Jan 22 2014, 9:16am CST | by Forbes
“I was into just making really healthy food, living a pretty relaxed lifestyle, surfing and doing a lot of yoga,” says Eric Ethans, 30. Dressed in a wrinkled black T-shirt and gray jeans, he’s squeezing lemon over a bowl of freshly scooped avocado, reaching up to brush away a stray lock of hair, bleached by the sun and salty with the tang of the Pacific Ocean. “This one,” he says, nodding at his lunch companion Annie Lawless, 26, “really pushed me to make sure I could maybe provide for a family one day.” Lawless laughs, “Noooo. No. You can stop talking now.”
But it’s a nice little story. A surfer dude and self-taught chef teams up with a law-school dropout turned yoga instructor to create one of the fastest-growing organic juice makers ever. In a little more than a year and a half, Suja Juice, tucked away in an office complex among scrubby hills outside of San Diego, has expanded from minimal revenue to $18 million in 2013, its first full year of operation. This year it’s poised to do $50 million in sales. “I don’t think anyone here thought this was going to be as big as it is,” says Ethans
“Or as big as it can be,” pipes up another diner in the conference room. He is Jeff Church, 52, a Harvard Business School grad, private equity veteran and, since May 2012, CEO of Suja. Without him there would be little more than a kitchen operation of store-bought produce, a few juicers and repurposed coconut-water bottles. Suja is the tale of two young entrepreneurs who had the good sense to hire some adult supervision. And, even then, it’s been a wild, seat-of-the-pants journey.
Today Suja makes three lines of juices from fruit, vegetables and exotic ingredients. The Classic retails for $8.99 a bottle; a set of six different flavors (yes, nearly $54) can replace an entire day’s worth of food in a so-called cleanse. The less radical Elements, nine flavors at $4.99 a pop, are snacks or supplements. And the upcoming Essentials, a slight nutritional step-down, will cost $3.99 a bottle. Things have come a long way from Ethans’ original concoctions.
Homeschooled for the first half of high school, Ethans lasted two years at Golden West College before opening a raw-food restaurant in Encinitas, Calif. called Raw Food Guy, while living at a pro surfer’s house nearby. When that flopped he jetted off to Bali, Indonesia, then followed a loop around surf spots in the Pacific for four years–Australia, Fiji, Hawaii–supporting himself by cooking at restaurants and serving as a private chef for vacationers.
He returned to California in 2007 and launched Blissfull, a restaurant and juice-delivery service in San Diego. It closed after six months. “We were undercapitalized,” Ethans says. Another failure, another trip to Bali, another California homecoming. As a permanent fixture at the La Jolla Yoga Center, he met Lawless, a receptionist, yoga teacher and law student at UC San Diego.
A native of Phoenix, Lawless led a more conventional life, studying philosophy at Arizona State, working at a commercial real estate firm and moving to San Diego. Growing up with celiac disease–an inability to process gluten–she began making homemade juices as a teenager to supplement her nutrition. One day in March 2011 she saw Ethans walk into the center with a bottle of homemade green juice.
Soon they began their own ragtag operation, selling homemade juices to fellow yoga students. Lawless would rattle off the ingredients needed for an ideal nutrient-rich blend while Ethans figured out how to make it palatable with odd ingredients like black walnut husk and lavender. The two bought produce at Whole Foods, then poured the juice into empty coconut-water bottles. Soon they had a team of ten part-timers from Ethans’ beach bungalow near La Jolla delivering Igloo coolers full of bottles. “They were literally taking the product into people’s homes and putting it into their refrigerators for them,” Church marvels. “It was probably breaking a ton of laws.”
Ethans and Lawless would never have met Church without James Brennan, a restaurant and nightclub entrepreneur. Even that was a chance encounter. With curly, slicked-back hair Brennan, 40, looks more like a New York City firefighter than a cold-pressed-juice aficionado. A fast-talking transplant from Rockaway, N.Y., he became an avid customer after his pregnant wife began buying the juice in the fall of 2011. When she mentioned how pricey it was, he didn’t blanch: “I was pretty intrigued by something that cost 11 bucks and didn’t have vodka in it.”
