Fred Lutz

Photo by Kris Kathmann

North Mankato’s Fred Lutz likes flyin’ high in the western sky in his Beechcraft 33 Bonanza, tail flaps up, headset on, sippin’ straight 7UP through a cocktail straw. It’s another ideal Saturday afternoon for a businessman who still has Uncola coursing through his veins. His 7UP-green Lincoln LS parked next to the green hangar at Mankato Airport has “UNCOLA” plates; and his Beechcraft 33 the registration number “N77UP.” Old allegiances die hard.

Lutz was a high-profile, national figure in the soft drink industry in the ’70s and early ’80s. He served as national president of the 7UP Bottlers Association and also the Dr Pepper Bottlers Association, and as state president of the Minn. Soft Drink Association. And he lobbied Capitol Hill as a board member of the National Soft Drink Association.

In 1987 his family sold its North Mankato bottling plant to Wis-Pak, and in 1992 sold the remaining distribution business to a Pepsi distributor. At its peak, Northland Beverage was pouring $25 million in revenues, bottling beverages for customers in a five-state region, and marketing 7UP, A&W, Orange Crush, Dr Pepper, Sunkist, Squirt and RC Cola from Winona to Luverne. Faced with early retirement in 1992, Lutz, who was only 52 then, could have permanently packed up for warmer weather and 7UP-green fairways in South Florida.

Yet he stayed in North Mankato, and continued making a difference in his community. He has dabbled in various ventures, including an interest in Mankato’s Barnes & Noble strip mall. And of course, he did buy that half-share in the NBA Minnesota Timberwolves. But Lutz’s main concern these days is in being an aggressive advocate for all south-central Minnesota.

A person needs both hands and feet to count up Lutz’s volunteer service over the years: Southern Minnesota Advocates, Valley Industrial Development Corp., MSU College of Business Advisory Council, Mankato Area Chamber & Convention Bureau, Mankato Airport Commission, SCTC Foundation, United Way, Educare Foundation, Mankato Jaycees, ISJ-Mayo Hospital, Downtown Kiwanis Club, SCTC President’s Advisory Council, Volunteer Center, YMCA, Air Services Task Force Committee, etc. It would appear he took the bottled-up enthusiasm he had as an advocate for various bottler and soft drink associations and simply redirected it to benefit the entire region.

CONNECT: What was it like being the son of “Mr. 7UP”?

LUTZ: I grew up with 7UP, the soft drink, from age 6 on. That was the only brand we had when my father bought Mankato Bottling Company in 1946. We made pancakes with it and used it instead of water or milk in many other recipes. My dad was “Mr. 7UP” on a KYSM radio program in which he told people how to cook using 7UP. It was quite a change for my dad, who used to be “Coke” oriented. Previous to buying the bottling plant in Mankato, he had worked for Coke. Back then Pepsi and 7UP were nothing, and Coke was king.

My dad was from Cedar Rapids, and went to school at Coe College. Goodyear Tire and Rubber hired him to manage a tire plant in Asia from 1929-39. In 1935, he sent my mother a one-way ticket on a slow freighter to take her to their wedding in Singapore. When the Japanese infiltrated the region before World War II, my parents had to return to the U.S. where he began selling A-frame pig “houses” in Iowa. And in 1942 my dad started working for a Coca-Cola bottling plant in Cedar Rapids.

He and a partner bought Mankato Bottling Company in 1946. They immediately gave up the Pepsi franchise connected with it because of the post-war sugar shortage — and they thought Pepsi would never make it against Coke anyway. But they kept the 7UP line, and initially did all their business selling seven-ounce bottles.

CONNECT: Describe your relationship with your father?

LUTZ: He was special. We didn’t argue much. He was always willing to listen and try new ideas. And he did some innovative things. When I was in high school in the late 1950s, he was one of the first bottlers to sell pre-mix dispensers that delivered soft drinks from a five-gallon stainless steel container. The product could be stored in the basement of a bar, for instance, and brought through a cooling unit. It became a significant part of our business.

