Private equity investment fund First Bev has acquired a controlling stake in Health-Ade Kombucha, the company announced today. The move comes alongside an executive shakeup for the California-based brand, as co-founder and CEO Daina Trout moves into the new role of Chief Mission Officer while First Bev managing partner and beverage industry veteran Jack Belsito is moving from investor to CEO.
As part of the transaction, First Bev (formerly known as First Beverage Group) is acquiring the stakes of two other Health-Ade investors, The Coca-Cola Company and CAVU Venture Partners. Meanwhile, investment group Manna Tree Partners has joined in the deal, adding Health-Ade to a portfolio that includes Vital Farms, Urban Remedy and The New Primal. Exact financial terms of the transaction were not disclosed.
According to Trout, bringing on Belsito — a 35-year industry veteran whose history of scaling international brands includes turns as the CEO of both VOSS Water and Snapple — is intended to help take Health-Ade to the next level. The kombucha brand, founded in 2012, is currently available in over 45,000 doors nationwide and is now reporting over $200 million in retail sales annually, according to the company. Belsito’s skill set will lead a new chapter of growth, Trout said, including international expansion, scaling operations and transitioning to a platform brand by exploring possible M&A opportunities to add new brands under the Health-Ade banner. Belsito has also joined Health-Ade’s board of directors.
In the newly created role of Chief Mission Officer, Trout said her responsibilities will be to continue to drive the brand positioning with a focus on innovation and creative elements. She will work alongside Belsito, with an aim to develop and maintain Health-Ade’s corporate identity as it scales.
“Jack and I are completely lockstep with our vision and I think that’s what really triggered this whole deal — because we were both on the same page of where we wanted to take this thing,” Trout told BevNET. “If you really want to change how consumers see you or really want to be a meaningful, inspirational brand to consumers, that takes a lot of effort and work and that’s what I plan on doing. At the same time, to continue to grow double digits, we need to be in channels that kombucha has never been [in] before and countries that kombucha has never been [in] before, and that’s where Jack will put his effort.”
Health-Ade was among the first significant investments made by First Bev after the fund formed in 2013. According to Trout, the firm’s decision to acquire a controlling stake came earlier this year following a series of sit-down discussions about Health-Ade’s long term business plans. She noted that, in response to the pandemic, many beverage strategics have retracted from M&A to focus on their core portfolios and in-house innovation, making now “the perfect time to buckle down and focus” on scaling and defining the company as “a true champion for gut health.”
CAVU, a firm run by Rohan Oza and Brett Thomas, invested $7 million in Health-Ade in 2016. Trout praised the firm as a “great partner” but noted that First Bev’s plan to grow the brand over the next five to 10 years was not in line with CAVU’s vision for the company, prompting the sale of its shares.
“CAVU has made a really good business out of supporting brands just like ours in their beginning,” Trout said. “They’ve been involved for five years and I think it made sense from a timing standpoint and from a return on investment standpoint for them to move on and continue to do this with other companies. I think when First Bev shared their excitement and desire to ante up for the next three, four, five or 10 years — whatever it’s going to take to really bring this brand to the Nike level for beverage — that wasn’t [CAVU’s] mission and so it was a handshake where they said this is a natural, organic time for us to make this change.”
First Bev will also acquire the stake owned by The Coca-Cola Company, which reportedly invested $20 million into Health-Ade in 2019. Amid the pandemic, Coke has wound down its Venturing & Emerging Brands unit (VEB) to focus on refining its current portfolio. Though Coke itself is still invested in First Bev, therefore retaining an indirect stake in Health-Ade, Trout said it was another example of a mutual parting that made sense for both companies.
Ultimately, Trout said the decision to move ahead with First Bev and Manna Tree as its key investment partners allows Health-Ade to simplify its cap table and craft strategy with a focused group of investors who are all in agreement about the future of the brand.
Over the past year, Health-Ade has aimed to expand its consumer base beyond the core kombucha drinker with a number of new innovations, including prebiotic soda Health-Ade Pop, functional line Health-Ade Plus and a line of kombucha-based cocktail mixers. As well, the company this year rebranded its core line with new packaging intended to build around the broader message of happiness and gut health. As the company moves ahead into this next stage, Trout said that owning “gut health” will be key to expanding Health-Ade into the platform brand it aims to be.
The transition also comes as the entire kombucha category has reached something of a crossroads; although kombucha has breached mainstream retail channels, its previously rapid growth has broadly plateaued, even as household penetration remains low. Health-Ade is also not the only company drafting experienced operators to seed the next stage of growth; Last month, Brew Dr founder Matt Thomas stepped aside as CEO, with the company bringing in General Mills vet Dan Stangler to act as chief executive.
Health-Ade is profitable and continues to grow double-digits year-over-year, Trout said. But while it has remained among the best performing brands in kombucha regardless of category challenges, Trout said she is now thinking beyond this limited category definition.
“How the category performs is almost not in my vision, because it’s about health and wellness, it’s about gut health, and kombucha obviously is going to play a very important role in that,” she said. “The health and wellness set has expanded a lot, so I think we’re kind of making a mistake by looking at kombucha as its own category. To me it’s part of health and wellness food and beverages, this functional set which is on fire.”
While Health-Ade currently has over 150 full time employees and is likely to expand its team in the near future to support this level of scale, Trout, who started the brand with husband Justin Trout and friend Vanessa Dew, said that for now no other executive shake-ups are planned.
“I think the only shift is going to be me and Jack,” Trout said. “And mine, I really see it as a promotion. So I’m pretty excited to elevate to the Chief Mission Officer role. Honestly, it feels so exciting and I can’t wait to start Monday morning.”