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How billionaire GT Dave brewed a fortune from kombucha

George Thomas Dave convinced America to love a tangy, tart, fermented beverage from Asia called kombucha — and it made him a billionaire. His greater challenge: surviving the rush of competitors flooding a market he once had all to himself.

Before entering his kingdom, George Thomas Dave dons his crown — a blue hairnet pulled over a fashionably short buzz cut. He pushes open the doors of his year-old factory, releasing a gust of cold air and the scent of vinegar. The interior is all steel and ­fluorescence, light glinting off Dave’s diamond-sheathed Rolex, the metallic studs on his dress shoes and the platinum rings on his forefinger, ring finger and little finger. 

Winding his way through the place, he watches a batch of his bestselling organic ginger kombucha get pumped into 16-ounce glass bottles, 100 at time. Each has a white label touting the fermented tea’s ingredients (electrolytes, probiotics, enzymes) and purported benefits (reawaken, rebirth, renewal).

Dave reaches the end of the 200-foot bottling line, where four robotic arms fill, stack and move cases of kombucha. He spent $40-million building in Vernon, California, 5 miles south of Los Angeles, allowing him to produce more than one million gallons a year.

“A lot of companies our size shy away from risk. I think that’s what kills the entrepreneurial spirit.”

GT Dave – kombucha billionaire

“This is the next level for us,” says the impeccably cheekboned Dave, known as “GT” since before he began brewing kombucha at his mother’s kitchen table.

Dave, 41, takes the opportunity to make a point, one very important to him and his GT’s Living Foods, a business with an estimated $275-million in sales: this new, 260,000-square-foot (24,000m2) factory doesn’t mean he’s changing how his kombucha is made.

Unlike many of his rivals, he says, he makes his authentically, and it’ll stay like that: “From day one, I tried to emulate a homemade process.”

Dave lets nature do much of the work, as he has since the beginning: fermenting a blend of black and green teas in small batches of 5-gallon jars for a month. It is not pasteurized, though doing so would make the beverage less perishable and easier to ship.

And Dave does not skim away the mix of yeast and bacteria that does the fermenting, leaving small amounts floating gelatinously in the drink. “This is what the customer wants,” he insists.

Dave’s absolute certainty that he knows best — and that GT’s Living Food should change little about its hit product — has played out in a number of other ways.

He has rebuffed numerous acquisition offers, taken no outside funding and remains the sole owner of GT’s, a firm conservatively worth over $900-million. His stake in GT’s, plus homes in Beverly Hills, 8 acres in Kauai and a growing contemporary art collection, makes Dave a billionaire.

(Here, he’d like the record to be clear. “I didn’t start making kombucha,” a drink with humble origins in the Far East, likely among pilgrims and travelers on the Silk Road, “because I wanted to be rich.”) 

“He has been able to scale his company while retaining his craft ethos and independent spirit,” says Greg Steltenpohl, an admirer of Dave’s and a founder of the Odwalla juice company.

Steltenpohl knows what it’s like to give up independence, chafing at the chains wrapped around him by public shareholders after Odwalla’s 1993 IPO. He long ago left Odwalla and has a new nut-milk startup, Califia Farms. Dave has “the freedom to still be 100% himself,” Steltenpohl says. “I can’t point to a single other beverage entrepreneur who has done that.”

A less sure-minded person in Dave’s position might be waffling on his convictions right now, for his kingdom is increasingly under siege.

He was the first to put kombucha on store shelves, in the late 1990s, and GT’s is still the biggest manufacturer, owning 40% of the US market. His $3 to $4 bottles can be found at retailers like Walmart, Costco and Kroger. But the shelves are getting crowded.

There are more than 350 kombucha makers in the world (most in the US), and they’ve slurped up roughly $340-million in funding from venture capital, private equity and big conglomerates like Coca-Cola and PepsiCo, which paid $260-million for GT’s biggest rival, Kevita, three years ago

These well-funded competitors are eating away at Dave’s first-mover advantage, putting him on his heels and prompting him to fire off defensive potshots.

With the sanctimoniousness of a perturbed monk, he decries competitors who have “bastardized” kombucha. He turns his ire on fast-growing rival Health-Ade, which now has $50-million in sales. “You know what they are? . . . Cherry-berry. Tropical punch. . . . [They] make it basic, make it mainstream.”

Health-Ade sells its drink in medicinal-looking yellow-tinted bottles, which draw even more of his disdain. “If your claim to fame is that you’re in amber bottles, or you’re three cool hipsters behind this product, and that’s it? Your days are numbered, in my opinion.”

Dave makes no secret what he considers his company’s greatest asset: “Our saving grace is that at the end of the day this company truly is an extension of me.”

The first time Dave tried kombucha, at 13, he nearly spat it out. He was at his family’s Bel Air home, and the tea was one of the first batches made by his parents.

The Daves were the type of family who vacationed at Indian ashrams, and they’d received a starter lump of bacteria and yeast from a vegan friend, who in turn had gotten it from a Buddhist nun.

“I thought it smelled weird. I thought it tasted weird. I thought it looked weird,” Dave recalls. The living cultures of yeast and bacteria suspended in the drink — made when they feed off carbohydrates, usually from the fruit juices often added to ­flavor kombucha — were particularly unappetising.

His perspective changed the next year when his mother, ­Laraine, received a sudden cancer diagnosis. He recalls the grim time in their lives unfolding like this: Laraine’s initial prognosis was bad, a growing golf-ball-size tumor in her breast. Doctors scheduled a bone marrow transplant before additional tests came back.

When the doctors finally got them, they were astonished. Despite their initial guess, the tumour was years old but dormant.

They asked if she had been eating anything unusual. No, she said. But she had drunk homemade kombucha every day for the past two years. The doctors raised their eyebrows and, Dave says, deemed her condition “miraculous”.

That prompted him to research kombucha at a local library. Its origins are mysterious, no one quite sure exactly where it began.

What’s clear is that ancient Asian warriors consumed it as an “immortality tonic” to acquire great strength before a battle. It became a peasant’s drink in Russia and parts of eastern Europe, and in the 20th century, it became a supposed immune-booster for HIV patients during the AIDS epidemic. 

Kombucha captured Dave’s interest at an opportune moment. Almost 16, he was failing his classes at Beverly Hills High and had fallen in with a crowd that had “lots of money, lots of drugs.” He needed an exit.

“You quickly can get swept up in it. I certainly did, until I caught myself.” He passed his GED and left school early, thinking he would start fresh at a city college. Then it dawned on him to make kombucha instead…..

Forbes.com: Read the full article here [long read]

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