He was also one of the first to invest heavily in vending machines. We owned thousands of those flap-top chests where the bottles would hang by the neck before being slid out by a customer. We bought those chests by the truckload, and used them to expand our business.

Originally, our Mankato bottling facility was a block south of the old Mahowald’s Hardware, across the tracks on Elm Street. Eventually we bought plants in Fairmont and Rochester. In 1969, when our Mankato facility became too small, we expanded to North Mankato behind South Central Technical College. With the extra space we added brands, flavors and sizes. We also changed our name from Mankato Bottling Company to Northland Beverage. By then we were far more than just 7UP. The “North” in Northland came from being in “North” Mankato and also reflected our new regional distribution and production facility.

CONNECT: How competitive was the soft drink industry?

LUTZ: The U.S. used to have 15,000 independent bottlers. Over the 40 years we owned our business we alone bought out about 15 of those 15,000. There are only 300 independent bottlers left today. We were a medium-sized bottler then, and all the bottlers our size were being bought out by the soft drink companies themselves. (That is still happening today.) We knew someday we would not be in business.

So we sold our production plant in 1987 to Wis-Pak, a co-op owned by 50 Pepsi bottlers. They inherited our building and our bottling plant employees. We didn’t have the volume to stay competitive as bottlers, and the industry was fast becoming a volume business. To increase volume we would have had to spend huge sums of money in retooling. After Wis-Pak bought our production plant it soon more than tripled our previous production volume because of their brands, customers and new high-speed equipment. Their all-automated equipment meant an increase from 600 cans a minute to 2,000.

Even though we sold the bottling plant, we still kept the distribution business. From then on we bought soft drinks from Wis-Pak and continued selling and distributing product in our territory throughout southern Minnesota.

CONNECT: Give our readers a taste for the scope of your business. Did you have a firm territory?

LUTZ: Our basic franchise was from border to border in Minnesota — from Wisconsin to South Dakota — and most areas south of Minneapolis. In addition to bottling product for our own distribution system, we eventually produced cans and nonreturnable bottles for other bottlers in a five-state region.

When we bought smaller franchises, such as the one in Franklin, Minn., we never bought the plant. All we bought were the accounts. We were selling 7UP already in the Franklin territory, for instance, but it had Dr Pepper. When we bought them we simply started putting Dr Pepper onto our trucks. We were bottling Dr Pepper already from having bought a plant in Fairmont and moving that production to Mankato.

CONNECT: At the peak, near the end, what were your revenues?

LUTZ: We had two revenue streams in 1987: production (bottling) and distribution. Our production facility was selling product to distribution competitors and to other 7UP bottlers. That’s how we developed a relationship with Wis-Pak — our eventual [bottling] buyers — because they bought A&W, 7UP, and Dr Pepper from us. Our best year was $25 million in revenue, which combined production and distribution. When we sold the remaining distribution business in 1992, our revenue was $16 million. By then, of course, we weren’t producing, just ordering product from Wis-Pak and delivering it to retailers.

My brother-in-law headed production, and I ran distribution and sales. My father died in 1988, but had been active as chairman up to the last month of his life.

CONNECT: What were your job roles over the years?

LUTZ: When I first started I helped deliver and sort empties. In high school I worked in the pre-mix area, and in delivery and sales. After college, in 1962, I started full-time in sales. (My brother-in-law started full-time about the same time.) In the 1960s I began working directly with the sales representatives from 7UP and Dr Pepper to help them figure up advertising budgets, promotions, agreements, and co-op monies. I also dealt with media and advertising. I was president when we sold the production business in 1987, and when my father died in 1988. (My sister was vice-president.)

CONNECT: Why did you sell the distribution business?

