Within five minutes of meeting me, GT Dave, creator of the wildly popular fermented probiotic beverage GT's Kombucha, tells me the story of his conception:
Late one night, his father rolled over and made love to his mother "in the lotus position, of all positions," he says. GT's meticulously coifed 69-year-old mom, Laraine Dave, is sitting across from us in the living room of her hilltop home, a white modernist affair perched above a steep canyon in L.A.'s exclusive Bel-Air enclave. She grins and leans into the conversation, no sign of embarrassment. "So I was conceived," GT says. "And it was just something that was meant to be."
If he can tell that I fail to fully grasp the miracle, GT is unfazed. He's explaining how destiny has driven his success, even before he was born, and he's dead serious about it. His parents already had two sons that special night, he tells me, and didn't necessarily want a third. But one son, Justin, had a life-threatening heart condition. Laraine had meditated on her family's future and ended up vowing to go off contraceptives and let fate take over. After GT arrived, the family had a streak of good fortune. Justin's health stabilized, and his parents' marital stresses subsided. "Everything kind of leveled out," GT says. "I'm not saying I was the Messiah, but there was something that happened that was pretty unique and special."
In GT's view, the story of his company is rooted in the Eastern philosophies his parents followed (they frequently took their kids to a famous ashram in India), the family's various health struggles, and his own altruistic intentions. His parents' taste for homebrewed kombucha played into all those things, and GT eventually saw himself as a sort of conduit for spreading the love, the missionary of an almost magical elixir.
The story may also be seen as one of extraordinary bootstrapped growth. Before GT's, there was no such thing as commercial kombucha. According to an Inc. analysis, this year consumers will buy $600 million worth of the fizzy stuff--that roughly equals the U.S. market for coconut water--and more than half will be GT's. The category, which started in local health-food markets and went national thanks to Whole Foods, has now spread to Safeway and even Walmart. GT owns 100 percent of the company, and has taken out only one loan, $10,000 from Laraine. And he's never bought an ad, preferring to let the product speak for itself--which it does rather effectively when it shows up in the hands of Madonna, Gwyneth Paltrow, Reese Witherspoon, and other paparazzi targets.
Perhaps most remarkably, GT did it all without any training or experience, without even graduating from high school, and certainly without anything resembling a business plan. He was all of 17 when he started the company in his parents' kitchen 20 years ago. Today he's the envy of the beverage world, an upstart who single-handedly created a blockbuster new category.
He's also, lately, a prime target. When you create a new category, you create a platform for competitors. And when you maintain an almost religious devotion to handcrafting your wares, it can be both your biggest strength and biggest vulnerability. Thanks to mega specialty markets like Whole Foods, a niche product once relegated to crunchy co-ops can reach consumers almost everywhere. But such scale brings pressures that can erode the artisanal principles that made the item so special to begin with.
In this way, the saga of GT's Kombucha is both road map and cautionary tale for quirky, handmade upstarts. For now, GT is still comfortably in command, but the next chapter of his story promises to test the limits of his destiny--and his purity.
If you've never tried kombucha, imagine drinking a sweet-tart cider vinegar that's carbonated like beer and has a few little chunks swimming around in it. It's made of slightly sweetened tea--green, black, or both--that ferments for up to a month while a mushroom-looking blob floats on top of it. The blob is the key ingredient. Known as a scoby (for symbiotic colony of bacteria and yeast), it essentially eats the sugar, tannic acids, and caffeine in the tea, and creates a cocktail of live microorganisms that many believe to be beneficial. Scobys constantly grow and reproduce, and their offspring are something of a currency among kombucha devotees, who use them in homebrewing.
Kombucha is, shall we say, an acquired taste. But historically, taste wasn't the point. Most accounts of kombucha's history go back to 221 BCE in China, where it was known as the "tea of immortality." Over the centuries, it spread to Japan and Russia, and eventually made its way to hard-core health-food types, like GT's family, in the U.S.
Kombucha's actual effects are a matter of debate. Plenty of studies have shown that probiotic foods--fermented dishes like kimchi, sauerkraut, unpasteurized yogurt, and kombucha--aid digestion and help maintain intestinal health. There's also evidence that consuming live bacteria can boost the immune system and stave off allergies. Modern commercial kombuchas like GT's often include supplemental ingredients such as ginger or juices that have their own documented health benefits (and also make the stuff taste better). True believers, though, tout kombucha as a treatment for just about everything, including baldness, acne, hangovers, AIDS, and cancer.
