Recommended: Daina Trout of Health-Ade Kombucha podcast interview

The Pattern Recognition Podcast

The Pattern Recognition podcast ties together insights across world-class venture capitalists, private equity investors, and startup founders as they invest and manage billions of dollars of capital. The host, John Hu, digs into the patterns that senior leaders look for as they move markets and invest in innovation. His March 20 edition is a 25-minute interview with Daina Trout, the co-founder of Health-Ade.

The Health-Ade story

Daina shares the ‘accidental beginnings’ of Health-Ade, where the three founders started cultivating SCOBYs as a hair-loss cure (seriously!). The ‘booch was a liquid by-product of this scheme that happened to be perfect for a timely opening at the Brentwood Farmers Market that landed in their laps.

They came up with the name, the anchor logo and the “Follow Your Gut” tagline in a weekend, but it’s been their “badass” ethos ever since. They are now in 18,000 stores, will sell 36 million bottles in 2019, have 200 employees, and are “the fastest growing brand in beverage”.

Overcoming Production and Logistics Challenges

Daina shares the challenges of growing a business. Here’s what she says:

If you want to grow, and grow fast, expect to be in a state of discomfort and challenge the whole time. You’re always going to be pushing for the next step. With production and logistics, it does have a bit of a chapter feel to it. Meaning you’ll get to the next level and that will suffice for a bit…There’s a part where it hums for a little bit.

In our lives at Health-Ade there’s been probably 12 major hills with manufacturing and getting to that next level in terms of supply chain. Back in the Farmers Market days, when we went from one market to seven markets and we all had out full-time jobs, it wasn’t like we had time. When we were making it for one market I was making it like you make it at home. Brewing tea, putting it in a glass jar, doing it all by hand. I didn’t have a filling machine in my kitchen. And that was OK to do. I was only making 50 cases of kombucha a week. It was still taking a lot of time.

As soon as you go to seven markets and you’re making seven times that, suddenly you can’t do it like that and you’ve got to push to the next phase. You’ve got to say what’s going to make this better. What’s going to make this go faster without compromising the quality. Even in the very beginning stages you’re pushing yourself…

With each phase you just have to make the best decision you can.

She cautions that if she’d been shown, when starting out, the Health-Ade production operation as it is today, it would have been too discouraging. The beginner does not need to know what larger operations look like. They just need to know how to get to the next level. The focus should be on building the business step-by-step without “needing to see the whole staircase.”

Considerations for Growing Manufacturing Capacity

• Bigger spaces need more capital. Health-Ade is about to move to a 6th brewery.
• Go as big as you can with the money you have.
• Location is critical. California is the “single worst place” to build a manufacturing facility. Consider manufacturing elsewhere. Other states might have incentives worth considering.
• Squeeze every dollar to keep prices point down.
• Hire someone with manufacturing experience. Daina’s best hire was someone with brewery experience.

Future plans

Health-Ade wants to make ‘booch accessible to all with flavors that appeal to the mass market. They are also looking to branch out from ‘booch to other health-related products.

The Pattern Recognition podcast is available on iTunes and 10 other podcast platforms. Check it out.