Longing for the spicy, fragrant chai she discovered while traveling through India, Brook Eddy began concocting her own gingery brew in her home kitchen. What started as a comforting treat became a holiday gift for friends and family and before long an aspiring business.
She began brewing Bhakti Chai for local cafÃ©s in 2006, launched a company website in 2007 and started selling in Whole Foods Market in Boulder, Colo., in 2008. Today, Bhakti is available in natural product stores in 25 states and growing.
Natural Foods Merchandiser: What surprised you most about launching a product?
Brook Eddy: Retail obstacles came up every step of the way. Even though I had data and hundreds of fans requesting my product, it was still a constant push to get retailers to carry it. It was completely different with foodservice. The first place I approached with Bhakti Chai took us and, voilÃ , we were in business.
I think being the first to market a concentrated chai required a lot of education on the retail side. There was a lot of back and forth when deciding which department it should fall under. Because Bhakti is refrigerated, we pushed to have it carried in the dairy case, not on the shelf with the other tea products. That was challenging.
NFM: Why approach retail if you were doing well in the foodservice business?
BE: Mainly because of customer demand. A lot of people wanted to buy directly from me, so I would meet them in parking lots and parks and sell gallons out of my trunk. I was happy to do it because it was extra income, but then it got more complicated. I already had a pretty busy schedule, so I thought, Oh my gosh, I just need a place to send people. At that point, we only had the original flavor, so it seemed pretty easy. I met with the dairy buyer for the Whole Foods on Pearl Street [in Boulder]. I just brought in a mason jar and explained the situation. The buyer knew of the product because the store already served it in its coffee bar. We started out with a single SKU direct-delivered to one store. Over time, Bhakti evolved into new packaging, new flavors and more distribution. We couldn’t handle all of the stores in the area, so we started going through UNFI. It was step-by-step and really bootstrapped.
NFM: How can retailers better support small brands?
BE: I think just by giving us a chance. I realize everyone is so busy, but sometimes that’s used as an excuse for not following up with a brand. Take an extra minute to consider a new product from a company that doesn’t have the wherewithal to send a representative. Shipping refrigerated product is really expensive, so please open it, taste it and try to respond. In the case of Bhakti, we have to communicate a lot with retailers via email and phone.
NFM: How have you funded your business?
BE: When I started, I couldn’t even get a credit card for the business. I was going through a divorce, so it was very touch-and-go even to be able to afford the ingredients. The first two years, I funded Bhakti with the small savings that remained from my full-time job as a development director—then, little by little, with profits from the company. By year three, it was vital that I find funding because I wasn’t able to support the constant growth that Bhakti required. The banks would not consider us, even though we were profitable, so I found local angel investors who believed in the product, mission and opportunity.
In 2007, I raised $150,000, which helped us achieve the triple-digit growth we’ve averaged over the last five years. In 2011, I raised another $210,000 from angel investors, which helped us launch our ready-to-drink line and expand into three Whole Foods regions. Right now I’m doing another round and am looking for $500,000. A couple of investors have reinvested, and we’re trying to use those relationships to connect with new angel investors in the area.
NFM: Is obtaining funding your biggest operational challenge?
BE: Cash flow has been the biggest challenge. With an average of 111 percent growth over the last six years, we’re always trying to keep up. We just secured Whole Foods’ Midwest and Mid-Atlantic regions starting March 1—that’s more than 100 stores. There are six months of upfront costs before we even begin getting paid. UNFI warehouses take at least two months to pay, and by that point you’ve already shipped 10 purchase orders and more than $100,000 worth of product. That will put us back behind the eight ball and needing cash quickly. It’s a timing issue. All of the money we’re raising this round will go toward that. Actually, $750,000 is what we need. I really want to feel comfortable and not like, Oh, we can’t buy any more hats.
NFM: How do you secure investments?
BE: It’s pretty much a full-time job. I talk to board members and ask them to talk to their colleagues and friends. Of the meetings I go to, I’d say 60 percent of people don’t invest. And when you’re running a company and raising kids, there’s definitely this urgency to try to get it done. Now the minimums are higher. At the beginning, we were getting lots of people coming in at the $4,000-to-$7,000 range. Now we have a $25,000 minimum, so we’re looking for the savvier investor who I don’t know personally. It’s a lot of networking.
NFM: What’s your dream situation?
BE: I can’t even imagine because we’ve never run the business with money. The ideal situation would be to have enough capital for the next two years to be able to grow in a really efficient, strong way. Right now we’re still at the point where we’re waiting for the checks to arrive every day. But there is a trust there. We still can make our payroll every month, and even though it’s tight, it all seems to work out in a very close-call way.
NFM: If a Fortune 500 company offered to buy your business, would you consider the offer?
BE: Yes, I would consider any strategic partner that could help the brand expand its geographic reach. People outside of our current distribution ask us every day why they can’t find our products at their local stores. We have to explain that we’re working on it. We’re not just spending money to convince people to buy the product—we’re trying to get it out there so people can continue to experience it. So to partner with a strategic brand that has legs, distribution and the financial ability to push something out quickly would be fantastic. The way we’re going, it will take 20 years to get to the U.K., and there are people who want us there.
NFM: What most helped market your product in the beginning?
BE: With a limited and always-strained cash flow, we had to use word of mouth and sampling in the beginning. Then we began using social media—because it was free—to continue connecting with our customers. Printing shirts after three years was very exciting for us, and it was so fun to give them away and have people squeal with delight.
NFM: Is your ultimate goal to take Bhakti Chai worldwide?
BE: First I’d like to be the leader in our category, but I’d also like to reach people in the U.K. and Sweden. They’ve been to Aspen and Vail, Colo., tried the product and told me they have nothing like it where they live. These are cold-weather climates that would really appreciate a spicy, fresh product. But right now we’re just focused on getting into Chicago.
Year established: 2006
Number of SKUs: 14