Land Grab in Kombucha Category

With leading category retailer Whole Foods requiring its kombucha suppliers to go back to the drawing board to try to more carefully monitor the level of alcohol in the fermented product as it leaves the factory and sits on the shelf, it looks like many of the producers are trying to rebalance the category in their favor and eat away at the significant lead of erstwhile market leader GTs Kombucha.

Owned by Millennium Products Inc., GTs and Synergy are believed to have sales that have gone well north of $40 million in the past year. GTs was just one of several suppliers forced to pull their product and submit proof that their products were below the “near beer” ceiling of .5 percent alcohol – enough to keep it below the threshold of regulation by the Federal Alcohol and Tobacco Tax and Trade Bureau (TTB), which sets policy for alcoholic beverages.

But as with the NASCAR race that operates under a caution flag, producers have gone back to the factory and are racing to retrofit their production processes to meet Whole Foods’ – and potentially the TTB’s – standards, with the idea that the first few back online will have the chance to eat into GTs lead. The kombucha category is considered to be a potential natural foods gold mine, and larger companies like Honest Tea and Hain Celestial have rushed in to try to capture what is believed to be one of Whole Foods’ best selling product classes.

“The expectation is that whoever can get to market quickest with a mass product that’s under the (0.5 percent alcoholic content ceiling) will take the category, said Will Savitri, the owner of Greenfield, Mass.-based Katalyst Kombucha.

Savitri added that many of the smaller kombucha marketers have been in conversation to try to form an advisory group to promote best practices in the manufacture and brewing of the fermented tea product in an effort to keep in compliance with the wishes of Whole Foods and its largest distributor, UNFI.

“I’ve called just about every company, and the only one who didn’t get back to me was GT,” Savitri said.

GT Dave, who owns Millennium, did not return calls for this story.

Katalyst has had some success getting kegs of its product back into Whole Foods – the on-tap products tend to ferment less when they are under the pressure inside a keg, which has little oxygen present to keep the brewing process going. According to Savitri, several other keg-based companies are also almost back to normal when it comes to getting product out.

And while having tap handles online might make fans of unprocessed kombucha happy, other companies from the pasteurized side of the category, including Carpe Diem and Kombucha Wonder Drink, are working hard to remind consumers that they are consistently under the .5 percent level because of the additional processing step. By killing the live bacteria for which most kombucha is known, processors also kill the alcohol production.

Meanwhile, the entire industry is awaiting a ruling from the TTB, which has been investigating the industry since it was referred by investigators in Maine, who found several brands of live kombucha, including GTs, that had alcohol content well over the .5 percent cap in the Portland, ME Whole Foods about six months ago.

That investigation was kicked off during a routine labeling audit by a consumer protection inspector scanning labels to make sure they were in compliance with the state’s bottle bill, of all things.

“I’m out there scanning items, and these things are pretty much bubbling over,” said Randy Trahan, who works for the Maine Department of Agriculture, Farming and Rural Resources. “I guess I opened up the Pandora’s box.”