In this four part interview with Chris Reed of Reed's Inc., Chris talks about the growth of his company from a small soft drink start-up to becoming one of the top 100 beverage companies in America with products in over 100 supermarkets nationwide. Chris also talks about the process of learning to make ginger ale, and more recently, developing Virgil's new Real Cola. You'll see that for Chris, ginger is not just a tool for cash, it is a passion. Although I interviewed him over the phone, I could almost see the joy in his face each time he talked about his favorite herb.
Can you give us a brief history of Reed's?
I am a chemical engineer by trade. I designed oil and gas refineries. Also, I got into cryogenics with refined natural gas – L & G, they call it. I had what they call not a midlife, but a third life crisis, and got the heck out of it.
I decided that I wanted to start my own company with alternative energy. That was very appealing to me (it still is) and natural food, since I had been studying a lot of herbology out of India. I thought, “We need more ginger in the U.S. diet.” It’s good for digestion and lots of people, especially in natural foods, were eating a lot of what I consider to be indigestible stuff. I said, “Okay, this is a help for digestion and would be really perfect.”
I decided to set up a business around ginger and then I settled in on ginger ale because it was the least gingery ginger product out there and a wonderful vehicle for dosing people up on the herb ginger.
I started off very altruistic, idealistic. I wanted to change the world. I wanted to improve everybody’s health and I thought it would be through soft drinks. I spent two years researching and developing the recipe. I spent time at UCLA, all pre-Internet, because I am an old fart now (I turned fifty this year). This was like ’87, ’88, ’89.
I would go over there and study, use their computers, and go into old recipes for making ginger ale and eventually stumbled upon pre-commercial sodas and found the homebrews people used to make for root beer, ginger ales, and cream sodas back before there was any soft drink industry.
I started brewing up. I was totally fascinated, especially as an herbalist. It made total sense that you would use the whole root and get the whole benefits of the root. I was very passionate about this and we are the first and only commercially brewed soda in the world that makes soda the way sodas were made a couple of hundred years ago, and commercialized for our economy.
I launched and we went to a small brewery in the San Fernando Valley. We brewed up the first batch of Ginger Brew. I went home, labeled the bottles, put them in my Volkswagen Bug, and put them out into the marketplace and we had people reorder within hours.
I didn’t know it would be accepted. I was going to make an authentic drink and those hardcore users would drink it. But, it actually ended up tasting better than the commercial ginger ales. It started out in eleven accounts and by the end of ‘89, I was running batches every month and distributors were asking me if they could have more product and start expanding the stores they were in - putting it their customers’ stores.
I got my first distributor at the end of the year and quickly ran out of production, so I moved production to Boulder. I went to the first natural food industry trade show at the beginning of ’90 and I picked up three new distributors and for the next year and a half, I could not keep up with sales. They were doing all the distribution.
The following year, I picked up a huge brewery in Pennsylvania and my products had already within in a year and a half made it through the whole natural food industry and I was in key accounts across the country - Whole Foods, etc. But during that time, the natural food industry went from two or three billion to 50 billion, today. So, I basically was pulled along.
They said, “Look, you have a very popular product. We are growing. Could you kindly give us more product?” So, I put out more products - acquired Virgil’s Root Beer, got up to six of my Reed’s Ginger Brews, got into ginger candies and ginger ice creams, and bought China Cola, a natural cola company. In ’02 or ’03, it became apparent that all of the category leaders in natural foods were going into mainstream and doing very well, like soy milk from Silk and White Wave out of Boulder. I jumped into that. I said, “I am going to test this out.” I had the number one selling drink in natural foods. So, I decided, “Okay, I’m going to try my hand in mainstream.”
We did really well in California. So, I went public in the end of ’06. At the end of ’07, we went on to NASDAQ. And now, we’re in about one hundred supermarket chains around the country, growing rapidly, and we’re just having a great time.
Were you surprised by the growth of your company?
It’s been a long haul. You’re very surprised when your kids go off to college and you remember them as a baby, but on some level it’s kind of a natural outgrowth of being there for your kids and feeding them and driving them to school and soccer practice for twenty years. I mean, we babysat the company - we showed up and worked very hard. It is a miracle still. There is no guarantee that everything will fall into place.
The products are extraordinary. I’m sure better entrepreneurs would have taken this a lot further than I’ve done so far. People like Darius at Vitamin Water or Seth Goldman at Honest Teas. Both of those guys would have moved this thing further along a lot faster. But, I’m not in a hurry. I’m not in a rush to go retire.
I’m just impressed. When I started this, I was just a weird cat with a weird product and they just did not get what I was doing. Now the whole culture that was pooh-poohing natural, making fun of yoga and meditation, has embraced what was fringe hippy stuff from the ‘60s. On some level, the world has caught up to where we were twenty years ago. That is shocking, surprising, and wonderful.
Has a lot changed since Reed's went public?
Yeah, now I have to clean my T-shirts and I have to tie my hair back into a ponytail. We have been pulling back from the Wall Street part of it. We spent a lot of time dealing with that and we said, “You know, the hell with this.” This is a tough economy and we are having a lot of success within it. We are so focused on the business of it. We just figure that at some point, Wall Street will get what we are doing and see the results there. But, we are very results oriented right now, and it’s not been as much of an impact as people normally think. But I will say this - it’s opened a lot of doors for us. I personally think for myself and my business, this was a better choice for us than other choices, like venture deals or just staying small.
How many employees does Reed's have right now?
I have about thirty-five. We outsource a lot. We have people produce for us. We use a lot of brokerage firms. I think if we had to do everything ourselves, we would be up to seventy or eighty people.
You have two colas, China Cola, and Real Cola. What’s the difference between them?
China Cola has been a staple in natural foods. It’s done well. China Cola was developed by someone else. But with the Real Cola, Whole Foods said, “Give me a cola with Virgil’s, and you’re in.” So, our salespeople kind of beat me up and made me do it. But, we had a lot of fun. We tasted every cola we could find until we blind tasted our stuff and it came out better than anyone else’s by a long shot. That’s when we launched it. The cola aficionados are really loving it.
China Cola has its fans and it has herbs in it which are important, but Virgil’s cola was about making the ultimate cola. Blind taste, hands down, this is it, whereas China Cola is different. I think a lot of people appreciate it over Coke or Pepsi. But in blind taste tests, it wasn’t beating Coke or Pepsi.
It was very hard to beat Coke or Pepsi. They are very good colas. In our blind tests, people really chose them more often than you’d think. There were one or two of the smaller brands that did a good job. There weren’t very many good alternative colas. A lot of people stay away from cola when they go designing a product because it is such a scary territory, but we didn’t really care what Coke or Pepsi would do. We wouldn’t have put it out if we couldn’t have done a better job. I’m quite prepared to leave it to other people if they do a better job at it. There’s only one reason for me to launch something: it’s that it’s just not being properly done.
How has the downturn in the economy affected your sales?
We probably are having trouble with sales because of the economy, but that aspect of our business is blurred by the fact that we have one hundred supermarket chains that we’ve never said hi to. So, our guys are going in there and saying, “Let’s do business.” And these guys are saying, “Well, maybe we can go up five or ten times this year.” Sounds good. So, you take the economy which has probably hit us 25 percent, then you take never doing any marketing properly and finally executing with some top people from Pepsi that we’ve hired, and you get good growth - if not great growth. We are concerned about the economy, but not seeing it reflected in our business.