Expo West? For Some CEOs, It Was ‘Exit, Stage West’

For the founders of a pair of fast-growing innovative entrepreneurial brands, Sweet Leaf Tea and Adina Beverages, Expo West was the last stop.

With outside investors playing a greater role in the companies they started, the ventures have moved from regional brands focused on natural channel distribution into more mainstream channels, with a greater emphasis on building and servicing national accounts. While that change is often one of the major growth drivers for an entrepreneurial brand, it can often lead to change at the top.

Such is the case at Sweet Leaf, where CEO Clayton Christopher, who founded the company ten years ago in Austin, Texas is leaving the company to travel and pursue other ventures, and at Adina for Life, where Co-Founder and former CEO Greg Steltenpohl will also no longer have an active role in company operations.

Both entrepreneurs will retain shares in their companies.

Christopher’s company took in $15.6 million from water giant Nestle last year and $18 million from private equity firm Catterton Partners in 2008 as a way to fuel growth and ramp up distribution. It worked, as the company has moved from a regional brand whose distribution was strongest in the Southwest to a national brand with a near-complete DSD network servicing large grocery chains.

But the change in emphasis – the company cut its vaunted field marketing operation while focusing on new plastic bottles and cans to fit its new channels – went against the tightly-wired sales-and-marketing approach to new markets that Christopher had championed in the early years at Sweet Leaf. Christopher, long the easygoing figurehead for the brand, has gradually eased out of an operational capacity since the middle of 2009, while Sweet Leaf’s president – soon to be CEO — Dan Costello, a former Nestle Waters executive, has taken a larger leadership role.

In an e-mail to employees, the departing Christopher praised their performance and integrity in helping grow the brand from a two-man operation to the number two ready-to-drink tea in Whole Foods. But the difference in philosophy between the entrepreneur and the larger investment concerns was apparent; the e-mail mentioned Christopher’s hope that “we will not sacrifice the magic of this brand and thus jeopardize the love affair we have created with our consumers in order to save a few dollars on our path up the mountain.”

Still, that path up the mountain is a potentially lucrative one, and cost savings and efficiency are important. Sweet Leaf has approximately 2 ½ years remaining for the company to hit an unspecified revenue amount to trigger a buyout option by Nestle.

Meanwhile, Steltenpohl has also been moved out of a leadership role with Adina, ending his odd-couple coexistence with SoBe founder John Bello, who had become CEO following Bello-led Sherbrooke Capital’s 2008 investment of $6.6 million in the company. Adina has been planning to announce another $14 million dollar investment, this one from CIC Partners, a private equity firm operated in part by former PepsiCo CEO Roger Enrico.

Steltenpohl will remain a board member, but day-to-day operations will be under the aegis of SoBe veteran Norman Snyder. Snyder, who will be COO and President, came on board after working on CIC’s pre-investment due diligence research on Adina.

“Greg’s taking the high road,” Snyder said of Steltenpohl’s departure. “The CIC guys came in because John brought them in, and John brought Norm to the party.”

With CIC Partners on board, the company plans to not only look at beverages – but possibly other brands, according to Snyder.

“What’s the difference between an ice cream bar, a beverage, a bag of chips,” Snyder said, discussing the company’s potential distribution synergies. “Although right now, [the emphasis is] on beverage.”

Snyder promised that the brand would “hit the lever” with regard to increasing the marketing spend behind the company’s Holistics line in the spring and summer. Nevertheless, Adina has been slow to find the right product mix since Sherbrooke’s initial involvement. First, a line of organic, fair trade coffee-based energy drinks failed to catch fire (it is now down to two SKUs from five) and the Holistics line, despite a fast-growing national DSD network, has yet to scale up with a wide consumer following.

Nevertheless, enthusiasm for Holistics was high at the Adina booth at Expo West, as representatives presented a new, brighter, painted-on label, tweaked packaging and formulations for the brand’s six exisiting SKUs and previews of two more. The flavors have been enhanced by a slight increase in sugar in the formulation, bringing the calorie count from 50 to 60 calories per serving, while two of Steltenpohl’s initial priorities remain in place on the line: organic and fair trade certification.