A Southampton-based iced tea brand that has seen its sales triple under new ownership is setting its sights on selling nationwide.
“Every day we’re adding more stores to our distribution,” said Michael White, who purchased a majority stake in Montauk Beverageworks in May. Monthly sales since then have grown from $10,000 to $35,000, he said.
“Our goal is to reach nationwide distribution in five years and to hit $100,000 a month by this summer,” said White, 50, an entrepreneur who also owns real estate development company Georgica Builders, a Manhattan-based bus service and a Southampton deli.
He saw opportunity in the brand, which was founded in 2009 but struggled to return to profitability after having its warehouse flooded during superstorm Sandy.
Montauk Beverageworks founder Raymond Smyth said selling “was like letting go of my baby,” but he is happy to see the brand growing. He still holds a minority stake in the company. Terms of the deal were not disclosed.
Smyth, 34, of Long Beach, said he created the drinks in his mother’s kitchen because he could not find the types of “healthy and flavorful” iced teas he wanted to drink.
The naturally sweetened drinks, which come in six flavors including Green Tea with Honey, Half & Half, and Red Berry Hibiscus, have 20 to 80 calories per 8-ounce serving; there are two servings per bottle. They fall into a category the beverage industry calls “better-for-you, ready-to-drink” iced tea.
The teas are produced at a plant in New Jersey. However, White said he is “actively looking” for a bottler in New York. The drinks, which retail for $2.59, are sold at select Best Market, King Kullen and Wild by Nature supermarkets; 7-Eleven stores; and BP gas stations, as well as a slew of local restaurants and delis.
Smyth, who is no longer involved in the company’s day-to-day operations, quit his job as the head of commercial leasing for JetBlue’s food and retail program at Kennedy Airport and tapped into his savings of about $75,000 to start the business.
“I started buying different types of loose-leaf teas, spices and dried fruit, and then taking empty Snapple bottles and making my own iced tea concoctions at home,” he said. “I was looking for teas that tasted like teas and not an overload of sugar.”
Smyth is not the only Long Islander who has entered the “better-for-you” iced tea category.
Kyle Chandler founded Centereach-based, organic craft tea brand The Subtle Tea Co. in 2013, and the Amityville-based Pekant Tea Co. sells “handcrafted and locally produced organic tea.”
These niche businesses, along with Woodbury-based giant AriZona Iced Tea and Hicksville-based Long Island Iced Tea Corp., are tapping into a blossoming market, according to a 2014 report by industry research firm IBISWorld. The bottled tea category grew 6.1 percent each year from 2009 to 2014, and it is expected to grow more than 10 percent annually through 2019, the report said.
“Competition in this industry is high,” the report notes, adding that new entrants could “more effectively gain footing in niche markets since these are less price sensitive.”
“In today’s beverage environment, creating an image which promotes health and innovative flavors is what a successful tea company looks like,” said Chrystalleni Stivaros, an industry analyst at IBISWorld. “Consumers, particularly millennials, are demanding innovative blends with nutritional added benefits. Often times, a small, local company that ‘makes it’ is a company that gets acquired by a national producer.”
Smyth worked with a food scientist to ensure his homemade recipe was shelf-stable and fit to be bottled in high volumes. At first, he delivered his teas to stores across the Island in his sister’s Hyundai, he said.
“There was a lot of driving in the early days,” Smyth said. “I’d go from Montauk to Manhattan and back again several times a day for deliveries. Sometimes I drove to Philadelphia. There were 15-hour days, there was a lot of ground to cover.”
While his early challenges included fighting for shelf space in stores, struggling to find reliable companies to produce the product and keeping up the flow of inventory, Montauk Beverageworks’ biggest setback came in 2012: superstorm Sandy.
Smyth’s fully stocked warehouse in Island Park was flooded 5 feet deep, and nearly all his merchandise was destroyed.
“I lost everything I had worked so hard for overnight,” he said.
Smyth halted business operations for six months to “rethink and regroup, but this time with a lot less funds.”
“Eventually, I had to sell the company to keep the brand going,” he said. “As hard as it was, I still love walking into a store and buying my iced tea.”
For his part, White says Smyth’s “baby” is now cared for by a very devoted adoptive father.
“We’ve grown 300 percent in one year, and I’m just getting started,” he said. “The baby’s getting stronger.”