LUTZ: Coke and Pepsi controlled 80 percent of the market. (Coke is bigger today than Pepsi primarily because of the fountain business at McDonald’s.) We had tried many times to grow Northland Beverage by buying the Pepsi franchises in Mankato, LaCrosse and Rochester from the Gillette family. Back then Pepsi didn’t have a lemon-lime product. 7UP had accounts in bars and restaurants that Pepsi didn’t have. We also had Dr Pepper, A&W, Squirt, and Sunkist. They would have been a perfect fit because we had nearly identical territories.

The Gillettes knew us well because they were part of the Wis-Pak co-op. But for them to sell out to us, the parent company, Pepsi, would have had to approve the sale. And they weren’t about to do that. At that time Coke and Pepsi were buying up all their independent bottlers. The handwriting was on the wall. We wanted to buy out the Gillettes, but Pepsi wouldn’t let that happen.

Then the Gillettes, who were Pepsi bottlers, became interested in buying us after another Pepsi bottler purchased a 7UP franchise in St. Cloud. The Gillettes needed a lemon-lime product. None of theirs had ever done as well as 7UP. They were also after our Dr Pepper. They couldn’t buy our RC Cola line because it would have conflicted with Pepsi. Our entire line then was RC, 7UP, Dr Pepper, A&W, Clearly Canadian, Squirt, Canada Dry, Sunkist, and Orange Crush.

We ended up selling our RC franchise to a Des Moines bottler and Gillette bought the rest. They purchased a few of our buildings — we had nearly a dozen in southern Minnesota — and the ones they didn’t buy we sold, such as ones in Albert Lea, Faribault, Winona, and Rochester. At our peak in 1987 we had 300 employees and 150 vehicles. We had people in distribution, sales, office, vending and ice machine repair, and production.

Some independent Pepsi bottlers in Minnesota today wouldn’t be around if it weren’t for the Wis-Pak co-op. The only way these bottlers can sell out is to the parent company. Pepsi and Coke are paying good prices.

CONNECT: You sold the distribution end of the business in 1992. You were only 52. What did you do then?

LUTZ: We knew we had to sell the distribution portion of the business. Later we were glad we sold when we did because 7UP has since become a less popular brand. Waters and juices have stolen market share. If we had waited just a few years our business would have been worth a lot less.
My brother-in-law and I each had three children, and none were in the soft drink business. We thought we possibly could buy another kind of business with profits from the sale — one outside the industry, totally unrelated — and invite some of our kids into that. We didn’t want them to enter the beverage business because we viewed that as a dead-end.

We sold out completely in August 1992. Our fiscal year was at year’s end, and we were planning to use the last months of 1992 to clean up our accounts receivable, and sell trucks and buildings before beginning anything new. The week after we sold out my brother-in-law was driving on Belgrade Avenue in North Mankato near the old Jack & Jill Grocery. He developed a sharp pain in his side, and had to pull over. He said it felt like a kidney stone. Doctors soon discovered a malignant tumor the size of a grapefruit on his kidney. He lived almost four years. That changed our idea of being in business together.

And then my kids started doing other things: one was a lawyer; another a stock broker; another, a teacher. They lost interest in starting a new career with me. My sister’s kids went their own way, too. We had enough money to take care of our needs. Even if I had started a new business, my lifestyle wouldn’t have changed that much.

CONNECT: What is Lutz-Lloyd Enterprises?

LUTZ: We started that after the buy-out in order to sell off company property. Along with Northland Beverage, through the years we had also owned Lutz-Lloyd Leasing which was a business that purchased vehicles and equipment and leased them back to Northland Beverage. That went out of business, of course, when we sold Northland. My brother-in-law was Jim Lloyd. Since then we have sold most of the old company property. When my brother-in-law passed away, my family bought out his family’s interest.

CONNECT: Are you a venture capitalist?

LUTZ: Not with Lutz-Lloyd, but on my own. I’m a partner with Curt Fisher, Myrl Barnes and Harlow Norberg in owning the Barnes & Noble strip mall in Mankato. Buying into the Minnesota Timberwolves is a kind of venture capital, isn’t it?

