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Co-founder: 'The deal we have done means we retain control'

Suja CEO on the Coca-Cola deal: 'It’s been a wild wild ride.. three years ago, we hadn’t even sold our first bottle!'

By Elaine Watson+

24-Aug-2015
Last updated on 24-Aug-2015 at 16:33 GMT2015-08-24T16:33:14Z

Suja CEO Jeff Church: 'Three years ago, we hadn’t even sold our first bottle'
Suja CEO Jeff Church: 'Three years ago, we hadn’t even sold our first bottle'

While news that Coca-Cola and Goldman Sachs’ merchant banking division have invested in organic juice brand Suja probably didn’t shock anyone that’s been tracking its jaw-dropping growth trajectory, it’s hard to believe that Suja is still less than three years old, CEO Jeff Church tells FoodNavigator-USA.

“Three years ago, we hadn’t even sold our first bottle.”

Pretty much right out of the gate, Suja’s progress has been nothing short of meteoric, generating revenues of $18m in 2013, more than $40m in 2014, and a forecasted $70-80m in 2015.

“It’s been a wild, wild ride, almost like a dream, but also the hardest work I’ve ever done,” said Church, who co-founded Suja Life with Annie Lawless, Eric Ethans and James Brennan in 2012.

 “As for whether I'd ever thought we’d be sitting here talking about doing a deal with Coca-Cola… what’s happened has been far beyond my expectations. I can still remember packing boxes in our garage and driving from San Diego to Long Beach and back every day with the products.”

To put things into perspective, Honest Tea had been plugging away for a decade before it hit Coca-Cola’s radar in 2008, while ZICO had been slugging it out for five years in the burgeoning coconut water market before founder Mark Rampolla sold a minority stake to Coke in 2009 (Coca-Cola is now the majority owner in both businesses).

We just felt like if we don’t do it, someone else will

But why get into bed with Coca-Cola, or indeed any big CPG company, if you can grow at this pace on your own (Suja products are already in more than 13,000 locations)? Wasn’t Suja – which has secured significant amounts of cash from investors including Boulder Brands Investment Group and Alliance Consumer Growth over the past 18 months - doing very nicely under its own steam?

“Yes, we would have kept on growing without Coca-Cola,” said Church.

“But late last year, when we saw the velocities that we were doing in conventional as well as natural grocery channels, we realized that we had a proof of concept and there was just this huge market opportunity, and then it becomes a race between you and the competition to get on those shelves first, so we thought we had to really push and lean in hard, because if you don’t do it, someone else will.

“So we started talking to a handful of world-class strategics.”

The premium juice category – with brands like Odwalla, Bolthouse Farms and Naked - is growing at “around 6% a year from what we can tell”, he said, whereas the organic, super-premium HPP juice market- in which Suja operates - is growing at more than 100% a year, but is still a tiny part of the overall juice market by volume, highlighting a significant opportunity:

“Conventional grocers see that organic and non-GMO products are growing at such a rate now and they need to cater to consumers that want to buy them.”

Suja has three core ranges: Suja Classic for daily nutrients at $7.99; Suja Elements juices, smoothies & teas with a purpose - exclusive to Whole Foods at $4.99; and Suja Essentials, a more affordable option promising vital nutrients, amino acids, omegas & antioxidants at $3.99.

The deal we have done means that we retain control

But what gave Coca-Cola the edge vs other suitors?

First, said Church, it was offering access to the Odwalla chilled direct store delivery (DSD) network, which he reckons will help Suja increase the number of locations it reaches by 50% over the next year, taking Suja into new venues from college campuses and ‘up and down the street’ locations it doesn’t currently reach, to big grocery chains that prefer the DSD model, such as Safeway.

But the terms of the deal with Coca-Cola were also more in line with Suja's strategy, he said: “Some [suitors] wanted a whole buyout, whereas the deal we have done means we retain control [four board seats out of seven].

