This Portland-based company sells tea, kombucha, and distilled spirits. Turns out, all three are connected and helping Brew Dr. Kombucha walk the path to zero waste.
“Sustainability is a way of life here in Portland, but it also just makes sense,” says Matt Thomas, CEO and founder of Brew Dr. “The distillery is a fun side project that makes Fridays fun. But more seriously, it also allows us to be more relevant in a different drink category and put some waste to use.”
The multi-million dollar kombucha brand, with an estimated sales of $30 million, has simple Oregonian roots. Thomas came to kombucha through tea. As a recent college graduate from the University of Oregon, he realized that he was not keen to work in a structured 9 to 5 job. So he opened a tea house in the early 2000s; everyone told him to serve coffee as well, but Thomas was more adamant on exploring the finer elements of loose leaf tea. He built the first tea house himself, putting his carpentry and electrical skills to the test. Raising $45,000 from friends and family, he put together his first business venture, Townshend’s Tea Company: they sold organic, loose-leaf teas from around the world, introducing customers to flavors that were lesser-known. From his tea-drinking customers, he learned about kombucha, a product offering that would scale Thomas’ business significantly and make him one of the top 3 kombucha manufacturers in the US.
Kombucha, the wonky, slightly sour drink that came of age in the 1970s, has made a massive comeback as Americans look for more healthy options, moving away from soda, sugary drinks, and even alcohol. In 2018, kombucha sales clocked in at nearly $1 billion, according to Nielsen.
In 2008, Thomas started making kombucha in the basement of his two tea houses: it began as a fun experiment but developed into a serious side hustle with Thomas and his tea staff producing 400 five-gallon buckets of kombucha, which were being hand packaged and labeled. In the past decade, he’s scaled Brew Dr. Kombucha, starting with a small local producer loan from Whole Foods and accruing significant debt on his credit cards, he jokes.
As kombucha has become more popular, it’s also faced a litany of lawsuits challenging those claims about it being a healthy drink.
Part of the problem is that the fizzy fermented homemade concoction is being commercialized and bought out by corporate food giants: Pepsico bought KeVita, Coca-Cola invested in Health-Ade. Both of the brands have been hit with lawsuits for underreporting the amount of sugar in their kombuchas and selling it as a non-alcoholic drink. The FDA guidelines define “non-alcoholic” as less than 0.5% alcohol content; kombucha can have up to 2 percent alcohol if left to ferment on its own. Whole Foods and Health-Ade even came to a $4 million settlement in March, offering to compensate customers for Health-Ade bottles purchased at their stores.
But Thomas saw this coming: “When you’re dealing with kombucha, you’re dealing with a live product. So the alcohol content can increase as the product continues to ferment. And on the other hand, kombuchas made in haste have a higher sugar content, because the yeast hasn’t had time to feed on it entirely.”
That’s why he decided to invest in a piece of equipment that set the company back $2.5 million: an alcohol extractor.
“It’s certainly not cheap, but it lets us ensure customers that they are getting a non-alcoholic drink,” he says. In fact, he ordered another one to speed up the process.
It’s also a big part of their circular model of no waste. The kombucha is made using loose leaf teas from the tea houses and their sister company, Townshend Tea. The used tea leaves are composted and the remaining brew is then fermented for at least two weeks, before entering the alcohol extractor, which uses a spinning cone column–a massive piece of equipment that removes the alcohol content without excessive heat (keeping it below 100 degrees Fahrenheit is critical, because heat pasteurization would kill beneficial bacteria in the kombucha). That alcohol goes to the distillery, where it’s transformed into gin, absinthe, and liqueurs. This closed-loop process, Thomas argues, distinguishes them from other kombucha brands. Not only can Brew Dr. Kombucha now sit comfortably on store shelves next to juice, water, and other non-alcoholic beverages, but they’ve cleverly developed a side business.
The distillery, which is a smaller, less than $1 million business, Thomas says, is a way for the company to experiment, repurpose, and explore new markets. Run by Seth O’Malley, a Millennial with an old soul, Townshend Distillery takes the alcohol extracted from the kombucha and produces award-winning spirits that have been recognized by bartenders in the Portland area.
The certified B Corp is looking at its footprint beyond the circular model with these three products (tea, kombucha, and spirits). It’s also thinking about its manufacturing. Andy Perkin is VP of Operations at Brew Dr. and previously was the plant manager. He’s not only concerned with the number of cans and bottles that they’re pumping out but how they’re doing it. He talks at length about how he worked with the builders at their new Tualatin facility to repurpose materials in the construction of this plant: for example, lights were refitted and given new life, and heating systems were reassessed to cut down on energy consumption. “They were definitely a bit thrown off by us,” Perkin says, seated in a conference room overlooking the new manufacturing plant, which produces more than 500,000 units a week using 100 percent renewable energy.
The environmental concerns go beyond their own use. Passionate about the outdoors, Thomas is now assessing how the brand can do more: they support a local non-profit that teaches elementary school kids about science, ecology, and the workings of nature; Brew Dr. Kombucha also gives back 1 percent to the planet, which to date has amounted to more than $350,000 in donations to environmental organizations.
From a man with some serious handyman skills to building a drinks empire, Thomas has incrementally grown the company using debt and their cash flow. At the end of 2016 and early 2017, he stopped being the salesman for the brand and hired professionals, he says. That’s helped them reach more mainstream retailers like Kroger’s, Trader Joe’s, and Costco, all of which carry Brew Dr. Kombucha now.
“We don’t want this to be a niche product,” Thomas says. “We really see this as a product for all Americans, not just the folks here in the Pacific Northwest. And so far, only 5 percent or so of the country knows about kombucha. So there’s a lot of potential.”