Tea And Sympathy

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"Here was this man, calling out of the blue, telling us he was selling a product with a three-month shelf life that would bring in $40,000 profit during its first season," Hugh Downey remembers, "and he wanted to give all the earnings to Lalmba. Skeptical? You bet I was skeptical, because people don't do this type of thing. We've been running this organization for 20 years, and we have to work hard for what we get. No one walks up and says, 'Hey, I want to give all my company profits to Africa.' " Marty Downey had a similar response. "First reaction? Well, is this guy nuts, or is he nuts?"

One year later, the Downeys still don't completely get it -- but Ron Schultz, they discovered, wasn't kidding. Flicking on the light in his chilly garage, Hugh Downey illuminates cartons filled with medicines piled ceiling high. All were purchased, he explains, with a portion of the money Schultz has given Lalmba. The rest of Schultz's money this year will be used to improve a nutrition program in the Sudan and help develop a clinic there for children under five years of age.

When Hugh Downey rejected Schultz's initial $40,000 offer, Schultz felt certain that Lalmba was the most effective outlet for his money. A bit stunned by the windfall, the Downeys weren't sure they had the resources in place to use all of Schultz's money effectively in just one year. So they agreed to accept $20,000 instead. Schultz immediately reduced his sales projections by half, claiming that he didn't want to make money any faster than he could substantiate what was happening to it.

The money came from Christmas Spice Tea. Last Christmas, 45,000 bags of the red-and-green-packaged spicy sweet blend hit the marketplace, enough to ensure its availability in at least a few stores in most states. It sold well, although whether because of its gustatory appeal or its social message no one is sure. The writing on the back of the bags of tea tells the buyer that he or she is "no ordinary consumer," because Medicine for Children is "no ordinary company." But it also urges the consumer to buy the tea "because you like it -- not because the profits go to charity." Recognizing that a cause-linked product limits the consumer pool to sympathetic buyers, Schultz wants his tea to stand on its own.

Distinguishing his product from his philosophy not only expands Schultz's potential market, it also permits him the autonomy he considers essential to running a successful business. "The failure of many charities to perform efficiently stems precisely from their lack of autonomy," he argues. "But since how much money I get isn't directly linked to how excited I can make someone about the cause I choose to support, I can be comfortable knowing that people would have bought my product no matter what I do with their money. So if I make mistakes, if I give my money to what I later discover is an inefficiently run organization, I can admit to it, and start over." An organized charity, he points out, doesn't have this luxury. Dependent upon the beneficence of others, a charity is under pressure to assure its donors all is going well.

Will Medicine for Children wash with the IRS? This year, at least, juggling the taxes won't be difficult for Schultz. For starters, the corporation gets its 10% write-off. Of the remaining pretax profits, Schultz hopes to write off about 50% as what the IRS calls "goodwill" advertising. If the company gave all that away directly, it would have to pay roughly $900 in corporate income taxes. Instead, it pays the earnings to Schultz, who works on a contract basis, in effect giving him a salary he doesn't need. Schultz in turn gives the money away, and takes a deduction under the IRS provision allowing up to 50% of income to go to charity. "It's when the profits from Medicine for Children exceed more than half my personal income that the tax game will get fun," Schultz says. He projects an $800,000 profit within the next several years.

Schultz's enterprise has already caught the fancy of other businesspeople. "When you're talking about a successful entrepreneur, what matters to me is that he wants something to happen," says Andy Berliner, former president of Magic Mountain Herb Tea Co., the first herbal tea to penetrate the supermarkets. Berliner, who now owns a frozen-pizza business, agreed to help Schultz market his Christmas Spice Tea even before the venture was under way. "After a successful business, you want to expand your energies, find more fulfilling ventures," he says. Both Berliner and Schultz believe that there are a lot of entrepreneurs who, having made plenty of money, want to do something more meaningful with their lives as they grow older.

As Medicine for Children has gotten off the ground, Delphin has shrunk, from peak sales of $1 million to its present level of roughly $250,000 a year. For Schultz, who draws what he calls a "comfortable" salary from Delphin, that is big enough. The reason is simply that some things are more important than others.

"It's a nice life," he says, gazing around his well-appointed home in Petaluma, "a good life. I like things. I appreciate them.

"But it's not everything, you know, being rich."

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