A lot of college kids may start seeing things after a drink or two, but when David Karr saw his Cal Poly San Luis Obispo classmate Alex Pryor drinking a green infusion out of a gourd, Karr saw the future, he says. Karr credits the brew, yerba mate (prounounced "mah-tay"), popular in Pryor's native Argentina but relatively unknown in the States, for instantly relieving his allergies. "I could breathe within minutes," he says. After a few months of drinking a daily mate with Pryor, Karr ditched his own computer business to work on Pryor's venture, which sold mate as a way to encourage the native forest people of Argentina to sustainably live off their land. "Everyone thought I was completely nuts," says Karr. "But I knew it would eventually catch on."
Thirteen years later, the drink, which outsells coffee 7–1 in Argentina, is beginning to catch on in the U.S., mostly thanks to the grassroots efforts of Pryor and Karr's company, Guayakí. Karr, his brother, and another business partner crisscrossed the U.S. five times in VW vans and RVs painted to look like a rainforest to preach the wonders of the South American beverage: Natural energy without jitters! Overall vitality! Clarity of mind! [Editor's note: The FDA has not verified these claims, and studies have shown conflicting results.] They showed up at stores without appointments and passed out sample sips. Their "mate lattes," made with soy milk and honey were a hit. In Hollywood, they were even invited to serve their concoctions on a movie set.
Guayakí has every right to feel happy about the results: Revenues have been growing by 30 percent annually, and the company anticipates sales of $10 million this year. Its various products—loose-leaf tea, tea bags, energy shots, and its biggest seller, ready-to-drink bottled mate—are sold in thousands of stores, including Whole Foods and Trader Joe's, as well as supermarkets such as Kroger, Wegmans, and Vons. The company's "market restoration model" is working: By selling 180 tons of shade-grown, fair-trade, organic yerba mate, Guayakí has helped steward and restore 17,000 acres of rainforest.
Still, many Americans haven't heard of the drink. Founders Karr and Pryor, both 38, are determined to take yerba mate from the natural-food niche into the mainstream market.
Karr asks NEWSWEEK's Small Business Panel:"We are in 6,000 stores, but there are 20,000–30,000 grocery stores and 40,000 convenience stores we can still go into. But we want them to be the right doors at the right time. We've only accepted money from angels and friends and family, and from a socially responsible venture fund. We are run by a bunch of best friends—that's the most unique thing about our company. How do we capitalize our business to achieve scale without committing to an exit strategy? What are the most effective media for natural brands going into mainstream?
"For now, we dominate in natural-foods stores. But as we go mainstream, we are going in to territory with no feet on the street or dollars. And Honest Tea [owned by Coke] recently announced a yerba mate drink, which sells for less than ours. We are the first organic fair-trade mate drink, the only one with a can, but we expect it won't be long before others have a canned yerba-mate product. What are the most effective strategies for maintaining category leadership as the competition enters the scene?"
I never took financing from anyone. I never sold until I was ready to sell almost all of it. I didn't want an infusion of cash that was not from the consumer. I had to listen to the consumer. I would take cash from the business and plow it in and grow.
Paid media is expensive. We didn't do it at Burt's Bees. We did all grassroots marketing. [Burt's Bees did do paid media after the company was sold.] Guayakí should continue the grassroots campaign, which is a lot cheaper. Don't give up on that!
They need to do something to go viral, like making video for YouTube, something really memorable. People think this is tea, but they are not even sure. There's some education to be done, and it should be fun and goofy and off-the-wall. It's easy to make a clip for YouTube, and it's cheap to test it. If it works, then go to radio or TV.
Guayakí has a counterculture personality. They should go to venues that are cultish, like green festivals and rock concerts. Like Bonnaroo! People are there because they are cool and know what's happening. Guayakí is also the first. They have to make everyone else look like a copycat. Coke says it's the real thing; start a viral campaign that says, "We are the real thing." Coke will be a "me too." Start working that position now.
At Burt's Bees, we had a really clear picture of who our competitor was. We went head to head with Estée Lauder, a multibillion-dollar company, and we had that in mind all the time. It made us take an inventory of what we were good at. They had beautiful, flawless women in pages and pages and pages of beauty magazines. They were so, so, so strong! There was no way to compete at any level. So we took a hippie, bearded hermit from the north woods of Maine, who was not even that attractive, and slapped his picture on every box of skin cream we sold. Our point was that beauty was more than skin deep. There's beauty of the skin, environmental beauty, inside beauty. Estée Lauder looked a bit shallow. We looked deeper.
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