GT's dad, Michael Dave, a lawyer, first scored a scoby in 1993 from a friend and former talent agent who'd left the entertainment business to start a café, Beverly Hills Juice. The ex-agent's wife had gotten it from a friend who'd picked it up from a Buddhist nun. But preferring his juices, he gave it to Michael, who took up homebrewing. Laraine started bringing his kombucha to the luxury department store I. Magnin, where she sold jewelry. She'd serve it in champagne glasses to cosmetics girls and customers, spreading the word about its benefits for skin and hair--"all those visual reasons, the Ponce de León fountain-of-youth type of deal," she says.
In July 1994, Laraine found a lump in her breast. Doctors diagnosed a fast-growing cancer. "It was three inches in diameter, and they couldn't give me a year to live," she says. "But after the lumpectomy, they found that a lot of the tissue around it was precancerous."
The doctors were shocked. "What have you been doing?" they asked.
"I've been drinking this kombucha every day, and it's supposed to turbo-boost your immune system," she said.
"Mrs. Dave, whatever you're doing, keep doing it," they said.
Around the time that Laraine underwent chemotherapy and radiation treatment, Los Angeles Magazine cited her as the force behind "the mushroom that's sweeping L.A." People started calling I. Magnin wanting to buy kombucha, and one night at the family dinner table, she mentioned all the interest she was getting. GT looked up from his plate and said, "Mom, you should do this. You should make it available for everyone. Think of all the people it could help. Look what it's done for you."
It was nearly a month before GT's 17th birthday. He had recently dropped out of Beverly Hills High after falling in with the wrong crowd and slacking off. Self-aware enough to know that he needed to make a change, he had gotten his GED and signed up for some classes at the local community college.
Laraine gazed across the table at her smart, charismatic, somewhat lost son. "You do it," she said. "And I will help you."
Along the refrigerator wall at Erewhon, a bustling natural-foods grocery on Beverly Boulevard, several dozen rows of GT's Kombucha dominate all other drinks. Flavors include Mystic Mango, Cosmic Cranberry, Guava Goddess, and so on, in a rainbow of colors peeking out from behind retro labels that evoke a 19th-century tonic.
Now 36 and buffed to a high shine, GT--it's short for George Thomas--carries himself with a bouncy, contagious energy. Sculpted biceps emerge from the short and cuffed sleeves of his Alexander McQueen button-down. Impossibly snug khaki pants reveal smooth and sockless ankles. On Saturdays, he drives his Lamborghini. Overall, he has a sort of ageless and Photoshopped look that suggests someone who takes very expensive care of himself--or maybe just drinks a ton of kombucha.
Which he does. "I'll go through eight to 12 bottles a day," he says. That includes sampling batches while they're fermenting to monitor effervescence and other factors, testing finished product to check flavor, and buying bottles from stores to understand the customer experience. He considers himself something of a kombucha artist, and doesn't trust anyone else to have a palate as finely tuned as his.
"He challenges us to step up our game," says Chris Reed, founder and CEO of the publicly traded Reed's, which is known for its ginger ale and recently launched a kombucha drink. "GT's kept the quality up there as he's grown, and maybe even improved it over the past year or two." Reed's Culture Club Kombucha is now the next-largest brand, but Reed calls it "a flyspeck" next to GT's, claiming only 2 percent of the market.
Beverages are a high-margin business, but experts say kombucha is extraordinary. The most important ingredient, the scoby, is free and self-replicating. Everything else--tea and sugar and whatever dash of flavoring gets added at the end--doesn't cost much more, even if you use only the finest raw materials, as both GT and Reed claim to. "When you dial it in like GT has, the margins are very high, maybe 50 percent," says Reed.
GT won't say so, but bringing me to Erewhon illustrates his hold on the market--he controls something north of 60 percent, he says, and likely much more at this hometown store. Beyond that, he won't discuss financial details. "It's not extraordinary," he says. "I'm not going to tell you it's a lucrative business." Doing so, of course, would distract from the "heart and soul" of the company: the mission to spread a good thing.
