RIP: Dr Hops Hard Kombucha, San Leandro, California
Statistics show that 50% of small businesses failure occurs within five years. Last year, we looked at general numbers for the kombucha industry. This is the story behind one brand’s decision to move on.
In this interview, Joshua Rood, founder of the hard kombucha company Dr Hops, discusses the challenges the company faced, including market saturation, declining product quality, and the impact of the pandemic on experiential marketing. He details the company’s national expansion strategy, its reliance on co-packers and contractors, and the financial difficulties that ultimately led to its demise. Rood reflects on the lessons learned and expresses his disillusionment with the beverage industry, while hinting at future endeavors focused on public benefit projects. The interview provides a case study of a hard kombucha company’s struggles in a rapidly evolving market.
Some lessons that can be learned from Dr. Hops’ experience, based on the interview with Joshua:
Decline of the hard kombucha market: The hard kombucha market stopped growing for reasons that are not entirely clear. Rood speculates that the rapid growth of the industry in its early years led to a decline in product quality as companies prioritized scale over quality. As companies rushed to scale up production, they may have compromised quality, which turned off consumers.
The limitations of digital marketing: Rood emphasizes the importance of field marketing, especially for new and unfamiliar products like hard kombucha. Explaining the product in person at events was crucial to their early success. For two-and-a-half years, the pandemic made in-person events like beer festivals and street fairs impossible, severely limiting Dr Hops’ ability to reach new customers. Social media alone, like Instagram, was not sufficient.
The challenges of national expansion: Dr Hops pursued a national strategy from the outset, aiming to be one of the first major brands in the category. This approach involved significant expenses, particularly for field marketing across a wide geographical area. Rood acknowledges that a more localized, organic growth strategy might have been more sustainable.
The importance of distribution: Rood highlights distribution challenges, particularly as the hard kombucha market slowed. Without strong distribution partnerships, it became increasingly difficult for Dr Hops to get their product in front of consumers. “We never really had a problem with consumers, once we reached them. But reaching the consumer is very hard.”
The need for the right product at the right time: Rood reflects that Dr Hops might have been more successful if they had a different product that better aligned with current consumer trends. He cites the example of Beatbox, a sweet, wine-based cocktail brand that has thrived in recent years.
Debt burden: Dr Hops raised millions of dollars in investments to fund its growth, which resulted in a significant debt burden. While much of the early debt was converted into shares, the company still had substantial debt at the time of its closure, which Rood was tasked with managing.
The value of perseverance and adaptation: Despite facing challenges, Rood and his team persisted for several years, exploring new product ideas and marketing approaches. Although they were ultimately unsuccessful in saving the business, their willingness to adapt and try new things is a valuable lesson.
Overall, Dr Hops’ difficulties resulted from a combination of market factors, the impact of the pandemic, strategic decisions, and operational challenges. The company struggled to find a solution for two years but made the difficult decision to close last month, at which point consumers did respond positively to the offer of free beer! And…I was able to add a nice 3-tap kegerator to my home brewing operation at a bargain price.
Podcast
Listen to the podcast to hear Joshua tell the Dr Hops story.
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