CONNECT: What went through your mind when Glen Taylor asked you to become a partner in the Timberwolves?

LUTZ: Glen and I go way back. We were in Jaycees together along with people like Kelly Gage, Jim Dailey, Howard Vetter, Dan Scheurer, Fritz Maes, Art Symens, etc. All of us were just starting our families. I met Glen through Jaycees, and later served with him on the YMCA board. The Jaycees was about leadership training and community development.

When Carlson Craft moved out of its building in lower North Mankato and into a new production facility in upper North Mankato, Glen became my next-door business neighbor. I lobbied him when he was a state senator to influence “ban the can” legislation, “bottle bills” and sales tax proposals. And we also had the same attorney, Jack Regan.

Here’s the Timberwolves story: I was on the way back from a Canadian fishing trip with a group of men when on the radio I heard that Glen had just bought the Timberwolves. We were all very surprised. On the radio he mentioned a few of his partners — all friends of his from Minneapolis. Not one partner was from Mankato. I thought, That’s surprising!

I asked Jack Regan, “How come you’re not a partner with Glen?” He said, ‘Glen never asked me.’ I said, ‘He never asked me, either.’

Two days later Glen called. He said, ‘I’m trying to find a couple of Mankatoans to join in with the Timberwolves. If you’re interested, I have a due diligence book that will tell you why you shouldn’t be a partner.’ At that time the team was being sued and had player problems.

Wynn Kearney, Jr., and I ended up splitting one share. Glen said my investment would have to stay put for at least five years. (This was in the fall of 1994, and he didn’t officially buy the team until early 1995. The NBA had to approve us all and run background checks.) I suppose I could have invested the money in the stock market, and possibly had a better return. But it has been fun.

I don’t receive many perks from my ownership. The investment really won’t pay off until I sell my share. Two of the original partners have been bought out over the years: USBank, for one, and the old team owners, the other, who retained an interest. I’ve been able to increase my stake through these buy-outs.

CONNECT: You’ve been active in quite a few organizations. I’m going to take you through one organization at a time and ask you a question about each. Mankato Airport Commission: Does Northwest Airlines take its business in Mankato for granted?

LUTZ: Yes, it does. I’ve been on the airport commission since 1970. Taylor Corporation is the key to restoring airline service to Mankato. Northwest Airlines is looking for corporate business to sustain flights, not individual flyers. Our proximity to Minneapolis doesn’t help us.

CONNECT: Why not go after other airlines that have connections to cities other than Minneapolis?

LUTZ: We tried that with United Express. At one time North Central had a flight here that stopped in Rochester before going to Chicago. That was the best coverage we have had. We have tried to lure TWA here. American isn’t looking around, and neither is Delta. American comes to Rochester but only because Mayo subsidizes it. Again, Taylor Corporation is the key here. Its executives and vendors do a tremendous amount of air travel. Northwest would lock up more of that business with flights into here.

Because Northwest Airlines has 70-80 percent of the Twin Cities market, they think they have our market locked up already. We have never had a Northwest connection in Mankato. But we certainly need one. You have to drive up there, and the parking is a hassle and expensive. I believe our best bet for service is to convince Northwest Airlines, through Mesaba, to start service to Mankato with a minimum of three flights a day at competitive rates. Right now they ignore southern Minnesota — and yet fly to Bemidji, Brainerd, St. Cloud, International Falls, Grand Rapids and Duluth.

If Mankato is going to be a regional center, it must have commercial air transportation. St. Cloud started with three flights a day and now they are up to five or six. The benefits of flying out of Mankato over Minneapolis are mind-boggling. There is no traffic to speak of here. You can park free here. You can go from car to plane in a matter of seconds. You don’t have to walk a mile to your gate. You could check your luggage here.

CONNECT: The pilot shortage isn’t helping matters, either.

