‘Kombucha Crisis’ Fuels Progress

It was the summer of 2010, when Whole Foods and other natural retailers, having found elevated alcohol levels in most raw Kombucha drinks, pulled the products from their store shelves. Many dubbed it the “Kombucha crisis.” However, the so-called crisis seems to tell us more about an affinity for alliteration than anything resembling reality; several beverage industry veterans believe that it hasn’t been detrimental at all. In fact, some say that the supposed calamity actually fueled Kombucha’s rapid rise.

Take Kombucha Wonder Drink, for example. Founded in 2001, the Portland, Ore.-based brand was a small part of the relatively unknown Kombucha category. By the time the reset took place, during which many Kombucha suppliers reformulated their products and returned to stores, consumers wanted to know what all the fuss was about. And what initially appeared to be a negative story about Kombucha turned into a way to raise category awareness and elevate Kombucha Wonder Drink to previously unknown heights.

“It really took the company to a new plateau and from which we’ve really been growing ever since,” said Paul Sposato, the sales and marketing manager for Kombucha Wonder Drink.

Today, Kombucha Wonder Drink is available from coast to coast in the U.S. and Canada, and the company has been exporting its products to Australia, New Zealand, Malaysia, Hong Kong, Belgium, Spain and other countries. Sposato admits that mainstream knowledge of the category is still relatively small, however, the recall has certainly helped it progress.

And as the awareness has increased, consumers have gained a greater understanding of Kombucha’s energizing and detoxifying qualities. Sales numbers in the category go a long way in verifying the growing appeal of the products. In the conventional all-outlet combined channel, beverages that use Kombucha as a primary ingredient accumulated $40,182,068 over the previous 52 weeks ending on Feb. 16, representing a 58.2 percent increase over sales in the same period one year prior, according to SPINS, a leading provider of syndicated market research. In the natural channel, beverages that use Kombucha as a primary ingredient accumulated $50,474,070 over the previous 52 weeks ending on Feb. 16, representing a 24.5 percent increase over sales in the same period in 2012.

Make no mistake, brand leader GT’s Kombucha has dominated the field. Chris Reed, the founder and CEO of Reed’s Inc., makers of ginger brews and their own line of Kombucha teas, said that GT’s is “such a number one, it’s unbelievable.”

“It didn’t hurt that for a long time [GT’s founder GT Dave] had on his label, ‘my mom had cancer, drank the Kool-Aid and cancer went away,’” Reed said. “He created a whole myth and culture understanding of the incredible health properties of Kombucha.”

Sposato took a more conservative approach toward acknowledging GT’s prominence, which could also be attributed to the fact that it was the first brand to widely market Kombucha in bottles.

“They’re obviously good business men,” Sposato said. “They’ve read the market just right.”

Despite GT’s supremacy in the category, there are a number of up-and-coming Kombucha brands that are attempting to piggyback off the company’s success and balance the currently tilted market share. Sposato calls Kombucha Wonder Drink “the little Kombucha engine that could.” Reed’s, which recently announced that its revenues last year increased by 20 percent to more than $30 million, is seeing dramatic growth of its Culture Club Kombucha line. Reed’s sold approximately 750,000 bottles of Culture Club in 2012, and forecasts that number to multiply by 10 in 2013.

“We expect it to be monstrous,” Reed said. “On a per-store basis, we’re doing more Kombucha than we’re doing all of our other products, so we expect some serious acceleration.”

Reed said that his approach to Kombucha is catered toward the consumer. By using ingredients such as ginger, formulating his Kombucha with Palomar Mountain Spring Water instead of Los Angeles city water, and entering, as Reed said, “any trendy place that’s hip,” he’ll be able to reach more than just the Kombucha diehards.

“If you don’t win with the consumer, you don’t win with anyone,” Reed said.

While also still in the background compared to GT’s, Búcha Live Kombucha embodies another up-and-coming brand in the still-growing category. With flavors like grapefruit sage, verbena rose and masala chai, the Torrance, Calif.-based brand aims to give consumers health benefits with an appealing taste.

“You’ve got to have balls to put sage in a drink,” said Bern Galvin, the company’s founder.

Galvin also said that he thinks Kombucha will eventually cross over from the natural channel into mainstream channels. He’s in talks with mega grocers Kroger and Safeway, has placed his products in about 500-600 stores, including a few hundred Whole Foods stores, and said that since 2010’s reset, the category has gained a significant level of professionalism and competitiveness. Still, a good thing can take a while to develop when it’s new territory for the consumer.

“The kombucha industry today is probably about where the craft beer brewing industry was in about 1983,” Galvin said. “It’s got a long way to go.”

Source: Beverages