Erewhon is also where his business began, just a few months after GT's fateful dinner conversation with Laraine. After tinkering with the recipe to make something more palatable than his dad's vinegary brew, he put on a suit, stuffed a legal pad and a calculator into a briefcase, and set off to pitch Erewhon, his dad at his side to lend gravitas. He had created a black and white logo inspired by his mom's Chanel cosmetics, and he measured meticulously before affixing a homemade label three inches from the bottom of each of his bottles, so they'd look like they'd come off an assembly line. Thanks to the magazine article about Laraine, customers were already asking for kombucha, so a deal was easy. "At no point did anyone at the store suspect I was a homebrewer," GT says.
The first order--two cases, or 24 bottles--nearly sold out on the first day. The next year and a half became a blur of brewing and bottling and pitching. GT's kombucha factory, initially a few punch bowls on the counter, outgrew the family kitchen and took over the dining room. GT started sleeping from 4 p.m. to midnight, and working while his family slept. He created alter egos--Jorge the delivery guy, George the cook, and GT the president--to sound like he had employees when he talked to his growing list of retailers.
Laraine pitched in by becoming chief product-demo officer. GT sent her to stores, where she'd set up tasting tables. "Please try GT's Kombucha. It stimulates your metabolism," she'd say. She'd promise people better skin after a month of drinking kombucha--if they drank it daily. She learned that the local Hasidic Jews were open to serving the drink to their kids. "A little every morning and a little every night!" she would suggest. "The kids will do better in sports and school!" Sometimes she shared her cancer story with shoppers.
"GT had the great advantage of being the first guy in," says Reed. "He took the time and energy to educate the consumer in the early days, just talking about kombucha, creating a culture around it." The mystical aura Laraine helped create--never mind if it stretched the truth--didn't hurt.
The beverage aisle of the '90s was not like today's, where every upscale market has a dozen different pressed juices and superfruit power drinks. GT's was pricey--$4.99--but not unprecedented, since Odwalla and Red Bull had already persuaded people to spend several times the cost of soda for extra nutrition or energy. And there was a sense of discovery. "It was like, 'My god, why haven't I had this before?' " says GT.
But as business began to thrive, Justin got sick again. As a baby, his recurring heart problems were treated by blessings from Sathya Sai Baba--the family's holy man in India--and surgeons in L.A. Now the diagnosis was a rare and terminal cancer. As GT worked nights furiously filling orders, Justin hunched over on his knees in the living room, unable to walk or even lie in bed. GT would turn away from his tasks to help his big brother go to the bathroom, or lift him into a more comfortable position.
"Starting my company was one of the most beautiful things I've ever gone through, like giving birth," says GT, his voice as composed as ever, if softer with emotion. "I'm there at the house creating, innovating, seeing my future, finally feeling like I've found something that resonates all the way to my core. And juxtaposed to that is my brother dying, being stripped of everything he felt was important--the physique, the popularity, all the pride and ego."
When Justin died, the stress tore GT's parents apart. It was December 1996, and GT realized it was time to go pro. He was more than two years into his adventure, selling 30 to 50 cases a day, and had strained his homebrew operation beyond capacity. He rented a 2,000-square-foot industrial space in Gardena, just outside of L.A., and started hiring.
Then Whole Foods came calling.
If the early days of GT's Kombucha are a triumph of precocious instincts and timing, the company's jump to adulthood owes much to Whole Foods. In 1999, the grocer wasn't the leviathan it is today, but it already held extraordinary power to pluck an obscure brand out of the wild and give it previously unimagined exposure. Suddenly GT's was in stores across the Southwest. He rented another 2,000 square feet in Gardena. And then again, and again, as his kombucha kept rolling out to more regions. By 2004, GT constantly struggled to meet demand. He'd increase capacity, and by the time he was up and running he'd need more.
Another constraint was his production process. GT was still brewing the traditional way, in tiny batches requiring tremendous personal attention. One potential solution, common among food and beverage companies, was to hire contract manufacturers. But GT was unwilling to give up his close oversight. He was also unwilling to increase yields by diluting the product, for fear that consumers would detect the difference. He gambled to hold fast to his standards and raced to find a much larger facility, one that he could grow into.
He did, and by early 2010, kombucha was everywhere. Stars were showing up in the tabloids toting bottles of GT's. A major national rival had entered the market: Honest Tea, then partly owned by Coca-Cola. (Today Coke owns it outright.) Amazingly, GT still held more than 90 percent of the market.