He began a ten-day cleanse guided by Ethans, supplementing his diet with the juice for another 30 days. “In two weeks I was totally hooked,” he says. Observing their slapdash operation, he offered to help out. “I said, ‘Look, if you ever want do something, I have a lot of resources. Cooks and kitchens, whatever.’?” (Brennan recently sold a 51% stake of his Enlightened Hospitality Group to Hakkasan.) Ethans and Lawless passed on the offer–until, a month later, exhausted after late nights filling juice bottles and barely eking out a profit, the two reconsidered.
Brennan introduced them to Church, a local entrepreneur and buyout whiz; the two had coinvested in Flank Marketing, a digital marketing startup. A Cleveland native, Church started as an accountant at Ernst & Young, then got an M.B.A. at Harvard. He spent ten years helping to turn around Erico, a Cleveland maker of industrial electrical equipment. His equity stake rocketed in value from $100,000 to a couple million by the time he left in 1998.
Eager to do his own buyout, he moved to L.A. that year and bought Aztec Concrete Accessories, which produces plastic fasteners for concrete construction, for $13 million. When it sold in 2000, investors got a sevenfold return. Lynx Grills he unloaded in 2006, making eight times his initial nut. He had less success with Universal Building Projects, a construction-products company bought in 2006 that filed for bankruptcy four years later.
A self-declared midwestern “meat-and-potatoes” guy, he agreed to meet with Ethans as a mentor but warned he probably wouldn’t like the juice. “I tried it, and it just stopped me in my tracks,” Church recalls. But dealing with Ethans, not so much. As Church peppered him with questions about the business, asking for administrative passwords for his website, Ethans clammed up. “Annie and I were pretty paranoid at that point,” Ethans remembers. Their fears subsided when Church placed a $1,000 order after the meeting.
As the two generations talked regularly, they warmed to each other. Church considered becoming more than a mentor. His wife became a fan, drinking the juice to ease arthritis pain. He and Brennan decided to chip in to a pot that totaled $1.2 million. But they worried about how to ramp up the business.
Cold-pressed juice is prized because no nutrients are lost in the heat of traditional pasteurization. But because it’s raw, it has a shelf life of only 3 to 4 days before microbes begin to spoil it. As a result, Ethans and Lawless never considered selling through distributors, since the product would expire before it reached shelves. But Church discovered high-pressure processing (HPP), a method used by rival BluePrint juice, to kill pathogens without heat. With HPP, plastic juice bottles are placed in a machine, then subjected to water pressure of 87,000 pounds per square inch, five times the pressure found at the bottom of the Mariana Trench. That kills microbes but leaves the nutrients intact and extends shelf life tenfold.
Ethans fretted that the process would ruin the taste. But when the team put some bottles through an HPP facility in Long Beach, Calif. and he noticed no change in the flavor, he initially refused to believe it had even been processed. “I still can’t taste any difference,” he admits. Armed with a scalable model, Church became CEO that May.
Next up: rebranding. The juice needed a new bottle design–and name. After a fruitless monthlong search, Ethans struck up a conversation with a woman behind a booth at a local health food store. She introduced herself as Suja, a Hindi name meaning “long, beautiful life.” He walked out gleeful; a design firm quickly mocked up a label and logo. (Months later, at a trade show, Suja was shocked to see Ethans manning the booth of an upstart juice company sporting her name. In return, he says, she gets free juice for life.)
Now for the distribution. Thanks to his startup Nika Water, a bottled water company that donates profits to clean water initiatives in developing countries, Church knew local buyers at Whole Foods. “Normally you wait four months for a one-minute meeting if you’re lucky,” he says. But a rep at Presence Marketing, which hawks natural food brands to retailers around the country, passed samples along to buyers in the Southern California region. “They went gaga,” says Church. Smitten, Whole Foods placed an order for 2,500 bottles that September.
