While it may seem impossible for a small company to compete against the beverage giants like Snapple, Nantucket Nectars or Coca-Cola, entrepreneurs are finding ways to get their new drinks on store shelves.
"We thought, when people make hot or cold tea, they tend not to put sweeteners in it, so why don't companies sell drinks the way people would make them at home?" said Seth Goldman, co-creator and president of Honest Tea Inc. in Bethesda, Md.
Two years after writing a business plan, the Honest Tea makers have their bottled tea on shelves in major health-food stores like Fresh Fields, which is their largest customer. (Although tea is not as popular as coffee, soda and beer, tea drinkers still sipped $500 million worth of specialty teas in 1998, according to the Tea Council of the United States, based in New York).
Goldman quit his job as vice president of the Calvert Group, a mutual funds company in Washington, D.C., to launch his tea business with money and guidance from Barry Nalebuff, a business professor at Yale University. Nalebuff also signed on as company chairman and chief executive.
The second round of funding actually came from fans who sent checks tucked into their fan mail. "A woman who e-mailed me asking about where she could buy the product ended up investing $250,000," said Goldman, who received contributions of over $1 million in one year.
Finding the perfect recipes resulted from many sleepless nights in the kitchen. "We couldn't sleep, because there was so much caffeine in our system," recalled Goldman.
After concocting hundreds of blends, they bottled up their best in Thermoses, and took the drink to health-food stores. Because eight ounces of tea contains less than 20 calories, Goldman knew the product, which retails for $1.19 to $1.49 for a 16-ounce bottle, would appeal to health-conscious individuals.
"People who are interested in our product are into reading labels, exercise, and are conscious about what they eat," said Nalebuff. "We're much closer to water than we are to Snapple."
Their hard work seems to be paying off; annual sales reached $1.1 million in 1999. Still, many stores refuse to carry the product, unwilling to give up shelf space to a small tea company.
Other drink makers face different challenges. Michael Cimino, owner of Cimino and Daughters Inc., a family business that makes sparkling grape juice in San Rafael, came up with his product as an alternative to wine.
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