Then he started hearing from panicked retailers. An inspector from the Maine Department of Agriculture had noticed some bottles of kombucha leaking and bubbling in a Portland Whole Foods; worried the drinks were still fermenting, the department tested several brands, including GT's. The alcohol levels ran as high as 2.5 percent by volume--five times the legal limit for nonalcoholic drinks. The retailers feared getting arrested for selling booze illegally.
Whole Foods pulled all kombucha products from its shelves. Others followed suit, and suddenly it was all but impossible to buy the drink anywhere. What was a $150 million product category disappeared in an instant--poof.
It got worse. Lindsay Lohan failed a court-mandated alcohol test, and press accounts blamed it on her heavy kombucha habit, spreading the recall news everywhere. Three class-action lawsuits came next, two charging GT's and Honest Tea with misleading customers about the alcohol content of kombucha, and another accusing GT's of making unsubstantiated health claims. At that time, Laraine's cancer story was printed on every label, and GT was fond of crediting the brew for her survival. "Kombucha is the reason she's still here today," he told Forbes in 2009. Laraine told the Los Angeles Times that Justin "would have survived" his cancer if only he'd let her feed him kombucha.
On his labels, GT has always included a warning of "trace amounts" of alcohol, and he suggests that the bottles tested had simply gone bad, as would any juice left on the shelf too long. More plainly, he felt persecuted. "Imagine," he says, "spending 15 years of your life doing something that you started because it helped people, because it touched your mom's health, and then somebody says it's all a lie, it's booze, it's unhealthy." He pauses to let his sense of unfairness sink in. "That's really, really hard."
He settled the lawsuits and removed Laraine's story from his labels. (That stung too. "We never used the word cure," he says.) But the real task was to save the company: to reformulate so Whole Foods would allow GT's back into its stores. Some brands were returned to the shelves two weeks after the recall. GT's stayed gone three and a half months, because he was unwilling to radically change his process. Some brewers use pasteurization to help control the alcohol content in their products, or ferment for shorter periods and add forced carbonation. GT says that he "changed the potential for alcohol by controlling the chemistry of the fermentation."
The result, which he named Enlightened kombucha, has a slightly softer taste. GT won't admit to the bright side of the new product's more mass-market flavor profile--that would suggest a financial motive rather than a pure, spiritual one--but the scandal clearly opened the door for novel approaches. The new formula has a shorter shelf life, creating opportunities to include things, like chia seeds, that previously wouldn't work.
According to Spins, a natural-products market research firm, in 2010 the kombucha category grew 28 percent--despite the disaster. (Spins's data excludes Whole Foods.) In 2011, the category grew more than 40 percent. "If there's a silver lining [to the alcohol problem], it's more people hearing about kombucha," GT says. And also this: The scare led GT's most formidable competitor at the time, Honest Tea, to pull out of the market.
A Damien Hirst painting of a butterfly hangs in the second-floor conference room of GT's current headquarters, just south of downtown L.A.--the only room GT will let me see in the 100,000-square-foot complex. For all his candor about the most intimate details of his family's struggles and spirituality, he's intensely secretive about how he makes his kombucha.
The reason, he says, is that people's energies can influence their surroundings; he doesn't want any bad juju around the kombucha, so it's accessible to only his roughly 150 employees. He tells of an employee who died from a heart attack some years ago. "He was going through some personal issues, fighting with his wife, and after he died, every batch he had touched went bad," GT says. "As silly as it sounds, because of its living-life-force qualities, the kombucha is sensitive to the energy that surrounds it."
As with the magical properties of the finished product, there's some debate about whether the production is as holy as GT makes it out to be. He's currently fighting two lawsuits from former employees over work conditions in the factory, one of which calls them "abhorrent." GT calls the claims baseless and the plaintiffs mere opportunists.
The reality, he says, is that "the environment we make kombucha in is peaceful, loving, quiet. Like a nursery." Each of the scobys he uses is an offspring of the original mother culture that his dad got so long ago. Each colony is small enough that, GT says, a single person could carry its container; there are thousands upon thousands of them in the factory.
