It’s a drink that won’t appeal to everyone, and that might be part of its appeal. Deep Eddy Sweet Tea Vodka is Clayton Christopher and Chad Auler’s latest venture. Christopher, who started Sweet Leaf Tea and grew it to a national business, intends to work the same magic with his tea-infused vodka named after the oldest swimming pool in Austin: Deep Eddy.
Deep Eddy is a bootstrap operation. Christopher and Auler absorbed the start-up costs for the company, although they recently raised a Series A round of funding from angel investors. Christopher started Sweet Leaf single-handedly in 1998, working from his home in Beaumont, brewing the tea in pillowcases and steeping it in 25-gallon crawfish pots. His start-up capital consisted of $15,000 he put up himself, and six months later, his father invested another $15,000.
“There were many times I wanted to quit,” he said. “It was seven days a week, it was 80 to 100-ish hours. I slept at the office a lot, and all I did was work, work, work. I did not take a vacation for the first four years.”
One of the driving forces was the debt he accumulated by buying trucks and better equipment for the fledgling company. Fear of bankruptcy forced him to put in those long hours. “I knew I could not ever give up, because failure simply wasn’t an option,” he said.
Getting distribution for Sweet Leaf was a challenge. “We had a tough time landing distributors and getting our product to market,” said Christopher. “It was challenging. A lot of that was because we didn’t have any relationships in the marketplace.”
Success finally came when the Whole Foods chain agreed to stock Sweet Leaf Tea. “We couldn’t get a buyer to return our phone calls,” he said, “so we found the head of their distribution center in Austin and got a meeting with him. We begged for a chance, and we told them how great the product was. He gave us a chance – he was able to back door the product in, and within eight months we became the number one selling tea in Whole Foods Southwest Division by a long shot.”
Christopher had targeted Whole Foods for Sweet Leaf from the beginning. The environment at the upscale grocery chain is different than at most supermarkets, and he believes that consumers are looking for a different experience when they shop at Whole Foods. Shoppers looking for an experience are less price sensitive, he says, and they take their time looking over the product, reading the labels.
“We would do demos in those stores to introduce the product, and we would create an event,” he recounted.” We’d have balloons, we’d have Astroturf so it feels like a backyard when they’re walking up to you – we wanted to create an experience. That’s largely the success of Sweet Leaf – really creating that love affair with consumers.”
Now, he’s no longer worried about getting his product on the shelf. He says his main challenge is getting it off the shelf: “That’s where the magic happens in creating that love affair with the consumer, and that’s so much fun. That’s what I love doing – making sure when they discover your product for the first time, they discover it in a place that’s a fun environment.”
For Christopher, selling a product starts with creating a buzz. He wants consumers to first run across his products in a fun environment. “When they’re at the ACL (Austin City Limits Music Festival), Lollapalooza, and music venues, and they’re thirsty and dancing and they get an ice cold Sweet Leaf Tea, and somebody puts a sticker on them, spots them a high five and there are balloons all around, they fall in love with our brand.”
For that reason, he avoided Wal-Mart. “You don’t create a love affair with the consumer in Wal-Mart,” he said. “When they go in there, all they’re thinking about is price, price, price.”
Christopher believes the love affair is spurred by the product’s authenticity. “Consumers,” he said, “even if they have never been to your website but take the time to look under the cap of Sweet Leaf where all of the sayings were either by my grandmother, or somebody’s grandmother who worked at Sweet Leaf, know the difference. It was Grandma’s sayings we’d put under there – it was my grandmother’s recipe. You can’t fake authenticity, and your consumers know it.”
Packaging also gets a lot of attention. “It has to jump off the shelf,” he says. “You want to create the most successful brand – brands have a personality, it’s not just a product on a shelf. A brand should be a living organism, it should be living and extremely dynamic.” The product, the packaging, the website — all the “touch points” — have to work closely together to build the brand’s personality.
Now, Nestle is on its way to acquiring the entire company. Over the next 18 months, Nestle has the option to purchase Sweet Leaf for close to $200 million.
But Christopher, who describes himself as a “serial entrepreneur,” is already refocusing on Deep Eddy vodka, among other things. After phased launches in Austin, Houston, and Dallas, he’s ready to go national in 2011. He’s using lessons learned from the start up of Sweet Leaf to get Deep Eddy out to consumers much faster.
“We hired the Vice President of Sales for the spirit division of Republic, the largest liquor distributor in Texas, and immediately we had a ‘yes’ from every liquor store chain in Texas before we made our first bottle,” he said. “We’ll do more in revenue with Deep Eddy in the first year than we did in the first four years of Sweet Leaf. We’ll do seven figures in our first year.
“There are six national competitors, and we’re now the number two brand in Texas out of seven brands. In South Texas – Austin and San Antonio – we’re the number one brand by one hundred percent, and we outsell Firefly two to one. Now we’re going to move outside of Texas, but we first want to make sure we establish Texas.”
Christopher bootstrapped Deep Eddy, but brought in outside capital much faster than he did at Sweet Leaf. The key, he says, is removing risk for investors: “We’re now at the point where you can go to your local liquor store and buy the product. It’s selling well. A lot of the risk is now gone.” What’s risky, he says, is to try to raise money with just an idea, especially in a field where the entrepreneur has no experience. “Once you get the product on the shelf, and it’s starting to sell – even if you’re only in two stores – then you’ll have a story to sell,” he said. “It’s so much easier to raise money after all your assumptions are based off of fact. Most startups don’t do enough proving out the assumptions before they raise money.”
He’s not done yet. Christopher and Scott Jensen, the CEO of Stubb’s Barbecue in Austin, recently funded Rhythm Superfoods, a line of snack foods. But not just any snack foods – their lineup includes sweet potato chips, kale chips, and kale and flaxseed crackers. “Americans forget that by using better and higher quality ingredients, you can have a great tasting product,” Christopher said. “We’re so used to all these processed foods because they’re cheaper, but they don’t taste as good. Consumers may want healthy products but they still vote with their palate.”
Links to accompanying Bootstrapping stories: