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Many entrepreneurs start their business with an end in mind, that ending being a multi-million-dollar exit that allows them and their family to be financially set for their futures. The blueprint for such a plan is easy to find and follow, but even with success, the ending might not turn out as planned.
But what happens when the buyer you have been counting on decides to walk away?
If you are Jeff Church, co-founder of Suja Juice, you move quickly into survival mode and work to keep things going. Through patience and persistence, his story turned out to be a happy one after all, even though the original buyer left him $40 million in soon-to-mature debt.
Early Success Brought Opportunity and Risk
Suja Juice came about through a local find by one of the business’s co-founders. He raved about the taste and benefits and begged Jeff to give it a try. As a meat-and-potatoes guy from the Midwest, Jeff was skeptical. However, after his first taste of the apple, kale, and lemon-flavored cold-pressed juice, he was intrigued. After all, if he could drink it and enjoy it, anyone could. So he immediately saw an opportunity in the growing market of cold-pressed juices in Southern California and started doing his research. Along with the man who introduced him to cold-pressed juice, Jeff joined forces to create their own business to make and sell the juice as a healthy alternative to other beverages in retail.
To find a place to sell their product, they knew they needed to extend the juice’s shelf life. Current methods at that time included heat pasteurization, which worked but also killed some of the nutrients cold-pressed juice offered. Their answer was High Pressure Processing, which exposed the juice to pressures up to 87,000 psi, enough to kill potential pathogens but not degrade the micronutrients of the fruits and vegetables used for their product. As a differentiator, the HPP gave them a 20-day shelf life and the confidence to approach Whole Foods about stocking their product. Their quick success proved to be a smart choice for Whole Foods, as Suja’s revenue grew to $44 million over the first couple of years.
When The Rug Was Pulled Out
When Suja Juice had reached $70 million in annual revenue after only three years in business, they received some serious interest from companies looking to invest in them. When Coca-Cola and Goldman Sachs decided to invest $150 million based on a $300 million valuation, that multi-million dollar exit was looking like a sure thing for Jeff and his partners. The investment included an option for Coca-Cola to buy out the remainder of the company, which was seen as almost a mere formality given Suja’s rapid growth and market potential.
Unfortunately, the market for cold-pressed juices became tighter with the introduction of alternative health-focused beverages. While they were still seeing double-digit growth, their need to control manufacturing and processing in-house meant the cost of their growth was high. There were a total of 11 rounds of investment sought, all involving equity shares, debt, or a mix of both. So, two weeks after Coca-Cola flew its entire North American leadership team to the Suja facilities, it decided not to pursue total ownership, leaving Jeff and his partners holding $40 million in debt that was soon to mature. Adding on $9 million of annual debt because of a tightening market, Suja appeared to be just months away from being picked apart.
No Fun In Fundamentals
One of the most valuable lessons learned from Suja’s story is that rapid growth can mask underlying weaknesses. Their revenue growth, success at Whole Foods, and a repeat rate twice that of the industry average in the Consumer Packaged Goods (CPG) industry were all indicators that Suja was a successful business. And they were. However, with their dependence on the major corporation’s buyout, their growth tactics left them overbuilt and underfunded. Larger facilities, increased staffing, and expanded distribution all resulted in costs that were fine for a company being acquired, but not fine for a company needing to remain in business while paying off debt without the aid of a larger corporation’s bankroll.
Pivoting That Saved The Company
As soon as the deal with Coca-Cola fell through, the management team went into correction mode. Instead of looking to the next level to meet the targets of potential suitors, they focused on building a healthier business model without relying on an exit strategy. Discipline replaced expansion and profitability replaced valuation. Eventually, Suja became a stable and successful business that attracted a new buyer for the right reasons. The stabilized operations and regained momentum resulted in a transaction valued at $325 million, even more than the original expected deal with Coca-Cola. They got their exit after all, but made a successful and self-sufficient process in the pivot.
Business is anything but usual, and many founders build their businesses with the expectation of an exit, without considering what they should do or be prepared for if it does not happen. Building a company that is a success regardless of its potential for acquisition will keep you covered in either case.
Are you interested in attracting multiple suitors for your exit? We’d love to help with that. Reach out to us today.