"With Coke, our business strategies just aligned. We felt that the deal was a win-win for both of us, and would help us grow without affecting our core commitments to organic and non-GMO, minimal processing, HPP technology and transparency in labeling; or our speed to market, or innovation.

“When Starbucks bought Evolution Fresh and Hain bought BluePrint it seemed like for a period of time, things happened somewhat slowly because they were integrating them into the company, but that’s not what we’re doing.”

But picking the right partner was also about “chemistry”, he said. “The people we’ve been working with at Coke [former Minute Maid president Michael Saint John has been a key contact] are smart, humble, down to earth, and hard-working. They have integrity and they treat us like partners.”

Anything that can improve margins can help us on our mission to democratize organics

Getting into bed with the world’s largest soft drinks company also offers procurement benefits, he argued.

The benefits are not really about sourcing organic fruits and vegetables [Odwalla and Minute Maid are not organic], but more about bottle costs, caps, labels… even things like hotel rates, anything that can improve margins can help us on our mission to democratize organics.”

The cash injection will also enable Suja to invest in a new production facility in Oceanside, CA, which will give it the capacity to meet demand, he says.

Given that Suja is a national brand and already has facilities in California, however, wouldn’t it make more sense to have a second site on the east coast?

Technically, yes, says Church, as the firm is currently incurring freight costs by trucking products across the country from its facilities in San Diego.

However, the fact remains that the “majority of organic produce is grown in California”, and it’s more important to be close to the source of raw materials than the end consumer, he said.

Suja juices are made by cold-pressing fresh organic fruits and vegetables to squeeze out the juice, bottling it, and then pasteurizing it via HPP, which involves putting the bottles into a high-pressure chamber that is flooded with cold water and pressurized (thus the ‘cold-pressured’ moniker).

As we grow in scale, it will lower the cost per unit

Much has been made about the hefty $8.99 price tag originally attached to Suja products, which are made by cold-pressing fresh organic fruits and vegetables, bottling the juice, and then pasteurizing it via HPP, which involves putting the bottles into a high-pressure chamber that is flooded with cold water and pressurized (thus the ‘cold-pressured’ moniker).

However, a new three-tiered pricing architecture has changed perceptions that cold pressured juice is just for wealthy hipsters, with Suja Classic 16oz bottles now retailing at $7.99; Suja Elements, a 12oz line exclusive to Whole Foods that launched in late 2013 retailing at $4.99; and the Suja Essentials 12oz line - launched in July 2014 - retailing at $3.99, he said.

“We took a significant margin reduction in order to offer an organic product like this at $3.99, but as we grow in scale, it will lower the cost per unit and we can ensure that we can lower the gap between organic and non-organic at a minimum to make our products accessible.”

Now we’ve got Essentials, we’re taking Classic even more upscale

But if shoppers come to expect to pay $3.99 for a top notch HPP juice, will they carry on paying $7.99 for Suja Classic products?

“We always knew there was a relatively limited market for $7.99 or $8.99 products,” said Church, “so now we’ve got Essentials, we’re taking Classic even more upscale into more leading edge, on-trend ingredients like charcoal for example, that wouldn’t be right for mainstream USA.”

Jeff Church: "Conventional grocers see that organic and non-GMO products are growing at such a rate now and they need to cater to consumers that want to buy them."

 The deal

The parties have not disclosed the terms of the deal, and Suja will only say that Coke and Goldman Sachs have each made “minority investments” in the business, but FoodNavigator-USA understands that Coke has invested $90m for a 30% stake (valuing the company at $300m), while Goldman Sachs’ merchant banking division has acquired just under 20%, leaving the founders with around 25%, early investor Boulder Brands Investment Group with around 5%, and employees and other early investors with the remaining 20%.

While neither party has commented on the endgame, it is expected that there will be a pathway to ownership for Coke after three years – as has been the case with other brands in which it has taken minority stakes such as Zico and Honest Tea.

Read more about the deal HERE .

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