annually in the United States so one company's success comes at the expense of another's market share.

Little of this unnerves Hernandez, a Texas native who had been in the Army for 20 years before taking a position in Van Nuys with Anheuser-Busch. He stayed at the brewer only two years, but that was enough to whet his interest in developing his own beer.

In 1999, Hernandez invested $5,000 to have Coast Range Brewing Co. come up with a lager beer to his specifications: smooth and without a heavy aftertaste.

The company's brew master managed to create the taste after a few tries and Hemandez entered into an agreement to have the brewery make, bottle and label. He said he came up with the name at a party a year earlier--Otra means "another" in Spanish and refers back to common Spanish phrasing of asking for "another beer."

Securing distribution

After raising $80,000 in seed money from friends, Hemandez leased warehouse space and took his first delivery of 1,380 cases. Then it was time to scour the mom and pop liquor stores and small Mexican markets in the northeast San Fernando Valley.

He sold his first 10 cases to a small market in Pacoima and made his first big sale to Tresierras Markets, a five-store chain based in San Fernando. "The beer industry is oligarchic. It's like trying to start a new GM or Ford. Kudos to him. I applaud him," said Arturo Tresierras, executive vice president of the five-store family-owned Latino business.

While Hernandez had 50 accounts by the end of 2001, he realized that was not enough and raised $1.2 million to start a bigger operation, still retaining 80 percent ownership.

Last year, Hernandez brought on Hector Elizalde, the marketer who had hired him at Anheuser-Busch.

Unable to secure distribution deals, Hernandez started its own distribution network for the greater Los Angeles area. Hernandez is now looking to expand throughout California, Arizona, New Mexico and Texas.

Ron Erskine, a principal owner of Gilroy-based Coast Range, said Hernandez is the first entrepreneur he has brewed beer for with a real shot at creating a large beer company.

"Most of us are just a bunch of guys who went out and got an SBA loan, and think we can sell enough beer to make a living," he said. "What you need to differentiate yourself and make it in the beer world today is a concept and a market you can address effectively. You can't just put Bill's Pale Ale out there and have people buy it."

RELATED ARTICLE: PROFILE

North American Latino Beer Industries Inc.

Year Founded: 1999

Core Business: Domestic beer marketer

Revenues in 2002: $150,000

Revenues in 2003: $1 million (projected)

Employees in 2001: 3

Employees in 2002: 21

Goal: Distributing its Otra Beer brand throughout California, Arizona, New Mexico and Texas within five years

Driving Force: Tapping into the desire of Latino consumers for a Hispanic American beer.