Fulfilling that order was hardly a snap. Suja commandeered the third-floor ice closet of Brennan’s San Diego nightclub for a makeshift production line. Just before the FDA came by for an inspection, Brennan frantically ordered his own team to paint stairwells and polish the floors, then routed inspectors up a carefully orchestrated route.
“Nightclubs don’t look so great in the daytime,” Church quips. While he and Lawless took care of sales and marketing, Ethans focused on production deadlines, with family members and friends processing hundreds of bottles a day out of the nightclub. Church ended up trucking the bottles himself to the HPP plant in Long Beach, supervising en route via mobile.
Only after the team finished the initial batch for Whole Foods did Church learn that Suja’s label had no varnish to protect it from the water pressure of HPP. The entire shipment had labels that scratched off with the press of a thumb. Whole Foods never noticed, and the problem was fixed by the next shipment. Lawless, who had dropped out of law school the previous spring, didn’t mention her new project to her parents until the bottles were on the shelves at Whole Foods. “I wasn’t about to tell them that I left law school for juice,” she says.
Suja launched in 45 stores in Southern California in the fall of 2012, often selling out within days. “People freaked on it,” says Ethans. The company has since launched nationwide with Whole Foods and now produces 250,000 bottles each week for the food retailer, as well as for Kroger and Costco and Safeway. Nearly half of last year’s sales, $7.5 million, came in the last quarter. The company isn’t yet profitable but claims gross margins of 40% to 50%.
Church has invested $10 million or so in an onsite plant that will soon produce 200,000 bottles a day; a new factory will open later this year in Philadelphia. Fresh fruit and vegetables, sourced from company-owned organic farms, start at one end of the production line and end up as bottled juice on the other end within hours. Chefs trained by the Culinary Institute of America taste each batch, often cutting the produce themselves to test flavor and consistency. This month Suja will install its own HPP machine just down the street.
How to pay for all this? Six months after the seed round in March 2012, Suja raised another $2.5 million from outside investors that September. Last July Boulder Brands, owner of Smart Balance, led a $10 million round. And in December Suja picked up another $17.5 million from Alliance Consumer Growth, a New York City private equity firm, valuing the company at an estimated $150 million. The Suja quartet says it’s still holding 50% to 60% of the equity, roughly divided in four.
Suja produces 20 different juices. Flavors for its original Classic brand include Fuel, with carrot, orange, lemon and turmeric, and 12 Essentials, with celery, cucumber, kale, chard and ginger. Among the nine varieties of Elements, a line made exclusively for Whole Foods, are Mango Fuego (apple, banana, mango, baobab, ginger, chili, lime and camu camu, an Amazon rain forest fruit like cherries) and Green Charge (apple, pineapple, banana, mango, kiwi, kale, spinach, chia seeds and flaxseed, among others). The new line, Elements, has fewer exotic ingredients and is designed for a broader array of palates; you can soon pick it up in chains like Safeway and Costco.
For now Suja is the only major independent making cold-pressed juice. But so do much bigger rivals. Brands like Starbucks’ Evolution Fresh and Hain Celestials’ BluePrint are keeping a close watch on Suja.
“I would have been happy if this thing were a fraction of its size,” says Ethans.
With a history of expanding (and flipping) companies, Church obviously feels otherwise. He insists Suja has a shot at becoming the next Chobani, the independently owned Greek yogurt brand that did $1 billion in sales last year.
Worth remembering that, like Suja, Chobani was a supplier to Whole Foods until it was suddenly cut off last year. The difference is Whole Foods amounted to less than 0.5% of Chobani’s retail sales. Suja, on the other hand, has 30% of its business tied up there.
Source: Forbes Business
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