Beverage Business INSIGHTS:
There may be lotsa little, local kombucha cos out there these days, but minority investment by First Beverage Group this month has eyes fixed on one in particular: LA-based Health-Ade (BBI, Oct 8). So what’s deal with co? Turns out it’s interesting bootstrap yarn. Which is not to say trio of founders are lacking in ambition: they’re taking leaf from fresh-pressed juice marketers by using fresh, local ingredients, fermenting bevs painstakingly in glass jugs and charging hefty premium. Now, with First Beverage’s check in their bank account, they’re also talking about establishing NY production beachhead.
Health-Ade was founded in Mar 12 by husband-and-wife team of Daina Slekys Trout and Justin Trout and their friend Vanessa Dew, who bring interesting mix of skills to project. Daina and Vanessa were colleagues at nutraceutical div of Calif pharma co with enough of entrepreneurial itch that they’d previously tried launching coupla ventures. (Both fizzled for lack of real commitment, Daina says.) Justin Trout was guitarist who – improbably enough – found his entrepreneurial instincts whetted by his first day job, at hair loss masking co. At entrepreneurial club they started in LA they analyzed various pains for which they might offer remedy, only to be daunted by capital demands. Answer was staring them in face: Daina’s kombucha, which had helped all 3 deal with health issues and was in constant demand among friends. They started working Brentwood farmers market, borrowing production space from bakery that was idle on Sundays, and soon enough were in 7 farmers markets. Retailers encountered there urged trio to make bottled version for stores. So the 3 made leap, quitting jobs and moving full-steam ahead with project. Daina generally focuses on operations, Justin on marketing and Vanessa on sales.
Trio went from 7 stores in Jan to 175 currently, including likes of Rainbow Acres, Erewhon and several CrossFit gyms, to which they distribute brand themselves. They also found own production space in industrial burb of Gardena, little realizing that by now, mere 12 months later, they’d be maxed out. They just signed deal to relocate to far larger plant in Van Nuys that can accommodate need for fermentation room. Once they occupy it in month or so, “we’ll finally be ahead of demand,” Daina said. That will happen just as brand’s been picked up by Amazon Fresh and is prepping to enter 3 local Whole Foods stores in Jan, which should further spike awareness and demand.
What’s at heart of brand? In cluttered kombucha market, they’ve opted for “disruptive and different approach,” eschewing “hippy-dippy” look that would appeal to narrow core in favor of antique, apothecary look that signals healing properties of elixir. They use straight-ahead brand name and brown-glass jars vs clear glass used by most rivals. Since broad range of consumers understand benefits of probiotics these days, front-panel slogan proclaims: “A bubbly, probiotic tea.” Bottom of label flags, American Apparel-style: “Made in California, USA.” Besides Original, flavor range encompasses seasonal offerings such as Lemon Ginger, Pink Lady Apple, Plum, California Grape, Pomegranate and sole cleanse item, Cayenne Cleanse. Fruit is sourced from local farmers such as Etheridge Farms. Taking cue from premiums commanded by HPP juices, Health-Ade isn’t shy about demanding $8 per bottle – nearly $10 at 5-unit Jack’s Stir Brew coffee chain in NY that FedExes product in for customers. Co provides home delivery in LA, idea that may translate well to NY, where that’s been longstanding tradition. Kegs are part of mix, too.
With small-biz loans difficult to come by, trio resorted for capital to Kickstarter campaign in Jun – only to flounder in hitting aggressive $100K goal – perhaps because they did too good a job flagging their success, undermining underdog lure of crowdsource platform, Daina thinks now. Effort generated contacts that resulted in approaches from likes of Shark Tank, but team didn’t view those as best fit. Fortunately, First Beverage emerged as investor and closed deal Oct 7. Its key attraction to Health-Ade, Daina said, is deep expertise of partners like Tom First in areas like production, financial modeling and distribution. With capital and expertise, “now we actually have the capability to act on things,” Daina said. So far co is comprised just of 3 founders, 2 production workers and delivery driver.
Two key priorities are production and distribution. On production front, scaling up poses significant challenge, given artisanal way brand is produced, fermenting in 2.5-gal glass jars and without resorting to powdered probiotics to accelerate process. Health-Ade takes as much as 21 days. Partners don’t want to trade that away in going bigger, with even stainless steel regarded as too great a compromise. They’re also set on opening production unit in NY, both to save on freight costs for heavy glass-bottle brand and “because locality is key,” Daina figures. Reception at Jack’s Stir Brew has been heartening, too. As for distribution, they’re looking for mix of DSD and broadline partners, tho it’s early days on that front.
FIRST BEVERAGE PLAYED KEY ROLE IN BIG BOULEVARD CRAFT BEER DEAL Since its first transaction in NA bevs, Activate cap-dispensed brand which it flipped to India’s Tata Group, First Beverage Group has been associated with trickle of small-$$ deals involving Thomas Kemper Sodas, Purity Organic juices and most recently Health-Ade. But co just played instrumental role in one of biggest craft-beer transactions: Boulevard’s acquisition last week by Belgium’s Duvel Moortgat for figure estimated between $110-$120 mil. Deal flowed out of work that First Beverage’s consulting arm had been performing for Boulevard founder John McDonald; that turned into assignment on banking side, as McDonald sought private-equity or strategic partner that would maintain integrity of operation down road.