What makes it all work, he says, is his relentless perfectionism, his dedication to personally tending to his babies, never pasteurizing, never filtering. If the kombucha that results from all that tender nurturing is a better product, that's a great way for GT to stay the undisputed king of the booch in an expanding market. But GT's is now, at least in health-food circles, a ubiquitous and instantly recognizable national brand, and that can undermine the idea that it's artisanally made. The values guiding healthy eating go well beyond natural and organic these days, and whether something is local is equally important--for proof, just check the aisles of your nearest Whole Foods.
"We're seeing a surge of local production," says Errol Schweizer, the global grocery coordinator at Whole Foods. "GT still has the best-selling brand in the category, but his growth [here] has tailed off. He has helped spawn a lot of competitors." In its quest to feature regional brands in its stores, Whole Foods is literally funding GT's competition. For instance, Kosmic Kombucha, a four-year-old startup in Austin, recently got a financial boost from Whole Foods' Local Producer Loan program, and is using those funds to expand. Complicating matters is that GT's new competitors don't necessarily hew to the same rules he does, and the easier ways to make kombucha are fast becoming the norm. When I visit Kosmic's headquarters, their product is fermenting in 50-gallon blue plastic barrels, not the small vessels that GT insists on. The founders, a young couple, seem no less passionate about their product and its benefits than GT is about his, but they have no qualms showing me how they force carbonate their drink after it ferments--a practice GT shuns. Chris Reed, of Reed's, similarly shrugs at carbonating his booch: "What's the difference, whether a bug ate the sugar and farted out the CO2 or you added it yourself?" And the nationally distributed Kombucha Wonder Drink touts being pasteurized--though the industry consensus is that pasteurization kills all the beneficial probiotics.
For GT, the only real response is to keep growing. Over the past two years, GT's has become increasingly available in mainstream grocers--first Safeway and Kroger, and now Target and Walmart. In the late 2000s, Whole Foods outstocked other retailers in GT's by a factor of three; today it is still the product's largest outlet, but just marginally.
Mainstream growth has been great for the business--conventional grocers are now the largest retail channel for kombucha, with sales rising more than 60 percent in 2014--but GT knows how it's perceived by his core consumers. "I think about how I felt when my favorite product that I could only find at a natural-foods store became available at the drugstore," he says. "There's a disconnect of intimacy that almost cheapens the experience."
"What GT is struggling with is not different from any other startup--his is just more mature," says Herman Uscategui. Formerly a Starbucks executive heading up international business development, Uscategui now consults for GT on what he calls "professionalizing operations"--helping set up better finance systems, IT, and market research, and finding first-class executives so GT doesn't stay at work until 11 every night.
Uscategui is urging GT to steel himself for more competition. With more brewers blurring the definition of kombucha, especially as the less-discerning mass market beckons, you can imagine Pepsi or another giant acquiring a less persnickety brand--like, say, Kombucha Wonder Drink, whose founder, Stephen Lee, co-founded Tazo Tea, which eventually sold to Starbucks.
"We need to be fully aware of the players with extremely large infrastructure and resources. They will be attacking," Uscategui says. "So I ask him, 'How much flexibility are you going to have and not compromise?' He's said to me he will not pasteurize his product, no matter what." But, Uscategui continues, "GT has come to realize that the purity of his concept and the purity of his ideas related to business strategy and product development need to be reassessed in order to deal with market pressures or consumer trends."
Even GT's tight control of the brewing process may need to loosen. Shipping refrigerated product in glass bottles across the country isn't exactly efficient, so he's thought about opening a second brewery on the East Coast, where he won't be able to drop in on the scobys every day and feel their energy. Uscategui even suggests that stepping up the brand's marketing isn't out of the question. Meanwhile, GT mulls expansions that would make his company a wider wellness brand. "I don't want to be confined to just kombucha," he says. "Whether that means another kind of healthy food or drink, a wellness center, a café, whether it's a mind-expanding film production, I'm all for it.
"Ultimately, what am I looking to achieve? If the only answer is financial growth, that's not enough. We are not just chasing dollar signs. It's authenticity, personal expression. It's a journey."
Sure. But the first 20 years of his journey were about transforming a handmade project into a scalable business and spreading the magic. The next phase is about transforming a successful startup into a billion-dollar, diversified brand. This special tonic--GT's destiny, his art, which might or might not have saved his mom and certainly gave his own life a purpose--is now on sale at Walmart. There's no going back.