Steven Prato’s alarm clock goes off at 2:50 a.m. He allows himself one smack of the snooze button. No more than that.
To survive in the intensely competitive food & beverage sector, his philosophy has been this: He simply has to have more hours in a day than everyone else.
In other words, he said, he knows what he’s gotten himself into.
“Food & beverage entrepreneurs have learned, if you’re in, you have to be all-in,” he said. “It’s not a halfway profession.”
Prato, his wife and two sons run New Jersey-based Joe Tea. Although it might feel in the most challenging times that they’re all wedged into the same sinking ship, he said, they also together understand the necessity to keep rowing. And, in doing so, their brand of teas and other beverages has managed to stay afloat for nearly 30 years.
The company sells 30-some beverage products and a line of kettle chips, and some mixture of those products is stocked in markets in each of the country’s states. The brand has business across the globe, inking deals with international companies like a German distribution firm that brought their products to “Tex-Mex” restaurants.
And, yes, the Jersey company is the “Tex” part of that equation.
All the while, the family-owned food & beverage business has been fighting for retail space with branded products (sometimes not-so-obviously) backed by PepsiCo, Coca-Cola and Keurig Dr Pepper Inc. That’s part of why Prato can’t be found in bed past 3 a.m.
“You’re the rag-tag Continental Army going against the Royal British Army and Navy,” he said. “But, you believe, and you care. That ultimately can be differentiating in and of itself.”
Prato is far more optimistic about their odds of competing with just about anyone than he once was. Granted, the husband-wife entrepreneurs started with $1,395 and some credit cards, selling lemonade out of the backseat and trunk of a Dodge Intrepid.
“And I’d like to tell you we advanced materially after 10 years of (our founding), but we were only a little further than that,” he said. “Largely, that’s because this is a highly competitive industry and you can either figure it out, or you can’t. At that time, we hadn’t figured out much.”
The biggest learning curve was the same area in which the major brands have the leg up: distribution. Coca-Cola and Pepsi haven’t just been establishing their brands through selling products for 100 years, Prato said, they’ve been building a distribution network.
Glass half-full
When securing supplies of glass bottles for Joe Tea’s products suddenly became a headache because of COVID, Steven Prato heard all sorts of explanations for it. …
One of those involved glass furnaces self-destructing, and the person from Europe qualified to make repairs experiencing trouble showing up to fix it due to travel restrictions.
“Needless to say, it was an odd period of time,” Prato said. “The supply chain challenges were incredible, to say the least. Where you are in most business environments is spending all your time trying to create demand, and you just assume you’re going to get all you need made on the supply side. But, during COVID, the demand was dynamic, and the supply was really just pathetic.”
For several years, the local company had to pivot. Instead of packaging its beverages in glass, it introduced a new plastic packaging for beverages.
“States such as California aren’t enthusiastic about plastic, and nor were we, necessarily,” he said. “But we were enthusiastic about staying in business. We had to adapt to circumstances.
“Thankfully, things have settled out. So, we’ve been able to manage to get back to glass bottles, which our customers know us for.”
As for how smaller companies compete in the food & beverage space despite not having the luxury of those networks, Prato said you have to exploit any advantage you convince yourself you’ve got.
“As an example, I spent a lot of time in the field myself. That concept of the founder in the field — having the company’s founder interfacing with the subset of retailers that would be providing the first round of market opportunity — that was an advantage,” he said. “The big company was not going to be running around asking for orders and developing relationships.”
Doing that, Prato forged relationships with store owners throughout the Northeast. Those business owners served as their eyes and ears to sense whether the products they were selling generated a positive response from customers. Particularly in the cornfield-lined back-road general stores of Vermont, Joe Tea found its footing as a brand.
The husband-wife business duo believed strongly in their product. It took a long time, but that belief proved contagious.
“I’ve always thought that, if you could lose long enough without totally going out of business, at some point, you’re going to get a cult following,” Prato said. “Someone chooses to champion the underdog. It’s from that you can end up having something competitive against (household) brands, even with all their strengths.”
But, customers — and sometimes retailers themselves — can’t always easily tell which brands exist under the tent of major corporations such as PepsiCo, Prato indicated.
That’s because there’s a number of entrepreneurial ventures in that space that set out to lure strategic industry buyers from the beginning. When it works out, those smaller brands quickly become subsidiaries under global food & beverage businesses.
Prato explained that, for the brands being acquired, what matters most is achieving a scale that’s attractive to larger corporations. Profitability is less relevant for these competitors.
“If you’re a self-financing business not planning to chase those opportunities, you can’t dig yourself into a hole you can’t get out of in that same way — even if we did a pretty good job of that anyways in the beginning,” Prato said. “It’s more of a deliberate, long-term track.”
After achieving some scale of their own, the family-run Joe Tea team sits in a middle ground between the small, independent food & beverage brands and those household names.
Asked if they would ever consider following the path of industry peers that have been acquired by the big brands, Prato won’t say never — because that’s a long time, he said.
“But, the brands that go that direction are designed to go that direction,” he said. “They’ve raised capital, they ultimately have to answer to that, give returns and have an exit strategy.
“We prefer to think of ourselves as a multi-generational family business that can be run that way over the next 50 years. That’s our desired game-plan.”
