Vol. 127 - NO. 39

Blog Startup CPG

SINCE 2019

Founder Friday Feature:
Orleatha Smith of Sip Herbals

Sip Herbals is Reimagining the Coffee Ritual Without the Caffeine

When Sip Herbals co-founder Orleatha Smith was a child, she struggled with eczema and urticaria, an auto-immune disease that causes you to break out in hives. Smith says, “I was a sick kid, so my story started a long time ago when my mom was trying to figure out what the heck was going on with my skin. My mom tried to take the holistic approach, so at a young age, I learned that what we eat affects our bodies.”

Years later, this understanding would come to serve Smith once again. “During the pandemic, I was chugging coffee. I kept saying, ‘I don’t know why I’m so anxious and can’t sleep.’ My business partner told me to stop drinking coffee, but I said, ‘You will pry the coffee out of my cold dead hands.” But when Smith slowed down and began listening to her body, the message was clear — she had to give up her beloved coffee. “I knew I couldn’t keep living this way, so I started trying to find an alternative [to coffee].” When Smith started looking, however, she found that the alternatives she tried either weren’t to her liking or included ingredients she’d rather avoid like the nebulous natural flavors. “Alright,” she thought, “I guess I’ll have to make something.”

Developing Sip Herbals

Collaborating with her partner, Kelly Raulerson, Smith put on her former biology teacher hat and began playing around with different herbs to recreate the coffee taste and feel. “My family is from Louisiana, so I knew chicory would give me that coffee feel. Then we needed bitterness, so I added dandelion, and carob is naturally sweet and smooth with a chocolate feel, giving the drink more body….We started giving what we had come up with to friends in the influencer and wellness community, and they were like, ‘This is really good. Where do I buy it?” With this vote of confidence, Smith and Raulerson moved forward. “We launched a Kickstarter and raised over $7,000 with 144 backers. We’ve now turned that $7,000 into over half a million dollars to date with almost 6,000 customers.”

Sip Herbals launched with the signature roast, but over time, they have added some of the coffeehouse flavors Smith missed. She explains, “People want to feel included, so we wanted to make something that would give customers the normalcy of the coffee ritual in the morning. We’ve created salted maple blondie, royal mocha, peppermint mocha, dirty chai, cinnamon roll, and pumpkin spice, and all of the flavors are made with whole food ingredients. Our salted maple blondie, for example, is made with our base of chicory, carob, and dandelion, but we add maple sugar, real vanilla bean, and sugar for that caramel, and salt. That’s it. You can taste that the flavors are real.”

Learning lessons the hard way

When Smith launched Sip Herbals, she also included a sample pack to allow customers to try before they buy. “[The sample pack] was our best seller. But then we started to grow and we were like, ‘Why are we not making the money if we’re selling all of these? How come we don’t have this much in our bank account? Then, in a business finance class, we realized that the sample pack was costing us money. It was eating out of the other profits. So we had to pull it.”

After pulling the original sample packs and learning more, they decided to revisit the offering and make it profitable for the business. “We used to offer five flavors in the sample pack, but we decided to drop vanilla because vanilla bean itself went up to like $90 a pound. We added peppermint mocha and cinnamon roll and separated the flavors into two sample packs, each with three flavors. Because of the price point, they are now profitable.”

Slow and steady wins the race

“We are primarily focused on DTC but we recently secured Lazy Acres market here in SoCal, Nuleaf market up north, and Mature Market in Canada. We are also in a few smaller boutiques, but our goal is to move into retail strategically, targeting specialty and smaller shops as opposed to a Walmart or Target.”

Whole Foods used to be our pie in the sky like everybody else, but the amount of resources that you need to get into Whole Foods to be successful is huge… getting in isn’t even the problem. It’s selling out of their stores and making sure that the velocity is high enough to maintain a reorder. Something like Lazy Acres is perfect because it’s small. We can cut our teeth and manage that. ”

“I have a mentor who advised us to grow slowly. She told me, ‘Don’t try to get into all the big distributors like KeHi without realizing the cost that’s included…that’s going to kill you…So we want to expand retail but strategically over time.”

Their biggest challenge

“As co-founders of color, we want to grow, but we don’t have the network to raise the capital it takes to do so. I was talking to somebody who said, ‘Oh, yeah, we just had a friends and family round and we raised about half a million.’ I don’t have the same friends.”

“What we’ve learned from that is that you have to reach outside of your comfort zone and network. You need to grow and stretch yourself and go into rooms full of people who don’t know or look like you, but they may have the ability to help you. And it’s scary. What if I fail or I don’t know what I’m doing or who do I ask? But you have to just get out there and make connections because it’s all relational.”

“There are also communities that are specifically for founders of color to connect, share resources, and ask questions in a safe space. Project Potluck and (included) have both been really helpful — (included) is how we got our booth at Expo West.”

Smith also does what she can to help others in CPG. “When you are willing to support other people, you can create your own community. I don’t know everything but I may have some resources to help, so who can I help? Even if it’s just a word of encouragement, saying, ‘Hey, you can do it. I don’t know how, but we’re both going to do it.”

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