Former Essentia investor acquires controlling stake in kombucha brand Health-Ade

Dive Brief:

  • Beverage investment firm First Bev acquired a controlling stake in kombucha company Health-Ade. Financial terms of the transaction were not disclosed.
  • Jack Belsito, the managing partner of First Bev, will assume the role of CEO at Health-Ade while the co-founders will go on to fill other roles. 
  • Health-Ade has expanded its product lines to take advantage of the better-for-you, functional attributes associated with kombucha. The brand’s growing portfolio includes Health-Ade Pop, a low sugar prebiotic soda; Health-Ade Plus, an adaptogenic kombucha line; and Health-Ade Cocktail Mixers.

Dive Insight:

First Bev made its initial investment in Health-Ade in 2013, and now it is a majority owner of a company that is placed squarely in the red-hot functional beverages market. 

Kombucha presents a top-notch alternative beverage suited to consumers gravitating toward functional drinks aimed at better overall health and wellbeing.

The category initially had an explosive, five-fold increase in sales from 2013 to 2015. During the next five years, the kombucha market is expected to register a 30% compound annual growth rate from $1.74 billion in 2020 to $4.97 billion in 2026, according to data from 360 Research Reports. This is a healthy growth figure for any industry, but also a sign the category is maturing.

Nevertheless, kombucha remains a popular and competitive category that has attracted the attention of large CPG companies. PepsiCo acquired KeVita in 2016, and Molson Coors purchased Clearly Kombucha two years later. 

Health-Ade competes in this space, but it stands apart as an independent company that has cultivated a dedicated fan base thanks to its probiotic content, variety of flavors and use of cold-pressed juice from organic local produce. Health-Ade has grown sales to more than $200 million annually, according to the company. First Bev is likely looking to leverage this competitive advantage to continue the brand’s growth trajectory.

The investment firm has a track record of taking smaller brands in highly competitive categories, freshening them up and then selling them. Most recently, First Bev did this with Essentia water which it sold to Nestlé this spring. While kombucha is not a tired category, First Bev does have the opportunity to polish Health-Ade’s image by aligning it with the Kombucha Brewers International code of practice to bring its products a dose of legitimacy following several lawsuits against the company regarding mislabeling.

Although big beverage corporations have long been interested in kombucha products, Health-Ade took the route of private equity rather than an acquisition by its longtime investor Coca-Cola to bolster its continued expansion.

The Atlanta soda maker has been pruning its brands to focus on those with the fastest growth and widespread appeal. The Atlanta-based beverage giant was one of the early investors in Health-Ade in 2014. Following a $20 million equity investment five years later, Coca-Cola may simply be happy now being a passive investor in the company or maybe Health-Ade was unwilling to deal.

Despite its early interest in the company that made it look like a logical buyer for Health-Ade, co-founder Daina Trout told Business Insider the brand intends to stand alone and become “an ultimate big brand” rather than partnering with a multinational company. In fact, it would appear that Health-Ade is already making strides to becoming a multinational player in its own right.

Belsito told the publication that Health-Ade is interested in expanding internationally and is planning to ramp up its marketing spending. With two of the co-founders now heading up these market expansion efforts, it is a good indication that the Los-Angeles based company is serious about competing with the brands owned by other multinational companies.

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