LUTZ: We’ve tried to use the flight program at MSU as a lure to an airline. The City has been very supportive by building a new terminal. The City would work with airlines concerning landing fees and security. But airlines aren’t expanding right now.

CONNECT: You are a former VIDC board member: Should that organization’s primary goal be to lure new businesses here? or should it help businesses already here to expand?

LUTZ: It’s very difficult to woo companies to Minnesota because of our high taxes, labor shortage, and cold weather. When I joined the VIDC board, which was at its genesis, people were tired of all the bickering between Mankato and North Mankato. As businesspeople, we wanted to return some common sense to tax increment financing and economic development. And that’s what we did. Now the pendulum seems to be swinging back the other way. Now the two cities want to become more involved.

CONNECT: You were on the MSU College of Business Advisory Council when the business school became accredited. Did you have a role in the accreditation? and what has it meant to MSU?

LUTZ: I was on the advisory council during the application process. I could see that to remain competitive MSU would have to attain accreditation. I was 100 percent behind it. I still believe it was a good decision to, in essence, sacrifice the graduate program in order to win the undergraduate accreditation.

CONNECT: The Mankato Area Chamber and Convention Bureau: It has a new CEO, David Schooff. What’s your personal advice to him?

LUTZ: Take your time, David, and continue listening to your board. He isn’t panicking right now even though he has been tossed into a few frays right off the bat. There are many valuable people with wisdom in this community. It’s his job to listen to them — and that’s what he seems to be doing. He’s a quiet worker. He’s not like his predecessor, Maureen, who had a different style. He faced one difficult issue when the Chamber decided to withdraw support of the July 4 fireworks. Their decision wasn’t about money; it was about securing enough volunteers for the event.

CONNECT: Recently you spoke to a group about “philanthropy.” How do you decide which organizations to support?

LUTZ: I support a handful of groups I know from either serving on their boards or from having family members involved. I keep almost exclusively to the Mankato area. I say no to requests for help but not as much as I should. I’m not bombarded with requests the way some others are. When I was in business we usually gave to people who did business with us, or to employees and/or their children who were asking on behalf of an organization. Giving in that way was easier because we could justify the expenditure.

CONNECT: Southern Minnesota Advocates?

LUTZ: I’m its co-chairman. Dr. Rush initially felt the local chamber wasn’t doing enough for southern Minnesota at the legislature. We recruited businesspeople, and have kept the issues regional. We lobby legislators.

I chuckle now when the City of Mankato says it wants to take over the convention and visitors bureau, fireworks, and VIDC. All those things started because the City wasn’t doing them. It was the same with lobbying St. Paul. The Chamber wasn’t doing anything with other cities in the region to send a united regional front to lobby St. Paul with issues such as completion of Highway 14. I think our region may be waking up to sending a united front.

Denny Dotson, Paul Stevens, and I were on a group that studied the merging of city services of Mankato with North Mankato. Why are there two fire departments? two police departments? two city halls? two libraries? two city administrators? A business normally can’t afford to retain two main offices less than a mile apart.

I have lived in North Mankato over 25 years. North Mankato has resisted the merger of services more so than Mankato. In my opinion North Mankato would not be what it is today if it weren’t for Mankato. It doesn’t have an airport, rail service, a cemetery, hospital, sewage treatment plant, etc.

CONNECT: Why not merge the cities into one?

LUTZ: It can be done. I believe that certain people in the two cities are more concerned about protecting their own territory and in keeping power than in looking at the big picture. If the two cities were businesses, they would have merged decades ago. When the two hospitals in Mankato combined years ago the quality of healthcare improved. I don’t know how much longer the two cities can continue this way. Businesses and school districts consolidate, but seldom do local governments.

Fred Lutz Biography

Born August 4, 1940, in Cedar Rapids, Iowa.
Mankato High School, Class of 1958.
B.S. Business Administration, Macalester College 1962
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