Daina Trout, Justin Trout, and Vanessa Dew consciously set out to create a fast-growth company. They brainstormed ideas while snacking on Daina's sauerkraut and pickles--but initially didn't foresee that another food product from her kitchen would be the one to bring them success. Seven years later, their Health-Ade Kombucha is available in stores nationwide in 12 flavors. The company has more than $30 million in funding and the founders say it is nearing profitability. According to chief executive Daina Trout, it's the fastest-growing refrigerated beverage brand in the country. She explains how the business developed from its humble beginnings. --As told to Christine Lagorio-Chafkin
Back in 2005, I was in grad school for nutritional biochemistry. I was really into food: cooking it, feeding it to others. I got into fermentation. When you came to my apartment in grad school, there would be stuff growing on my counter. I didn't just learn about how to make kombucha there at Tufts; I homed in on my philosophy that holistic health is about eating well and feeling good, and it's all connected. I didn't know that would someday become my identity.
My boyfriend, Justin Trout, and I moved to Los Angeles, where we had corporate jobs. I met my best friend, Vanessa Dew. Around 2012, all of us were feeling like we were just a number, one of a hundred thousand employees. But we each felt like we had all this energy to give. We all had the itch at the same time: We wanted to start our own company, so we started a club to brainstorm ideas. Some ideas were food, some were clothes, some were apps.
One day we were talking about how Justin had just gotten a haircut, and the hairdresser told him it was his last hurrah with hair. He was balding, at age 28. What would stop it? There were a lot of chemicals on the market, but not many natural solutions. After some research on the internet, we learned that some people use the kombucha scoby [an acronym for "symbiotic culture of bacteria and yeast"], or the fermented tea's living culture, to help regrow hair. So we started making lots and lots of kombucha to cultivate and grow new kombucha scobys to experiment on. The kombucha liquid itself was just a byproduct.
That was a problem, because we could drink and give away only so much. It was taking over my tiny one-bedroom apartment. But it's really, really good--I would never throw it away. We got to a point where we had 60 cases of glass bottles of kombucha. Then we got the opportunity to sell at the Brentwood farmers' market, which was sort of a very last-minute offer from a friend-of-a-friend. They were like, "It starts in two weeks." I didn't think about it. We were so hungry to start something, we said yes immediately.
What would we sell there? It was sitting in front of us. We just needed labels and some branding. We figured we'd take the cash from it and put it toward the real business. We did an apothecary-inspired bottle, very similar to the brown bottle as it is today, with an anchor for a logo. The three of us figured it all out huddled around a table in a couple of hours. I printed out the labels and Scotch taped them on. Five dollars per bottle seemed about right--there was no time for market research, so we just went with what felt right.
On March 25, 2012, we unpacked 60 cases of kombucha at the farmers' market. We sold out in an hour. From that moment on, we couldn't make enough kombucha to satisfy the demand. We thought this was just going to be a little summer project, but that summer held a different story for us. We realized we were the best-tasting kombucha, the highest-quality kombucha, that anyone could buy.
Store owners started to come see us at the farmers' market. We started stuffing cases of kombucha in our Honda Civic and driving them across Los Angeles. But we had no funding--we still had our day jobs--and it was super hard and super scary. But in the beginning, the money always fit. We took money from one thing, and put it into another. We bought a refrigerated van from early sales. But we only saw one step ahead at that point.
We were in a few mom-and-pop stores and some natural stores, but when we jumped into our first grocery market, that's when we really felt the strain. We needed to order 10,000 bottles, and put down $50,000. Justin, Vanessa, and I had no assets, no credit, and we were denied another line of credit from American Express. I recognized the importance of cash immediately. I structured some really simple loans from our friends and family. But it was clear that we needed investment, and that drove us to begin fundraising.
We also needed to move out of our shared kitchen space. Part of the challenge of our business, unlike most businesses in beverage and food, is that we are fully vertically integrated. We make everything in-house. It's been nonstop challenges growing the business, but if you ask me, the biggest challenge has been scaling the manufacturing. That's because you continually have to step up every time you scale, and those steps up are capital-intensive. It's not just going from having a director of sales to a VP of sales. It's more like taking a whole production line from manual to semi-automatic--and that's an $8 million investment.
We do it all ourselves, because our niche in the market was and is to be the most premium kombucha on the market. We brew every drop we make in two-and-a-half-gallon glass bottles in Los Angeles. Doing this is a crazy feat, because it is done in super-small batches, and the fermentation period is different for every variety, between 14 and 21 days. Extra flavor and function come from juice we cold-press ourselves that is blended in. Now in our facility we have 250,000 glass jars of kombucha piled 30 feet up in the sky in a heated room, fermenting.
One of the things that Justin, Vanessa, and I have, and have always had, is we're equally dedicated to this thing. In the beginning, we didn't have money to hire anybody--all we had was ourselves, three people who were willing to go to insane lengths. There was no question about that. We all have the same amount of drive and thirst to grow this as big as it can be. Even for the worst job in the early days--cold-calling retailers to try to get on our first shelves--we just rotated weeks doing it. We never had the issue of one person not carrying their weight. The three of us were just like, "We will work until we can't stand up."
There's a lot of room for us to still grow--into grocery stores, and into places like restaurants, bars, lunch spots. But the future is very bright, and I would say still untapped.