Closing the doors at Fresh Matters LLC was not what founders Andy Knowlton and Cedric Chastenet wanted. The decision to cease operations at company, which produces ‘tude Juice, a line of cold-pressed and high pressure processed (HPP) apple juice products, was instead one that its investors and board insisted upon, citing a long road to profitability in an increasingly competitive category, according to note sent to the company’s brokers and distributors yesterday.
It was a seemingly abrupt end for ‘tude, which Knowlton and Chastenet launched in 2011. The brand that had consistently expanded its distribution footprint over the past year and made significant strides with new retail placements in recent months, gaining shelf space chainwide at The Fresh Market, in Whole Foods’ Northeast region, and landing in the portfolio of online grocer FreshDirect.
The growth of the brand, however, was not enough to satisfy its investors, which includes Fresh Matters’ largest shareholder, Tree Top Inc., a grower-owned fruit cooperative based in the Pacific Northwest, and one of the largest producers of apple products in the U.S.
Tree Top first invested in Fresh Matters in January, 2014, according to Sharon Miracle, Tree Top’s corporate communications director, in a round that included other individuals, and raised a total of $3 million. Tree Top made a subsequent investment in Fresh Matters, but Miracle was unable to identify the exact date or figure of the financing.
The two investments gave Tree Top a 59 percent stake in Fresh Matters and a seat on its board of directors; a filing with the U.S. Securities and Exchange Commission detailing the Jan., 2014 funding lists Dan Hagerty, Tree Top’s senior vice president of CPG sales and marketing, as a director.
Tree Top’s investments supplied Fresh Matters with the funding to increase production, fuel marketing efforts and expand its product line, all of which helped ‘tude gain and maintain presence at key retailers. But the company needed more. In a fast-evolving category like cold-pressed juice, Chastenet said that Fresh Matters needed an infusion of capital to expand Fresh Matters’ production capacity.
“As we were growing, we were not growing quite enough,” Chastenet told BevNET. “The way that manufacturing was set up, to be successful we needed to increase volume, and we needed to decrease costs. And decreasing costs without the volume was not easy. We got to [a] place where we were spending a lot of marketing dollars. We would have liked to be able to spend more marketing dollars, but the gross profit margin was just too little to support spending more on marketing.”
Despite sustained interest in the market for cold-pressed, HPP juices, Tree Top declined to add to its investment in Fresh Matters. Tree Top “cut off funding” because “the initial business plan for which these investments were made has never materialized and had never come to fruition,” Miracle said, citing information she had sourced from Hagerty.
Faced with Tree Top’s decision to turn off the faucet, Miracle said that Fresh Matters’ board members voted unanimously to terminate operations. But it’s clear that Knowlton and Chastenet were not effusive with the move.
When asked how much influence they had on the decision to cease operations, Chastenet said “fairly little.”
“In some ways, it’s kind of funky,” he said. “When you’re working with a large company like [Tree Top] and with investors, the decision-making can be pretty disconnected from the management.”
While Hagerty thinks that HPP technology is “really worthy of investment” and that Tree Top has money to invest in innovative opportunities, “this one didn’t pan out, unfortunately,” according to Miracle.
Chastenet said that he and Knowlton have a good rapport and a good working relationship with executives at Tree Top (“there was really no issue there,” he said) but reiterated a disconnect when it comes to “decision making.”
“Our key investor there was really of a different build,” Chastenet said. “We’re [of] a start-up mentality. They’re a very large conglomerate with a very different kind of perspective on investments.”
“I think few investors understand that they are going to be putting money into a brand for 10 years without that company possibly ever turning a profit for 10 years,” Chastenet followed. “That is a model that most investors are not comfortable with. In this case, we have to build a brand, spend money on the marketing, and we probably would have needed a lot more funds [and] probably another year and a half of runway to be able to get to a profitable space. You have to have that vision, and not everyone shares that vision.”