Entrepreneur Cashing In on Thirst for Healthy Drinks.

DENISE Devine's young son, Nicholas, would drink a gallon of fruit juice a day if she'd let him. His thirst for sweet drinks inspired her to start a Pittsburgh-based nutritional foods company aimed at boosting the grain and fiber content of juices and frozen desserts.

The small company now holds 14 patents for healthier food products and is working on new ideas every day.

"We are on the edge," said Devine, who started the company with personal savings and funds from private investors. "I feel like the market is just beginning to catch up with our products."

She said the whole "functional food" debate, which is getting a lot of media attention lately, is "very blurred."

"We've stuck to our guns, changing what's in the products, rather than throwing stuff into existing products," said Devine. "We produce real foods where the inherent nutrients are there, including helpful fibers."

Devine Foods' first commercially available product, "Fruice!" is aimed at preschoolers who can benefit from a healthy juice-like beverage. The product contains fruit concentrate, organic brown rice syrup, organic barley flour, soy fiber, oat flour and chicory root extract - not your usual fructose and corn syrup-based kid-die drink.

While older kids may object to the thicker consistency of the beverage, Devine contends young children like it. Fruice is currently available in health food stores and a few grocery chains around the United States.

"When I went to the chemists at Cornell University with a beverage idea for children, they thought I was crazy," said Devine. "But one female chemist was interested in organic food, and she thought there was a new discovery here."

Devine's research team is also developing a non-dairy, soft-serve dessert and is currently testing it at the Penn State Creamery.

"It tastes very much like ice cream," said Devine. "It's better than frozen yogurt and really delicious. There are a lot of (vegetarians) on college campuses, and they need a non-dairy alternative."

Devine, who has an MBA and worked on the financial side of Campbell's soup company, is getting valuable assistance in developing her soft-serve product from Uncle Sam in the form of a Cooperative Research and Development Agreement (CRADA) with the U.S. Department of Agriculture's Agricultural Research Service (ARS) laboratory in Pittsburgh.

"There is no shortage of wonderful ideas, but it is a big step going from the idea to a product on the shelf," said Jerry Crawford, technology transfer coordinator for the ARS Pittsburgh lab. (There are other ARS labs located in Albany, N.Y., California, New Orleans, Illinois and Georgia)

Since 1986, the ARS has signed about 1,000 CRADAs. The Federal Technology Transfer Act of 1986 smoothed the way for government researchers in several agencies and private companies to work together.

"Prior to that legislation, companies weren't especially interested in signing on as partners with government researchers," according to ARS background information. "The lure of marketing rights as promised by the Technology Transfer Act encouraged public-private partnerships."

Rather than cash, the ARS program provides companies support in the form of government labs and salaries for scientists and equipment.

"The advantage to the company is, if an invention works out, they have the first right of refusal to license the exclusive technology," Crawford explained, adding that these cooperative agreements help bridge "the area between research and commercialization that is known as 'Death Valley."' Meanwhile, Devine is working on new product ideas with an emphasis on healthy eating. She said the revised USDA "food pyramid," with its focus on grains and vegetables, inspires her to come up with new food products for kids and adults.

"I thought, wouldn't it be great to sneak whole grain and vegetable formats into food and drinks?" she said.

Devine said the company, which employs fewer than five full-timers and relies on contract manufacturing, doesn't have a big marketing budget. Still, the products are selling well.

"We find that when consumers try our products, they like them," explained Devine, who said annual revenues at the privately held firm are under $5 million. Her company also has "a licensing agreement with a very large pharmaceutical company for a unique product."

The USDA also has a Small Business Innovation Research Program (SBIR), which has an Aug. 31 deadline for fiscal 2001 project applications. The USDA's limit for initial funding is $70,000, and the grant money is not for startups, according to Ruth Lange, assistant program director.

Some recent projects funded include a grant for finding new sources of herbs from Arizona Indian reservations, a project called "Modification of European Cheese-making to Create Small Farm Economic Opportunities," and the use of the Internet to create a "Virtual Maine Arts Heritage Trail."

In fiscal 2000, the program distributed $15.5 million in grants, funding 91 projects out of 480 applications. That's up from only $4.8 million in 1991.

Jane Applegate is the author of "201 Great Ideas for Your Small Business," and is founder of Apple gate Way.com, a multimedia Web site for busy entrepreneurs.