Austin, Tex. has gone through some pretty big changes in the past couple of decades. Riding the wave of the dot-com bubble, it went from laid-back college town to a good-life-seeking-Yuppie-infested new economy hub. But with the growth of Whole Foods, Hewlett Packard and Hoovers, Inc. attracting MBA-types to the area, it’s gotten pretty tough on the natives. In fact, despite the benefits that a growing economy offers an urban center, things have gotten so bad for the locals that they introduced a new slogan: Keep Austin Weird.
Similarly, another home-grown Austin enterprise is about to enter the local struggle between character and capitalism: Sweet Leaf Tea. Sweet Leaf might have started out with pillowcases for teabags and water from a garden hose, but lately the only thing the pillowcases have been good for is carrying the company’s cash. Last month, venture capital group Catterton Partners cut Sweet Leaf an $18 million check, and that means the company has reached the same crossroads as Austin. Now that Sweet Leaf founder Clayton Christopher has cashed that check – and used at least a portion of those proceeds to buy out a few early investors – the question is whether the product will be able to keep its down-home sense of fun even as it tries to move into new markets.
That’s not to say that Sweet Leaf hasn’t been good at opening new markets in the past. For years, the founders would survey new retail arenas and then wiggle into delis and convenience stores. But there’s an imperative that comes with the Catterton money, an imperative to leave the nest of Whole Foods and upper-middle class sandwich joints, and fly into new cities and mainstream supermarkets.
Shoved or not, Christopher says that the new bankroll is unlikely to clash with any hippie sensibilities at Sweet Leaf. The ex-charter boat captain and college dropout has always taken a conservative approach to his business. He kept marketing budgets tight and only moved into new places when the time was right – even going so far as to say “no” to distributors that wanted to carry his product in what he felt were the wrong markets at the wrong times.
Still, if Christopher isn’t necessarily a Texas slacker, there’s a bit of Austin’s Hill Country attitude that helped make Sweet Leaf such a success in the first place. Now Christopher will couple that attitude with a venture capital partner that, he said, brings “more strategic value than just the check.”
“We went with Catterton because they have deep industry experience,” he said. The company has a record of success that includes Kettle Foods, Odwalla, and Gold Coast Beverages Distributors, one of the largest beer and beverage distribution companies in the U.S.
Still, the money helps. In addition to buying out some existing shareholders, Christopher said Sweet Leaf will use the windfall to bolster sales and marketing across the U.S., and help the company move into mainstream channels.
As the marketing team swells, they’ll use a lot of the tactics learned in the company’s early days.
Once the company targeted a market, they committed to it. Company personnel spent their weekends at retail locations passing out samples. Christopher said the only way his brand could work is if people fell in love with it.
Early on, the brand wasn’t without its problems. The kitchen-produced product spoiled in two weeks, Christopher said, and their bottles were ugly. In 2002, he shut the company down for five months to roll out a shelf stable product. As soon as he did, he said, he landed a deal with his hometown grocery giant, Whole Foods. Within eight months, Sweet Leaf was the number one selling RTD tea in the natural food giant’s southwest region.
The company’s growth has only continued since then – especially in Austin. Brad Miller, the general manager of the Austin Beverage Company, said he’s carried Sweet Leaf since 2002, when he placed an order for two mixed pallets. Now he moves 65-70 pallets a month to convenience stores, delis and Aramark food services.